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Indian industries exchange polluted air for health fix

The first ever air pollution trading scheme in the world has produced results

Experts warn against relying too heavily on market solutions

The developing nations are unable to reduce air pollution

Bhasker Tripathi

In India, air pollution is a major health issue. The country's 1.4 million people breathe air that exceeds the World Health Organization guidelines for particulate (PM) matter.

These particles are finer than human hair and can cause serious health problems such as lung cancer and respiratory infections.

The average Indian loses 3.5 years in life expectancy due to pollution.

The industry is a major source of air pollution, and policymakers are struggling to combat it. They have taken the traditional approach by creating and enforcing emission limits.

Over the past two decades, PM2.5 concentrations -- which are particulates 30 times smaller than a human hair -- have increased in India by 11,6%.

In order to find a solution, economists from Yale University and University of Chicago in the United States as well as the University of Warwick (England) collaborated with Gujarat Pollution Control Board to create a unique emission trading scheme to reduce air pollution.

The pilot program has been running since 2019. Results published in The Quarterly Journal of Economics' May issue show that ETS reduces emissions in coal-burning power plants by 20-30% compared to those that use a standard approach.

Michael Greenstone Milton Friedman Distinguished Services Professor in Economics, University of Chicago and one of the pilot's architects, described the ETS pilot as "a rare win-win". It reduced pollution, decreased abatement costs, and increased the government's ability to enforce the air pollution control laws.

He said, "And all of this was achieved in an environment where the possibility of pollution markets working was viewed with great skepticism."

Experts say that such tools are only appropriate for industries in which a switch from coal to gas, or an upgrade in technology, like better filtration, is not enough to reduce pollution.

Swagata Dey, a policy expert at the Center for Study of Science, Technology and Policy, a think tank in India, warned that the ETS shouldn't become a "polluter-pays" model, where industries continue to pollute and pay only small fines.

She said that such schemes are best used in industries where process optimization and changes in fuel consumption are difficult to achieve on a short-term basis.

THE PILOT

The ETS, which was piloted in Surat, Gujarat, with 317 large coal-burning units, is hailed as the first market-based scheme in the world to control air pollutants in an industrial cluster.

The remaining plants are being kept in compliance with the standard pollution control regulations. They will be spot checked by the pollution board to make sure they meet the emission limits.

Plants on the market are now part of a cap and trade system, where a maximum limit for total PM emissions is set. This limit is then periodically lowered.

Plants are given permits for a certain amount pollution. A plant that is able to reduce pollution easily with a change in technology or fuel can trade permits with others that have a harder time reducing pollution.

Surat ETS plants not only reduced their overall pollution but also held enough permits for their legal compliance to be met 99% of time. Plants outside the ETS were able to meet their pollution limits at best 66% of time.

The study found that it costs plants operating under the ETS 11% lower to reduce emissions than plants operating under the command and control regulations.

CHALLENGES

Surat ETS was partly inspired by one of the biggest programs ever, the U.S. scheme for trading sulfur dioxide emissions to combat acid rain. This program reduced pollution by 40% from 1980-2003.

Canada and Europe have adopted successful trading markets for various pollutants based in part on U.S. examples.

But low-income countries are yet to follow these examples.

Pallavi Pan, an air-quality scientist and the head of Global Initiatives for Health Effects Institute in the United States, explained that this is because countries lack monitoring and regulatory capability.

Pant stated that "the relevant departments or ministry [in developing nations] may lack the financial and technical capability, or even personnel to implement effective solutions."

Pant said that the Surat ETS Pilot offers an interesting model which can help to generate better data and track mechanisms for specific pollution sources.

(source: Reuters)