Surat Emission Trading Scheme

GS3 – Environment

Context:

The Emission Trading Scheme (ETS) launched in Surat, Gujarat, has shown how market-based tools can successfully curb particulate matter (PM) pollution, based on results observed from 2019 to 2021.

Overview of Surat ETS

• Launched in 2019, the Surat ETS is the first emissions trading market globally designed specifically to control particulate matter pollution through a Cap-and-Trade system—similar to models used in carbon trading.
• The initiative targets industrial emissions, which are responsible for roughly one-third of the PM pollution in the city.

Implementation and Monitoring

• Trading activities are carried out on the NeML platform (National Commodities and Derivatives Exchange e-Markets Ltd).
• The scheme is overseen by the Gujarat Pollution Control Board (GPCB).
• It involves collaboration with leading institutions such as:
  • EPIC India (University of Chicago),
  • Yale University,
  • J-PAL South Asia,
  • Various industry associations.
• Continuous Emission Monitoring Systems (CEMS) have been installed in participating industries to enable real-time tracking of emissions.

Understanding Carbon Trading Mechanisms

1. Emission Trading (Cap-and-Trade):
   • A regulatory framework where carbon emissions are capped.
   • Emission permits are allocated based on historical data and capacity.
   • Entities with surplus permits can trade them with those exceeding their emission limits.
   • Non-compliance leads to penalties or fines.
2. Offset Trading (Baseline-and-Credit):
   • Organizations earn carbon credits by supporting projects that reduce or capture emissions.
   • Helps entities meet emission targets when direct reductions are not practical.
3. Carbon Credit Trading:
   • One carbon credit equals one tonne of CO₂ (or equivalent GHG) reduced or removed.
   • These credits can be traded to help other entities offset their emissions.

Other Tradable Units in the Carbon Market

• RMU (Removal Unit): Generated through activities like reforestation.
• ERU (Emission Reduction Unit): Produced under joint implementation projects.
• CER (Certified Emission Reduction): Created from clean development mechanism (CDM) projects.