Gujarat unveils India’s first emissions trading scheme to curb air pollution

Chief minister Vijay Rupani launched the pilot programme on Wednesday in Surat, a densely populated industrial centre with a significant number of polluting textile and dye mills. The government claims this is the first such programme of its kind and will be a model for the rest of the country and the world.

Under the programme, the government sets a cap on emissions and allows industries to buy and sell permits to stay below the cap. As the first market-based approach to regulating pollution emissions in India, it is expected to slash air pollution at lower costs for both the government and industry, and provide best practices for replicating trading schemes to other emissions.

“With this programme, we are kicking off a new era of cleaner production, while lowering industry compliance costs and rewarding plants that cut pollution in low-cost ways," said Rajiv Kumar Gupta, chairman of the Gujarat Pollution Control Board (GPCB). “We believe using this market-based system will prove that rapid economic growth, ease of doing business, and breathing clean air can all be achieved at the same time."

For effective and efficient pollution control, the emissions trading programme will be experimentally tested to understand its impact on emissions, industry costs and regulatory costs.

The GPCB is carrying out the emissions trading programme with the help of a team of researchers, including Michael Greenstone and Anant Sudarshan from the Energy Policy Institute at the University of Chicago (EPIC), Rohini Pande from the Evidence for Policy Design at Harvard Kennedy School, Nicholas Ryan from the Economic Growth Center at Yale University, and others from The Abdul Latif Jameel Poverty Action Lab (J-PAL).

The researchers will evaluate the programme’s benefits and costs, relative to status quo, using a randomized controlled trial.

“As one of the most sophisticated such initiatives in the developing world, and the first globally to tackle particulate air pollution, Gujarat’s forward-looking vision has the potential to create lasting changes for the people living in this state, as well as become a benchmark for other states in India and countries across the world," said EPIC director Greenstone.

The emissions trading programme builds on another early innovation by the GPCB —the use of continuous emissions monitoring systems to track industry emissions in real time.

About 350 industries around Surat have installed continuous emissions monitoring systems and now transmit real-time, high-quality emissions data. The new scheme takes advantage of this technology’s modern, transparent approach to monitoring.

In 2015, the GPCB worked with the same research team to design, test, and, based on the test results, implement a new way of carrying out industrial pollution audits, fixing the incentive problem that occurs when third-party auditors responsible for testing plants on behalf of the regulator are also paid by these same plants.

Globally, the cap-and-trade system has been used to reduce other forms of emissions such as sulphur dioxide (SO2) and nitrogen oxides (NOx) in the US. But the Gujarat programme is the first in the world to regulate particulate air pollution, which is the single greatest threat to human health globally, the state government said.

The impact of particulate air pollution on life expectancy exceed that of devastating communicable diseases such as tuberculosis and HIV/AIDS, behavioural killers like cigarette smoking, and even war, according to the Air Quality Life Index (AQLI).

The AQLI, produced by EPIC, converts particulate air pollution into its impact on life expectancy, and finds that it cuts global life expectancy short by about two years.