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NEW DELHI: India will be unveiling its own cap and trade mechanism to deal with air pollution on February 1. The proposed market-based mechanism seeks to introduce a system of self-regulation among industrial units by putting a price on emission of pollutants. A price for emissions, makes it costly to pollute, therefore incentivising polluters to reduce emissions. The first domestic emissions trading scheme will begin in Tamil Nadu and Gujarat.
This is a shift from the command control system, where state pollution control boards determined the emission levels of individual units to a market-based system, where a price is set on emissions.
The regulator or state pollution control board sets an overall limit for emissions of different pollutants and industrial units self-regulate to ensure that these limits are not breached.
Broadly, the state pollution control board with set a limit on the amount of categories of air pollutants that can be emitted on the basis of its its desired concentration in the atmosphere. The state regulator then allocates through permits the “acceptable” level of emissions to industrial units. The industrial units can trade this right to emit, so units which exceed the set level will have to buy permits from those who manage to restrain emissions to that below the cap. This will help in lowering pollution levels at lower overall costs of compliance.
Environment minister Jairam Ramesh is of the view that in dealing with the issue of pollution there is a need to consider “new innovative regulatory systems that go beyond the traditional commands-and-control inspector raj systems, which have their own inherent limitations.” This would require the leveraging of technology and harnessing of markets to ensure better compliance with environmental laws and regulations.
There are several pre-requisites of this scheme that will have to be addressed. These include reliability in data monitoring, estimation of sccurate baselines and strong regulatory framework. Basically a transparent mechanism, with robust monitoring and institutional preparedness, is a must for the scheme to take off. The state regulators will need to consider how to implement the scheme in the unorganised sector where monitoring may not be easy.
The pilot project has been devised by a team from MIT/Harvard which includes economist Esther Duflo. It draws on the US experience of dealing with acid rain—reducing sulphur dioxide emissions—in the mid-nineties , the emissions offsets trading programme for total suspended particulate matter in Chile in the early nineties, and the emissions trading scheme for carbon dioxide in the European Union.
Tamil Nadu and Gujarat were selected for the pilot studies since there are critically polluted areas with large industries in these states suitable for an emissions trading scheme. Tamil Nadu also fits the bill for the project as it has already begun a continuous monitoring programme for generating realtime air quality information report. Gujarat has shown interest in innovative measures to control pollution.
