We present a study on the retrieval sensitivity of the column-averaged dry-air mole fraction of CO2 (XCO2) for the Chinese carbon dioxide observation satellite (TanSat) with a full physical forward model and the optimal estimation technique. The forward model is based on the vector linearized discrete ordinate radiative transfer model (VLIDORT) and considers surface reflectance, gas absorption, and the scattering of air molecules, aerosol particles, and cloud particles. XCO2 retrieval errors from synthetic TanSat measurements show solar zenith angle (SZA), albedo dependence with values varying from 0.3 to 1 ppm for bright land surface in nadir mode and 2 to 8 ppm for dark surfaces like snow. The use of glint mode over dark oceans significantly improves the CO2 information retrieved. The aerosol type and profile are more important than the aerosol optical depth, and underestimation of aerosol plume height will introduce a bias of 1.5 ppm in XCO2. The systematic errors due to radiometric calibration are also estimated using a forward model simulation approach.