A bold experiment in Surat has shown the world a new way to tackle air pollution. A study, by a team of researchers from the University of Chicago, Yale University and the University of Warwick, which will be published in the May issue of the quarterly Journal of Economics, found that a special kind of ‘market’, think of it like a trading game for pollution, can cut harmful air particles by 20 to 30 per cent. It also saved businesses money and made it easier for the government to enforce clean-air rules.
This first-of-its-kind project could potentially change how countries fight air pollution caused by industrialisation, especially in developing economies like India.
According to experts, an average person loses about three and a half years of their life because of air pollution. Tiny particles, called particulate matter, originate from coal-burning factories and power plants. These particles are so small they can get deep into your lungs, causing heart problems, lung disease, and even early death.
In India, almost everyone breathes air that’s much worse than what health experts term as safe: sometimes 10 times worse. For years, the government has tried to control pollution with strict rules, telling factories exactly how much they can pollute. But these rules are hard to enforce and businesses often complain they’re too expensive to follow.
That’s where the concept of a ‘pollution market’ comes in. Imagine it like a farmers’ market, but instead of trading apples or tomatoes, businesses trade “permits” to pollute a certain amount. Here’s how it works: the government sets a limit on how much pollution all the factories in an area can release together. Each factory gets a share of that limit, allowing it to release a certain amount of pollution. If a factory cleans up its act and pollutes less than its share, it can sell its extra tickets to another factory that’s struggling to meet the limit. This way, the total pollution stays under the government’s cap, but businesses have flexibility, and some even make money by selling their extra ‘credits’.
The Surat experiment, launched in 2019 in collaboration with the Gujarat Pollution Control Board (GPCB), involved 317 large coal-burning plants. Half of them were randomly assigned to the Emissions Trading System, while the rest remained under traditional regulations. The GPCB mandated Continuous Emissions Monitoring Systems (CEMS) for all plants, a significant upgrade from sporadic spot checks. In the ETS, a cap was set on total particulate emissions, and permits were allocated to plants. Those that reduced emissions below their cap could sell surplus permits to others struggling to comply, creating a financial incentive for cleaner operations.
The results were striking: ETS plants cut emissions by 20-30 per cent compared to the control group, reduced abatement costs by 11 per cent (boosting profits), and achieved 99 per cent compliance with permit requirements. In contrast, non-ETS plants violated pollution limits at least a third of the time.