Can pollution markets work? Study evaluates Gujarat’s cap-and-trade experiment

A new study found that the world’s first market for trading in particulate matter emissions, launched in Gujarat’s Surat, delivered both environmental and economic benefits. The programme lowered industrial pollution, slashed abatement costs for plants and improved compliance with environmental regulations.

Published in the May 2025 issue of The Quarterly Journal of Economics and released on April 15, 2025 , the study evaluated the emissions trading scheme (ETS), a cap-and-trade system for particulate pollution. The programme, operational for over five years, was the first of its kind globally for particulate matter and India’s first pollution trading scheme of any kind.

Using a randomised controlled trial in Surat — a major industrial hub — researchers found that the market-based programme reduced particulate emissions by 20 to 30 per cent. Pollution abatement costs dropped by over 10 per cent, and compliance with environmental laws rose to 99 per cent among participating plants.

Air pollution remains one of the gravest public health risks in India, with some research suggesting the average Indian loses over 5 years of their life expectancy due to air pollution exposure.