Context: Gujarat has launched India’s first trading programme to combat particulate air pollution-the emission trading scheme (ETS)

 – on World Environment Day 2019, which has air pollution as its theme.

Key features of the programme:

• It is a market-based system where the government sets a cap on emissions and allows industries to buy and sell permits to stay below the cap.
• Being initiated in Surat by the Gujarat Pollution Control Board (GPCB).
• Gujarat programme is the first in the world to regulate particulate air pollution.

How it works?

• Under the cap and trade system, the regulator first defines the total mass of pollution that can be put into the air over a defined period by all factories put together. 
• Then, a set of permits is created, each of which allows a certain amount of pollution, and the total is equal to the cap.
• These permits are the quantity that is bought and sold. Each factory is allocated a share of these permits (this could be equal or based on size or some other rule).
• After this, plants can trade permits with each other, just like any other commodity on the National Commodity and Derivatives Exchange Limited (NCDEX).

Significance and benefits:

• The reason for trading is that in a cap and trade market, the regulator will measure pollution over a period of time and industries must own enough permits to cover their total emissions.
• Factories who find it very expensive to reduce pollution, will seek to buy more permits. Those who can easily reduce pollution are encouraged to do so because then they have excess permits to sell.
• Eventually, after buying and selling by plants that find it cheap to cut pollution and those for whom it is expensive, most pollution is taken care of. Whatever the final allocation, the total number of permits does not change so the total pollution is still equal to the predefined cap. And yet the costs to industry are decreased.

Current practice and issues associated:

Under existing regulations, every industry has to meet a certain maximum concentration of pollutants when it is operating. They are tested occasionally and manually (one or two times a year). However, there is widespread non-compliance across India. This is partly because penalties are rarely applied, in large part because they involve punishments such as closing down the entire plant which is not necessarily appropriate for small violations.