A groundbreaking study has revealed that Surat Gujarat, home to the world’s first market for trading particulate matter emissions, has successfully reduced industrial pollution and saved businesses money. Published in the Quarterly Journal of Economics (May 2025 edition) the study highlights how this innovative Emissions Trading Scheme (ETS) achieved both environmental and economic wins.
The ETS, which began as a pilot project over five years ago, is the first of its kind globally to target particulate pollution a major health hazard in India. The programme was a joint effort by the Gujarat Pollution Control Board and the Energy Policy Institute at the University of Chicago.
Using real-time monitoring systems, 318 large coal-using industrial plants in Surat were brought under a cap-and-trade system. Each plant was given or could buy permits allowing it to release a certain amount of particulate matter. Those who emitted less could sell their extra permits to others, creating a market-driven incentive to cut pollution.
The results were impressive. A randomised trial found that participating industries reduced emissions by 20–30%, cut their pollution control costs by 11%, and showed a 99% compliance rate with environmental rules. In contrast, non-participating plants complied just 66% of the time.
The study’s authors economists from the University of Chicago, Yale, and Warwick estimated that the benefits of this approach outweighed the costs by at least 25 times.
Importantly, the success of the ETS in Surat proves that even in countries with limited enforcement capacity, market-based solutions can work better than traditional regulation. The scheme also inspired hope for tackling India’s severe air pollution crisis, which research says reduces the average Indian’s life expectancy by over five years.
Rohini Pande, one of the lead researchers, summed it up: “This isn’t just about emissions it’s about showing the world that smart policy can deliver cleaner air and economic gains at the same time.”