Gujarat in India Intends to Launch Cap-and-Trade Market for Carbon Emissions

To guarantee climate-friendly economic growth and boost an energy transition, the Gujarat Government, India, is seeking to implement a cap-trade market for carbon emissions from significant sources. The market will permit power plants and industries in Gujarat to trade CO2 permits. Also, an overall cap will offer the government a flexible tool to meet climate goals. The cap-and-trade market will be the first among today's prominent economies outside China.

As per Gujarat's CM, this market is essential to the state's climate and economic strategies. With the launch of this carbon market, the state is resuming its legacy of pioneering the latest policy solutions, paving the way for others to follow in India and worldwide.

Gujarat's carbon market supports the state's experience in operating the first emissions trading market in the world for specific pollution, which started in Surat in 2019. Since its inception, the Surat pollution market - which achieved a prestigious SKOCH award for the Best Government Initiative this year - has decreased particulate emissions in Surat by around 24 per cent without any measured increase in the industry running cost. The program is now reaching other cities in the state and beyond.

Gujarat also paved the way for enhanced environmental audits that have systematically decreased pollution in the state. The audit norms need environmental auditors to be randomly assigned to industrial facilities and have their work cross-checked for accuracy. The reforms came after a large-scale impact study revealed the modifications lowered pollution by 28%. The Government of India (GoI) stated that the Gujarat reforms made for a convincing case for other states.

A research team from the Yale University, the University of Chicago and the Abdul Latif Jameel Poverty Action Lab (J-PAL) will help the Gujarat government design the CO2 market. Just as California has led the way for climate and environmental progress throughout the U.S.A., Gujarat is proving to be a trendsetter in India.

According to a prominent official, by using markets to recognise the least cost way for heavy polluters to adhere to and rewarding facilities that reduce carbon using low-cost methods, they believe the program will contribute to rapid economic development, simplify the rules of conducting business and aid meet their climate commitments.

Another official said that fully committed to the Nationally-Determined Contributions and the realisation of Panchamrit as vocalised by Mr Narendra Modi, the Prime Minister of India, Gujarat is ready to explore new means and ways, including market mechanisms to address climate change effectively.