Environmental regulation in India is overdue for an overhaul. State Pollution Control Boards are desperately understaffed. The environment acts have not kept pace with changing circumstances, and continue to rely on stringent command-and-control norms. The foundation for effective and efficient pollution control in India rests on four legs: high-quality monitoring, consistent enforcement, policies compatible with the incentives of polluters and other stakeholders, and accountability through public disclosure.

One major challenge for regulators has been to know who is polluting how much. Till very recently, this had to be done through manual audits, which have some systemic problems. One, plants can be on their best behavior during these audits, making the reported emissions unrepresentative of their regular operations. If the inspections are conducted by third party auditors, these auditors have clear incentives to underreport their clients’ emissions. Indeed, previous research found….