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Michael Greenstone, Rohini Pande, Nicholas Ryan, and Anant Sudarshan
The flagship program of the India Initiative is an evaluation of a pilot Emissions Trading System (ETS) for particulate matter, a byproduct of the combustion of solid and liquid fossil fuels. While the primary goal of this program is to protect public health, it also bears directly on industrial energy consumption. By measuring and regulating particulate matter emissions, this program will affect the energy use of regulated industrial plants. In particular, conserving energy, improving combustion and switching fuel type or source are likely low-cost means of abating particulate matter emissions.
The research design of this project will introduce emissions trading systems for suspended particulate matter (SPM) in the three leading Indian industrial states, covering several of the most polluted industrial areas in the country. The implementation of the design will come in several stages. Researchers are working with the regulators, the Ministry of Environment & Forests and State Pollution Control Boards, to define eligibility criteria for emissions trading based on location, sector, and ex ante emissions capacity data. The research team will fix eligibility criteria in this group and randomly allocate firms into trading and non-trading subgroups. The non-trading sources will be placed on fixed standards for the total mass of SPM emitted and subject to traditional command-and-control regulation. The trading sources will be allowed to trade permits, denominated in SPM mass, among themselves in order to meet their regulatory obligation. The research team will collect emissions data from continuous emissions monitoring systems, and cost and engineering data from field surveys, at each unit in both groups over the first two years of the new regulation.
The project has made a great deal of progress in designing a viable trading system. The project team has worked with the State Pollution Control Boards and the Central Pollution Control Board to develop detailed technical standards for Continuous Emissions Monitoring Systems (CEMS), which are essential for monitoring pollution emissions at each plant. These systems are now being field-tested. Initial results show that particulate matter CEMS accurately match the pollution readings produced by traditional manual sampling methods. This result is important in establishing the reliability of the monitoring on which the emissions market will depend. The State Pollution Control Boards and the research team have also selected the group of plants to which the regulation will apply. The research team recently submitted a formal Detailed Project Report (DPR) to the Ministry of Environment and Forests for the approval of the project design and budget over the coming three years, potentially allowing the team to leverage the investment that SSP has made in this early-stage research into a viable emissions trading system.
This project will represent the first application of continuous emissions monitoring to regulation of particulate matter emissions in developing-country contexts and the first application to relatively small-scale industry anywhere in the world. Furthermore, the information release treatment will be the first publicly available data on plant-level pollution in India. The project will run until the middle of 2014. A baseline survey, which will require three months for completion, began in August 2013. Thereafter, industry will be mandated to phase in installation of CEMS. Evaluation will be concurrent and industries will come online as they install equipment. Early results of the CEMS evaluation are expected to become available by the end 2013. The successful implementation of a CEMS is the first stage of enabling a viable ETS.