On World Environment Day on June 5, 2019, Gujarat launches the world’s first-evermarket-based particulate pollution regulation system as a pilot project. The system provides economic incentives to industrial units that successfully control their emissions of particulate pollutants. The government sets a cap on particulate emission levels and then allows industries to buy and sell permits in order to stay below the cap. Permits are certificates earned by companies that have achieved emissions reductions to meet their targets, which they can sell to companies that have failed to meet theirs. This could work better than India’s current command-and-control approach to pollution regulation, which has resulted in high levels of non-compliance, caused also by the lack of high-quality information.

Indian cities have some of the world’s most toxic air and eight of 10 Indians breathe toxic air that killed 1.2 million in 2017–more than tuberculosis, diarrhoea, pneumonia and malaria. The country’s average levels of particulate matter, or PM 2.5–particles that are 30 times finer than a human hair and can enter the bloodstream to cause heart disease, stroke, diabetes, etc.–are eight times the World Health Organization standard and the fourth highest in the world.

Gujarat is launching this novel cap-and-trade programme for particulate pollution in Surat, a densely populated industrial centre where textile and dye mills release a significant amount of particulate pollutants. Since 2011, the Gujarat Pollution Control Board (GPCB) has been working with the Energy Policy Institute of University of Chicago (EPIC-India), the Abdul Latif Jameel Poverty Action Lab (J-PAL South Asia) and Evidence for Policy Design (EPoD) at Harvard University (EPoD–India) to evaluate the impact of emissions trading in Surat.

Can the cap-and-trade programme solve India’s air pollution problem due to non-compliance by industries? Yes, said Michael Greenstone, the director of EPIC, in an interview with IndiaSpend. Greenstone, the Milton Friedman Professor in Economics at the University of Chicago, has served as the chief economist to the council of economic advisers attached to former US president Barack Obama. He is of the view that the Gujarat programme could become a “very powerful tool in the tool-chest” for reducing particulate pollution in other parts of the country.

Edited excerpts…