From Gujarat to Rio: How India's pollution solution could offer lessons for Delhi-NCR’s dirty air crisis

Nearly 15 years ago, a group of economists, engineers and regulators in Gujarat began grappling with a deceptively simple question: Could industries be encouraged to reduce pollution without having to fear shutdowns?

Today, that experiment has evolved into an emissions trading scheme (ETS) that is travelling nearly 14,000 km from India and emerging as one of the country’s newest environmental exports.

After reshaping industrial pollution regulation in Gujarat and inspiring similar programmes in Maharashtra and Rajasthan, the India-born model is now headed to Rio de Janeiro.


The Brazilian city has signed a letter of intent to explore whether the approach can be adapted to tackle its own pollution challenges. If implemented, Rio would become South America’s first emissions trading system focused on industrial particulate pollution.

A market-based answer to industrial pollution

For Delhi-NCR, which finds itself battling a severe air pollution crisis every winter, Gujarat’s experience offers another way to approach industrial emissions. Instead of relying solely on penalties and shutdowns, the model uses economic incentives to encourage industries to compete to pollute less.

For decades, India’s industrial pollution control largely depended on periodic inspections and closure notices when factories breached emission limits. Researchers believed there was another way — one that rewarded factories that invested in cleaner operations rather than treating every industrial unit in the same manner.

The principle behind an ETS is relatively straightforward. Regulators establish an overall pollution cap for an industrial cluster and divide that cap into permits.

Factories that reduce emissions below their targets can sell their surplus permits to plants for which cutting pollution is more difficult or expensive. Cleaner factories can therefore earn from reducing emissions, while other plants gain flexibility in meeting their obligations. Crucially, total pollution remains within the prescribed cap.

Surat became the testing ground

The approach was piloted in Surat in 2019 by researchers affiliated with the Energy Policy Institute at the University of Chicago (EPIC) and J-PAL, working alongside the Gujarat Pollution Control Board (GPCB).

The pilot involved 162 of Gujarat’s 317 large coal-burning industrial plants. The remaining plants continued under conventional regulation, giving researchers a comparison group against which to measure the effectiveness of the new approach.

The results were striking. Plants participating in the randomised trial reduced particulate emissions by 20-30% while cutting pollution-control costs by 11%. Compliance reached 99%, compared with roughly two-thirds under conventional regulation.

Researchers estimated that the benefits of the programme exceeded its costs by at least 25 times.

Emissions fell while compliance improved

Under conventional regulation, a typical plant emitted around 1,300 kg of particulate matter each month.

For similar industries operating under the ETS, emissions fell to around 900-1,000 kg per month — representing a 20-30% reduction. The improvement was sustained across all 10 compliance periods during the nearly two-year study, which ran from April 2019 to 2021.

The flexibility built into the system allowed companies to meet pollution targets more efficiently and at a lower cost.

“This pollution market was made in India, tested in India and it succeeded in India. Just as pollution doesn’t respect borders, ideas don’t respect borders too,” said Emissions Market Accelerator (EMA) co-chair Michael Greenstone, one of the four researchers who worked with GPCB on the experiment.

For Dr Kaushik Deb, the executive director of EMA, one of the biggest challenges was persuading industrial units that cleaner air and economic growth did not have to be competing priorities.

“The first reaction was, ‘why another form of regulation?’ But we created the scheme such that there were no losers,” Deb told TOI. Only one industrial closure occurred under the system in seven years, he said.

From Gujarat to the global stage

The programme now covers a population of nearly 300 million across India and is expanding beyond particulate pollution to include sulphur dioxide and wastewater pollution.

Dr Bala Srinivasan, the EMA co-chair, said the model’s international journey gained momentum after Gujarat became an Earthshot Prize Finalist in 2025. Founded by Prince William, the prize identifies and supports the scaling of breakthrough environmental solutions from thousands of entries worldwide.

“Earthshot suddenly gave us a lot of global exposure,” Srinivasan said. That visibility, he said, helped open conversations beyond India — including with Rio — while also generating renewed interest among Indian states as the prize prepares to come to Mumbai later this year.

Could Delhi-NCR take a cue?

For Delhi-NCR, the Gujarat experiment presents a different way of thinking about industrial pollution — one that gives businesses an economic incentive to reduce emissions rather than relying exclusively on inspections, penalties and shutdowns.

The region’s pollution challenge is considerably more complex than that of Surat’s industrial cluster, meaning the Gujarat model cannot simply be transplanted to the national capital region.

However, experts believe its broader principle could offer a useful lesson: reducing emissions across sectors can become a competitive advantage for businesses rather than simply another regulatory burden.

In a region where repeated pollution-control restrictions have often created tension between environmental protection and economic activity, the Gujarat experience could offer a model worth examining.