This will probably be more than outweighed by the savings in public health due to less pollution. Air pollution kills and harms so many people every year.
If X becomes cheaper, the right thing to do (IMO) is to return the savings to the people, not to spend the surplus on Y or find a new Z to spend it on. If the people want to choose to spend more on Y or Z now that they've seen the savings on X returned to them, that's perfectly rational possibility, but shouldn't be automatic.
That's exactly the point I was making.