Beijing and New Delhi have more in common than being two of the world’s most populated capital cities – extreme air pollution has blanketed both their skies.

While stories of air pollution in Delhi resemble “Beijing from 20 years ago” to climate policy expert Saurabh Jain-Punamiya, the Delhi problem has grown into a pan-India problem, with air pollution cutting almost six years off the life expectancy of the country’s residents…

…Whlie India can improve its air quality, Michael Greenstone, economics professor and director of the Energy Policy Institute at the University of Chicago, said it is challenging to “find regulatory tools that work and that are consistent with the urgent and vital need for continued, rapid economic growth.”

But moving to market-based approaches such as pollution markets or taxes has shown major promise.

Greenstone, whose research inspired the Air Quality Life Index (AQLI) which links air quality with life expectancy, has been involved in an “exciting” initiative by the state government of Gujarat called India Clean Air Markets.

Essentially, the government sets a cap on emissions but then allows industries to buy and sell permits to stay below that cap.

The state ran a randomised experiment where firms were either regulated under the existing rules or by the new cap and trade regulations. The new regulations came out as the clear winner.

“Pollution went down by 20 to 30 percent, and industries’ compliance costs went down,” Greenstone said.

“The current form of regulation is so costly for polluters,” he said. By India moving to a more environmentally conscious market approach, it can “facilitate faster economic growth by reducing the cost to industry.”

It is an approach that has been widely used in developed countries like the United States, but the Gujarat initiative has show it is also effective in India, according to Greenstone.

“There is a remarkable opportunity sitting there to be grabbed that will allow for faster economic growth and allow for people to live in a cleaner and healthier environment,” he said.

Providing information can also develop political will to address air quality, which is what Greenstone hopes to achieve with the AQLI, which uses satellite air quality data to form an index of average global life expectancy loss due to air pollution.

“Economic growth is great, but it is a limited measure,” he said, adding that “if you are making everyone sick” and reducing the length of lives, these are real human costs.

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Areas of Focus: AQLI
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