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First in pollution control: how Surat industries will trade particulate matter (Relevant for GS Prelims & Mains Paper III; Environment)

The Gujarat government recently launched what is being described as the world’s first market for trading in particulate matter emissions. While trading mechanisms for pollution control do exist in many parts of the world, none of them is for particulate matter emissions. For example, the CDM (carbon development mechanism) under the Kyoto Protocol allows trade in ‘carbon credits’; the European Union’s Emission Trading System is for greenhouse gas emission; and India has a scheme run by the Bureau of Energy Efficiency that enables trading in energy units.

How will the Gujarat scheme work?
Launched in Surat, the Emissions Trading Scheme (ETS) is a market in which the traded commodity is particulate matter emissions. The Gujarat Pollution Control Board (GPCB) sets a cap on the total emission load from all industries. Various industries can buy and sell the ability to emit particulate matter, by trading permits (in kilograms) under this cap. For this reason, ETS is also called a cap-and-trade market.

Why was Surat chosen for the scheme?
In the last five years, the quality of air in Surat has deteriorated. Also, industries in Surat had already installed Continuous Emission Monitoring Systems, which makes it possible to estimate the mass of particulate matter being released.

How does the trading take place?
At the beginning of every one-month compliance period (during which one emission permit is valid), 80 per cent of the total cap of 280 tonnes for that period is distributed free to all participant units. These permits are allocated based on an industry’s emission sources (boilers, heaters, generators) as this determines the amount of particulate matter emitted. GPCB will offer the remaining 20 per cent of the permits during the first auction of the compliance period, at a floor price of Rs 5 per kilogram. Participating units may buy and sell permits among each other during the period. The price is not allowed to cross a ceiling of Rs 100 per kilogram or fall below Rs 5 per kg, both of which may be adjusted after a review.

How are the auctions conducted?
These take place on the ETS-PM trading platform hosted by the National Commodities and Derivatives Exchange e-Markets Limited (NeML). All participants must register a trading account with NeML. Transactions are linked to the bank accounts of the users, who can view updates through these accounts.

Will there be a punitive action for non-compliance?
Based on permits held by units at the close of the compliance and true-up periods, units will be declared compliant or non-compliant. An environmental damage compensation at Rs 200/kg will be imposed for emissions in excess of a unit’s permit holdings at the end of the compliance period. This amount will be deducted from an environmental damage compensation deposit that each unit has to submit before the start of the scheme — Rs 2 lakh for small units, Rs 3 lakh for medium ones and Rs 10 lakh for large units. After any deduction, a unit will have to deposit extra money to meet that shortfall.

 Source: The Indian Express



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