How Gujarat’s ETS Is Cleaning the Air and Empowering Industry

In a historic and bold environmental move, Gujarat became the first place in the world to introduce a market-based trading scheme to regulate particulate air pollution. Launched in the industrial city of Surat in 2019, this Particulate Matter Emission Trading Scheme (ETS) has shown impressive results—cutting pollution levels by 20% to 30% while reducing regulatory burdens on industries.

This innovative mechanism not only reshapes how pollution is regulated in India but also serves as a global model for smart environmental governance.

What Is the Particulate Emission Trading Scheme (ETS)?

The Emission Trading Scheme (ETS) is a cap-and-trade system that allows industries to buy and sell pollution permits under a pollution cap set by the government. While cap-and-trade models have been used globally to regulate carbon emissions, Gujarat is the first to apply this model specifically to particulate matter (PM10 and PM2.5)—a major contributor to air pollution and respiratory illnesses.

Key Features

• Implemented by: Gujarat Pollution Control Board (GPCB)

• Support from: Ministry of Environment, Forest and Climate Change (MoEFCC), World Bank, Energy Policy Institute at the University of Chicago (EPIC-India), Abdul Latif Jameel Poverty Action Lab (J-PAL South Asia)

• Location: Pilot run in Surat, Gujarat

• Start Year: 2019

• Target Pollutant: Particulate Matter (PM10 and PM2.5)

• Monitoring Method: Continuous Emission Monitoring Systems (CEMS)

How Does the Scheme Work?

1. Pollution Cap: GPCB sets a total pollution cap for all industries in a given zone.

2. Permit Allocation: Each unit is given a quota (permits) for how much it can pollute.

3. Real-Time Monitoring: All industries must install CEMS to measure emissions in real time.

4. Trading Mechanism:

   • If a firm emits less, it can sell its extra permits.

   • If it emits more, it must buy permits from cleaner firms.

5. Market Operation: Trading is done through an online platform facilitated by regulators, ensuring transparency.

The Results: Cleaner Air & Smarter Compliance

A 2021 evaluation by EPIC-India and J-PAL South Asia showed the following key results:

• 20–30% reduction in particulate emissions from regulated factories.

• 35% lower cost of compliance compared to traditional command-and-control regulation.

• No decline in industrial productivity—proving clean air doesn’t mean slow growth.

• Higher transparency and enforcement due to real-time CEMS data.

• Improved health indicators in nearby communities.

Why Surat?

Surat, a rapidly industrializing textile and dyeing hub, was chosen due to its:

• High levels of particulate emissions from small- and medium-scale industries.

• Existing infrastructure for environmental monitoring.

• Willingness of local industry leaders to adopt cleaner technology.

The city’s environmental challenge became an opportunity to pilot a data-driven, scalable policy experiment.

Economic Benefits for Industries

Unlike conventional systems, which impose uniform pollution limits, ETS lets companies decide how and when to reduce emissions:

• Industries that innovate and reduce pollution get to earn revenue by selling unused permits.

• Companies that find it difficult to reduce emissions can buy permits at a lower cost than retrofitting technology.

• This flexibility lowers costs and encourages voluntary compliance.

The scheme thus creates a market for clean air, where efficiency meets environmental protection.

Human Impact: Air That’s Safer to Breathe

It’s not just about numbers. The real-world impact is being felt by:

• Workers in factories who now face less exposure to toxic air.

• Families living near industrial zones are enjoying fresher, safer air.

• Children and the elderly—often most vulnerable to pollution—experience better respiratory health.

By focusing on particulate matter, which causes lung disease, cardiovascular problems, and premature deaths, Gujarat is directly protecting public health.

Why This Is a Global Breakthrough

Gujarat’s ETS is being hailed as a policy innovation with global relevance, especially for:

• Developing countries with growing industries and weak enforcement capacity.

• Cities facing industrial pollution but hesitant to clamp down on economic growth.

• Policymakers are looking for low-cost, tech-driven, scalable solutions.

The World Bank has also recognized Gujarat's ETS as a global first and a replicable framework for other regions.

What’s Next?

Following Surat’s success, Gujarat is planning to expand ETS to other cities, including

• Ahmedabad

• Vadodara

• Rajkot

The Central Pollution Control Board (CPCB) is now considering nationwide adoption, and dialogues have begun for piloting the system in other states.

There are also discussions to include other pollutants in the market, such as

• Sulfur dioxide (SO₂)

• Nitrogen oxides (NOx)

• Carbon emissions (CO₂)

FAQs

What is Gujarat’s Emission Trading Scheme (ETS)?

• Gujarat’s ETS is the world’s first market-based trading program for particulate matter pollution. It allows industries to buy and sell emission permits under a pollution cap, encouraging cost-effective pollution reduction while promoting clean air.

How does the ETS work in Surat?

• In Surat, industries are given emission limits and equipped with Continuous Emission Monitoring Systems (CEMS). Those who emit less can sell their unused permits to others. This creates a cap-and-trade market, ensuring overall emissions stay within safe limits while industries find the most efficient way to comply.

What pollutants does the Gujarat ETS cover?

• Currently, the scheme focuses on particulate matter (PM10 and PM2.5)—dangerous air pollutants known to cause respiratory and cardiovascular diseases. Future versions may expand to include other pollutants like SO₂, NOx, or even CO₂.

How effective has the scheme been so far?

• A randomized evaluation showed a 20–30% reduction in PM emissions from participating industries. Additionally, the scheme reduced compliance costs by 35% without affecting industrial productivity, making it both environmentally and economically efficient.

Which organizations support Gujarat’s ETS?

• The program is supported by the Gujarat Pollution Control Board (GPCB), the Ministry of Environment, EPIC India, J-PAL South Asia, and the World Bank, combining international expertise with local implementation.

Why was Surat chosen for the pilot program?

• Surat, a major industrial hub with significant air quality challenges, was ideal due to its high concentration of textile and dye industries, a proactive regulatory setup, and willingness from stakeholders to test innovative approaches.

Is Gujarat planning to expand the ETS?

• Yes, after the success in Surat, the Gujarat government is working on scaling the ETS to other cities like Ahmedabad, Rajkot, and Vadodara. The Central Pollution Control Board is also exploring nationwide implementation.

How does this help people living near industrial areas?

• By reducing particulate matter in the air, the scheme directly benefits public health—especially for children, the elderly, and workers. Communities near factories report cleaner air and fewer respiratory issues since implementation.

Gujarat’s ETS is more than just a policy experiment. It’s a beacon of hope for polluted cities, proving that data, markets, and environmental stewardship can coexist. At a time when climate crises and air quality emergencies are making headlines globally, Gujarat is quietly pioneering solutions on the ground.

By putting a price on pollution, the state has done what no one else has dared to—turn clean air into a tradable asset, empowering industries and citizens alike to breathe easier.

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