1 day Ago By Akanksha Mishra
New Delhi: A cap-and-trade market for particulate or air pollution works better than conventional regulations to reduce pollution, a new study by University of Chicago’s Energy Policy Institute (EPIC India) has found. As part of the study, the world’s first-ever pollution market for particulate matter (PM) emissions was established in the industrial hub of Surat in collaboration with the Gujarat Pollution Control Board, involving 317 large fossil fuel-burning plants. The experiment, conducted between 2019 and 2021, meant to assess whether such a market would help reduce overall PM emissions more than the existing method of regulation and monitoring.
The study found that the market method reduced emissions by 20-30 percent more in comparison to the regular mechanism. Further, industrial plants’ pollution control costs were reduced by more than 10 percent and there was higher compliance with the law. The study report has been published in The Quarterly Journal of Economics .
A pollution market incentivises industries to reduce pollution by providing them the opportunity to gain monetarily by reducing emissions. The way it works is that, if a company reduces its emissions, then it can sell its reserve emission permits to another company that has more emissions. It is similar to carbon markets, where the amount of overall emissions are regulated, but companies are allowed to trade among themselves and pay if they want to emit more.
In the Surat study, half the plants were randomly assigned to the market and given a cap on the total amount of pollution they could emit, while the rest were monitored using the regular pollution norms. Those that met the cap traded permits with those that could not meet the cap. The pollution market industries were not just found to have reduced emissions by 20-30 percent as compared to the regular ones, almost 99 percent also complied with the emission norms.
Among those under regular norms, only 66 percent were able to comply. A pollution market or emissions trading system (ETS) has been active in countries in the EU. In the experiment in Surat, there was some doubt about India’s low state capacity and whether it would be able to handle a pollution market effectively, but the results showed success.
“The market delivered a rare win-win-win by reducing pollution, decreasing abatement costs, and raising government’s success at enforcing the law. And, it did all this in a setting where there was great scepticism that pollution markets could work,” said Michael Greenstone, a professor of economics at University of Chicago and one of the authors of the report, in a press release Tuesday. Rohini Pande, professor of economics at Yale University and a co-author of the report, had the same view.
“The exciting part of the experiment that we did for particulate matter, aside from reducing emissions, is that it provides a proof of concept that even in a setting with lower state capacity, a compliance market can work, and often will outperform the command and-control approach,” she stated. Also Read: India’s air quality now a global embarrassment & it’s no longer just Delhi’s problem Currently, air pollution by industries in India is regulated by the central and state pollution control boards via a “command and control mechanism”. Pollution norms and limits have been set for different industries and they are monitored through surprise inspections by board officials.
“These regulations are stringent on paper but weakly enforced in practice, perhaps because strict enforcement would be too costly,” reads the EPIC India report. In the Surat study, however, both industries and regulators were found to respond well to the pollution market, and participated actively in it. By conducting a cost-benefit analysis of pollution markets versus conventional pollution norms, EPIC India suggests that benefits of pollution markets exceed the costs by 25 times.
While the study recommends a future where pollution trading markets are the new norm to curb air pollution in India, certain challenges remain. Reports as far back as 2007 pointed out the drawbacks of such emissions trading systems in the EU. These outline challenges such as pollution permits being priced too low, being inefficient, and also the threat of “carbon leakage” where, because of emission restrictions, most industries just move away to places with fewer restrictions, thus leading to no overall change in the emissions and consequent pollution.
(Edited by Nida Fatima Siddiqui) Also Read: Delhi’s PM2.5 levels in 2024 were over 2x the national limit despite stubble burning dip—CSE report var ytflag = 0;var myListener = function() {document.removeEventListener('mousemove', myListener, false);lazyloadmyframes();};document.
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