Market-based tools like emissions trading — long hailed as successful in the US and Europe — can deliver big wins for cleaner air in developing nations too, the Economic Survey 2025-26 has asserted, citing a pioneering experiment in Gujarat’s Surat city.
Traditionally, experts doubted whether pollution trading schemes could work in lower-capacity settings due to weak monitoring, limited enforcement, and low state credibility. Regulators often struggle to track emissions accurately or ensure polluters buy permits for every unit released.
But the Survey points to strong counter-evidence from the world’s first particulate matter emissions trading market, launched in Surat — a major industrial hub — and evaluated in the seminal 2023 study by Greenstone et al.
The scheme, run by the Gujarat Pollution Control Board, covered 317 large industrial plants (mostly coal-burning units in textiles and other sectors). It replaced old command-and-control rules (tech mandates and concentration limits) with a cap-and-trade system, backed by mandatory Continuous Emissions Monitoring Systems (CEMS) for real-time tracking of particulate emissions.
Key findings from the randomised trial:
The market worked smoothly — active trading took place, and plants achieved near-universal compliance (99% of emissions covered by permits vs just 66% under the old regime).
Participating factories slashed particulate emissions by 20-30% compared to those under traditional regulation.
For the same pollution level, abatement costs dropped by 11-14%, thanks to firms trading permits based on their differing marginal costs.
The Survey calls this a breakthrough proof that, with credible real-time monitoring like CEMS in place, pollution trading schemes can achieve major emissions cuts at much lower compliance costs — even in challenging developing-country contexts.
“This shows market-based environmental regulations are not just for rich nations. When supported by strong tech-enabled enforcement, they offer an effective and cost-efficient path to cleaner air,” the document notes.
The Surat pilot has already inspired expansions in Gujarat (including Ahmedabad) and discussions in other states, highlighting its potential as a scalable model for tackling industrial air pollution across India.
