EPIC India News • June 5, 2021

Government of Punjab, J-PAL South Asia, and EPIC India Launch an Emissions Trading Scheme to Reduce Industrial Air Pollution in the State

Ludhiana in Punjab becomes the second Indian city to roll out the groundbreaking emission trading scheme for particulate pollution.

The Government of Punjab’s Department of Industry & Commerce and the Department of Science, Technology & Environment is partnering with the Abdul Latif Jameel Poverty Action Lab (J-PAL) South Asia and the Energy Policy Institute at the University of Chicago (EPIC India) to launch the use of an Emissions Trading Scheme (ETS) to tackle growing industrial air pollution in Punjab. 

To reduce particulate and greenhouse gas (GHG) emissions in the state, the Government of Punjab and the Punjab Pollution Control Board (PPCB) will launch an ETS to regulate emissions from 200 dyeing industries in Ludhiana as the first step in this partnership. 

ETS offers a market-based approach to reduce air pollution in which governments set a cap on emission levels and distribute emissions permits among firms. The approach uses continuous emissions monitoring systems (CEMS) to send real-time and continuous readings of particulate emissions and enable better and more targeted regulatory oversight standards. 

Researchers from EPIC and JPAL South Asia and their academic partners helped the Gujarat State Pollution Control Board introduce an ETS in 350 highly polluting industries in Surat in August 2019 and established a monitoring system for particulate emissions trading to regulate industrial pollution in the area. A randomized evaluation of the pilot found evidence that the scheme offers a mechanism for improving air quality that is transparent and predictable. Moreover, it also has the potential to transform the trade-off between environmental regulation and economic growth by lowering compliance costs for firms. The Government of Punjab will work with J-PAL South Asia and EPIC India to design and establish pollution markets in Punjab. The partnership includes providing technical assistance and capacity building to public officials to effectively use data and research evidence from Surat’s established and functioning emissions trading market. 

Talking about the partnership, Shri Alok Shekhar, IAS Principal Secretary Industries & Commerce, said, “The Government of Punjab is keen to combat environmental pollution through regulation that promises a win-win situation of cleaner production, coupled with lower compliance costs for industries. ETS is one such initiative that can help regulate critically and severely polluted industrial belts in Punjab.” 

Of the partnership, Prof Michael Greenstone, the Milton Friedman Distinguished Service Professor in Economics, Director of EPIC and Co-Chair of Energy, Environment, and Climate Change of J-PAL added, “Pollution reductions can be delivered – the world’s first ETS for particulate pollution in Gujarat has already shown this. Punjab is now becoming the second Indian state to adopt this pioneering vision. For various other Indian cities battling polluted air and expensive regulations, ETS has the potential to improve air quality and health, reduce the regulatory burden on industries, and decrease government enforcement expenditures.”

Prof Michael Greenstone and Dr. Anant Sudarshan from the University of Chicago and their academic partners will work closely with the Government of Punjab in implementing the ETS program in Ludhiana.