Market-based environmental regulations have the potential to abate pollution at a low cost but are seldom used in developing countries, where pollution levels are the highest. We report the results of an experiment to test the efficacy of a new emissions market, for particulate matter, in the abatement of air pollution from industrial plants in an Indian city. We find that plants randomly assigned to participate in the market reduce pollution emissions by 20% to 30% relative to control plants that remain
in the command-and-control status quo regime.

This preliminary draft estimates the effect of the market only on pollution. Ongoing work will also measure its effect on abatement costs.

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