Can industrial growth and clean air coexist? This article examines how the country’s first particulate matter emissions trading scheme in Surat is setting a new benchmark for clean, cost-effective, and scalable environmental regulation.

India’s industrial growth has brought prosperity and progress—but also pressing environmental challenges. With air pollution emerging as a major public health concern and regulatory capacity often stretched thin, finding innovative, scalable, and cost-effective solutions is more important than ever. One promising approach that has gained momentum over the past few years is the Emissions Trading Scheme (ETS)a market-based mechanism designed to reduce pollution while providing industries with the flexibility to choose their compliance methods, thereby encouraging innovation and cost-effectiveness.

India is leading the way among developing countries in piloting and scaling ETS programs for industrial air pollution. With the successful launch of the world’s first particulate matter (PM) ETS in Surat and scale-ups now underway, the country is demonstrating that clean air and industrial growth can go hand in hand.

Emissions Trading

Traditional pollution control relies heavily on a “command-and-control” approach, where regulators set uniform emission limits and technology standards. While this method has seen some success, it often lacks flexibility, imposes high compliance costs, and fails to reward innovation.

In contrast, an ETS works on the principle of “cap-and-trade.” Regulators set a total emissions cap for a group of industries. Each industry is allocated tradable permits or allowances, which represent their right to emit a certain quantity of pollutants. Industries that reduce emissions below their allowance can sell the excess, while those that exceed their limits must purchase additional permits.

This creates a financial incentive to reduce emissions: the cleaner a unit runs, the more it can benefit from selling its unused allowances. ETS schemes have been widely used globally to address carbon emissions, but Surat’s program was the first to tackle industrial particulate matter (PM) emissions in a rapidly developing urban setting.