India, known for its severe air pollution crisis, is pioneering an innovative solution by introducing the world’s first market for particulate emissions. The country’s efforts to combat air pollution have led to the establishment of a unique trading system, aimed at curbing particulate matter emissions by industries.
According to World Economic Forum, India has been grappling with dangerous levels of air pollution, particularly in urban areas. In 2022, several Indian cities were listed among the most polluted globally. As of 2023, Delhi’s air quality has deteriorated to a ‘severe plus’ category, making it the most polluted city in the nation. This worsening situation has spurred the Indian government to seek innovative solutions in collaboration with the private sector.
Taking inspiration from successful pollution control markets in the United States, Canada, and Europe, India has launched its Emission Trading Scheme (ETS) in Surat, Gujarat. Initiated in 2019 by the Gujarat government, the ETS represents a significant step forward in environmental governance. It operates on a ‘cap and trade’ principle, where industries exceeding their emission limits must purchase permits from those emitting less. This market-based approach incentivizes industries to adopt cleaner practices by financially penalizing heavy polluters.
Gujarat was chosen for the pilot project due to its high industrialization and resultant air pollution levels. The state’s industries, particularly in the sectors of iron, steel, petrochemicals, and cement, contribute significantly to particulate pollution. Recent data showed that Gujarat’s winter air pollution levels were alarmingly high, prompting the need for immediate action.
The ETS pilot in Surat has demonstrated encouraging results, with a reduction in particulate emissions by approximately 24%. This reduction is significant considering that the traditional regulatory approach primarily enforced emission limits without addressing the total volume of pollution. The Gujarat Pollution Control Board, through the ETS, has introduced a total pollution cap based on historical emissions data, a move that addresses previous regulatory shortcomings.
Despite its success, the ETS has faced challenges. Industries with high emission levels or high costs for emission reduction may find the scheme burdensome. Additionally, consumers might experience slightly increased prices due to higher production costs or scarcity of emission permits.
Following the positive outcomes in Surat, the Gujarat government plans to replicate the ETS in Ahmedabad and other industrial clusters. This expansion aligns with India’s commitment to net-zero emissions by 2030 and its participation in the upcoming COP28 summit, where the focus will be on financing climate initiatives and possibly linking various emission trading systems to create a global market.
While this initiative marks a significant step in tackling air pollution, the balance between economic growth and environmental sustainability remains a challenge. The ETS represents a move towards integrating pollution costs into business expenses, promoting cleaner industrial practices through market-based solutions.