Market-Based Schemes for Air Pollutants

Researchers are collaborating with the Pollution Control Boards (PCBs) of Gujarat and Maharashtra to design and scale emissions markets for air pollutants. The goal of these markets is to reduce the cost of compliance with environmental regulations and reduce emissions of the targeted air pollutants to improve environmental quality. The markets being developed include an ongoing scale-up of particulate matter (PM) markets in Gujarat and scoping of a market to regulate Sulphur dioxide, as well as PM, in Maharashtra. The emissions markets represent an adaptation and scaling of India’s first emissions trading scheme (ETS) for air pollution, which the research team designed, implemented, and evaluated jointly with the Gujarat Pollution Control Board in the city of Surat, Gujarat. That pilot ETS was implemented as a randomized evaluation, in phases starting in 2019, to measure the effect of emissions trading on pollution emissions and industry costs. The experimental results show that plants assigned to the emissions market have lower emissions than a comparable group of control plants. These reductions in pollution have been achieved at low permit prices, suggesting that the market has lowered abatement costs.