India’s Gujarat state launched the world’s first clean air market for particulate pollution in the city of Surat as a pioneering effort to confront the twin problems of cleaning the air while facilitating robust economic growth. Since its launch in 2019, the Surat clean air market has reduced particulate pollution produced by more than 150 coal burning factories by about 24 percent without raising industry operating costs. The program has now been recognized for its success, winning the SKOCH Gold Award under the Environment Category. The SKOCH Awards are one of the most prestigious governance awards in India given by an independent organization and based on a third-party assessment of projects and institutions working to improve India.

Talking about the recognition, Shri R. B Barad, chairman of the Gujarat Pollution Control Board (GPCB), says, “The Emission Trading Scheme is an innovative initiative of the Gujarat Pollution Control Board in the direction of air pollution control which will prove to be an inspiration for other states and countries…accurate minute-to-minute readings of particulate matter emissions through Continuous Emission Monitoring System (CEMS) enables continuous monitoring of polluting industries and industries emitting less particulate matter get monetary benefits by selling permits; thus the Emission Trading Scheme provides a win-win-win situation for the citizens, Gujarat Pollution Control Board as well as less polluting industries.”

The Surat clean air market shows how economically efficient market-based policy—used first in the United States to tackle acid rain—may hold answers to one of the toughest environmental and health problems the world faces today: how to reduce air pollution. To design the market, the government of Gujarat partnered with a team of researchers, including Michael Greenstone and Anant Sudarshan from the Energy Policy Institute at the University of Chicago (EPIC), Rohini Pande and Nicholas Ryan from the Economic Growth Center at Yale University, and others from The Abdul Latif Jameel Poverty Action Lab (J-PAL). The researchers evaluated the program’s impacts, using a randomized controlled trial—another first for such markets anywhere in the world.

“This award recognizes GPCB’s pioneering vision and leadership in turning an idea into a reality and affirms Gujarat’s decision to expand the market to other parts of the state,” says Greenstone, the Milton Friedman Distinguished Service Professor in Economics and director of EPIC. “More broadly, this pilot underscores that pollution markets can be a game-changer in India and beyond by providing an appealing way to balance the goals of clean air and economic growth.”

In a clean air market, the government sets a cap on emissions and allows industries to buy and sell permits to stay below the cap. The Surat market included 350 highly-polluting industries, divided into treatment and control groups. Building on its success, the program is now expanding to other cities within Gujarat and beyond. For example, the GPCB is growing the program to include 230 industries in Ahmedabad.

Markets have been widely credited with reducing pollution in the United States although they have never been evaluated using the method used in Surat. One of the largest such programs in history, the U.S. sulfur dioxide emissions trading scheme, may have slashed pollution by 40 percent between 1980 and 2003. Analysts have shown that the program’s benefits exceeded its costs by a 40:1 ratio. Trading markets have since been adopted for pollutants in Canada and Europe but never before to tackle particulate pollution, which research from the Air Quality Life Index (AQLI) has shown reduces the life expectancy of people in South Asia by as many as 5 years.

“Markets work to efficiently reduce pollution in regions throughout the world,” says Anant Sudarshan, South Asia director of EPIC. “They can be especially useful in settings like India and other growing economies where government regulators are understaffed and underfunded because they can be easy to administer and they use technology to streamline pollution monitoring.”

To learn more about the Clean Air Markets in India, visit cleanairmarkets.in.

Areas of Focus: Environment
Definition
Environment
Producing and using energy damages people’s health and the environment. EPIC research is quantifying the social costs of energy choices and uncovering policies that help protect health while facilitating growth.
Air Pollution
Definition
Air Pollution
Air pollution from fossil fuel combustion poses a grave threat to human health worldwide. EPIC research is using real-world data to calculate the effects of air pollution on human health...