By Vishwa Mohan

The Gujarat government is planning to set up a cap-and-trade market for carbon emissions from large sources. The move will provide the state a growth-friendly approach to cut its carbon footprints and provide a model for other states in collectively taking India towards its ‘net zero’ goal.

The market will allow industries and power plants in the State to trade CO2 permits whereas an overall cap on quantum of emission, set by authorities concerned, will provide the government a flexible tool to meet climate goals. The idea behind the cap-and-trade market is to make it possible for industries to reduce carbon emission with minimal disruption to their businesses and output.
Under the trade mechanism, the industries which don’t meet their emission targets as per the limit/cap can purchase the surplus targets from other industries which met their goals and accumulated the credits. The market will be the first of its kind in the emerging economies, outside of China.

Leading researchers from the University of Chicago and other institutions will help design the programme, allowing Gujarat to tap global expertise in developing the carbon market that will provide a growth-friendly approach to tackling climate change. The Energy Policy Institute at the University of Chicago Trust in India (EPIC India) and the Abdul Latif Jameel Poverty Action Lab (J-PAL) on Monday signed a strategic partnership with the Gujarat government to set up such a market in the state.

“By using markets to identify the least cost way for heavy polluters to comply and rewarding plants that cut carbon using low-cost methods, we believe the programme will contribute to rapid economic growth, ease the rules of doing business, and help us meet our climate commitments,” said Rajiv Kumar Gupta, additional chief secretary, Gujarat.

Gujarat has, in fact, an experience in running the world’s first ‘Emissions Trading Market for Particulate Pollution’, which began in Surat in 2019. The city is learnt to have reduced particulate matter (PM) emissions by about 24% without any measured increase in industry operating costs since its launch three years ago.

“The programme is now expanding to other cities within Gujarat and beyond. Gujarat also led the way to improved environmental audits that have systematically reduced pollution in the state. The audit guidelines require environmental auditors to be randomly assigned to industrial plants and have their work double-checked for accuracy,” said the EPIC India in a statement.

“Just as California has paved the way for environmental and climate progress throughout the United States, Gujarat is proving to be a trailblazer in India,” said Michael Greenstone, a lead researcher on the project and the Milton Friedman Distinguished Service Professor in Economics at the University of Chicago and director of the EPIC.

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Areas of Focus: Climate Change
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