Background The strong and stable economic growth in China in the recent two decades has demonstrated its effectiveness in raising people’s incomes, alleviating poverty, and improving the quality of life for most ordinary families. However, it has in the meanwhile caused many negative impacts on the environment. Many Chinese cities are being threatening by ambient air pollution far beyond the national air quality standard. Meanwhile, farmers who form 70 percent of the national total population are living a comparatively poor life. Majority of them are still relying on biomass and coal for cooking and heating. The use of solid fuels is the largest source of indoor air pollution. So far, the association between mortality and morbidity and air pollution has been proved by medical studies both in China and worldwide. Air pollution is a serious public health problem in China that urges timely countermeasures. Due to the fact that environmental practice is largely constrained by the availability of funds, comprehensively considering the impacts of health and environmental policies on the economic growth from the point of view of national economy is of great significance, especially for policymakers to prioritize environmental protection and determine feasible and effective environmental interventions. Objectives In order to achieve an objective insight to the impacts of policies against air pollution on China’s national economy and provide scientific support for policymaking process of China’s environmental protection, integrated assessment approach was adopted as the analytical instrument in this study. Specifically, the purposes of this study are sevenfold. (1) To improve the existing framework of integrated assessment on air pollution and health, for addressing the interactions between air quality, health status and economic growth and using a consistent approach to quantify the impacts of policies and health effects on national economy. (2) To add the consideration of emissions of particulate and SO2 in computable general equilibrium (CGE) model in order to make CGE model be suitable for analyzing China’s policies of air pollution control. (3) To establish interface of receiving health feedback in CGE model, such as labor loss and medical expenditure induced by air pollution, for exploring the mechanism of health impact on economic system. (4) To promote and strengthen environmental protection through the demonstration of air pollution-induced health effects and economic impacts. (5) To enable the consideration of air pollution-induced health impact in environmental policymaking process. (6) To understand benefit generating from air pollution control from the standpoint of macro economy that various policies can be prioritized. (7) To put forward suggestions on how to promote the implementation of air pollution control in China. Methodology A developed integrated assessment framework taking CGE model as the core tool to simultaneously estimate impacts of environmental policies and the resulting health effects on China’s national economy was first applied to China. Under this framework, multidisciplinary models such as CGE model, enduse model, atmospheric model and epidemiological concentration-response relationship were assembled and externally linked with each other. Such a working chain keeps the advantage from each scientific community that addresses the issue more efficiently. PM10 was selected as the surrogate air pollutant to estimate health effects caused by air pollution. By making use of the projection on energy service demand, energy price and environmental constraints from CGE model, the enduse model calculated particulate emission in a geographical way. With the help of atmospheric model and Geographical Information System (GIS) technique, people exposed to different levels of ambient air pollution in urban areas were extracted. The concentration of indoor air pollution in rural areas was estimated according to the information provided by current epidemiological studies in China. Exposure population in rural areas was assumed to be equal to the percentage of solid fuel consumption of rural energy consumption for living. Based on concentration-response relationship, air pollution-induced health effects were estimated. Besides the business-as-usual (BAU) scenario utilized as the reference scenario, three typical policy scenarios were designed based on China’s specific situation in this study. They are environmental tax (TAX), “Total Amount Control of Air Pollutant Discharge”(CAP) and combination of “Total Amount Control of Air Pollutant Discharge”plus investment on cleaner energy (CAP_INV), respectively, all of which have parallel scenarios considering health feedback into economic system as defined as TAX_H, CAP_H and CAP_INV, respectively. The impacts of policies per se and the related health effects on China’s economic growth were all analyzed through CGE model. Study period in this study was set from 2000 to 2020. Results In 2000, labor loss comprising death and days away from work was equal to 0.64‰of the national working population; total medical expenditure on air pollution-induced illnesses were 1.85% of the national personal medical expenditure. Due to air pollution-induced heath damages, the national economy of China in 2000 bore a 0.37‰GDP loss. If there were no further air pollution control, in 2020, China’s GDP loss due to health damages led by air pollution would be close to 1%. When adopting policies against air pollution, the simulation results indicated that the implementation of environmental policies could result in some GDP losses. As compared to BAU scenario, the GDP losses under the scenarios of TAX, CAP and CAP_INV would be 0.09‰, 8.85% and 3.04% by 2020, respectively, without thefeedback of policies related health effects into the economic system; when policy related health effects were fed back into the economic system, the GDP losses under the scenarios of TAX_H, CAP_H and CAP_INV_H would become 9.09‰, 8.14% and 2.68%, respectively. The GDP losses under CAP and CAP_INV scenarios could be mitigated by 0.71 and 0.36 percentage points, respectively, implying that environmental protection will tend to be favorable to economic development when health factors are considered, because the avoided health losses are favorable to promote GDP growth. It was found that the current environmental tax policy in China is not an effective environmental protection measure, which would worsen people’s health status in the future; among the policies simulated in this study, combination of “Total Amount Control of Air Pollutant Discharge”plus investment on cleaner energy should be the suitable solution for China’s environmental protection because it leads to a relatively bigger health benefit and minimizes GDP loss as well. Conclusions (1) The research framework as designed in this study can be an effective approach that is capable of providing scientific decision-making warranty and technical support to design air pollution control policies and measures. (2) Environmental conservation can bring great benefit to the nation and to the individuals. The approach of achieving economic growth at the cost of environmental quality and people’s health is anyhow irrational. (3) The awareness of air pollution-induced health effects and the quantitative assessment of their impacts on national economy will greatly increase the feasibility of some environmental policies. (4) Comprehensive consideration of the economic impacts from environmental policy and the relevant health effects will greatly support the framing of proper environmental countermeasure to achieve a win-win outcome for environment protection and economic growth in China. Policy implications (1) Integrated assessment approach including health concern as well as addressing the coordination between environmental quality and economic development can help policymakers to assess the impact of relevant policies before they are actually be implemented. Such an assessment contributes to the optimization of policy options and the avoidance of possible misleading decision-making that would result in heavy losses of the national economy or people’s benefit. (2) China should take integrated measures to treat ambient air pollution, while adhering to the principle of “Total Amount Control of Air Pollutant Discharge”. (3) China should try to mitigate income gap between rural and urban residents in order to accelerate rural residents’consumption on cleaner energy and protect their health from indoor air pollution.