HEEP Faculty Fellow and Associate Scholar Advance Emissions Trading in India

Harvard Environmental Economics Program Faculty Fellow Rohini Pande and Associate Scholar Michael Greenstone have worked closely with the Indian government over the last year to plan India’s first emissions trading program—in this case for particulates, which have strong negative local health effects. Rohini Pande is Mohammed Kamal Professor of Public Policy at the Harvard Kennedy School; Michael Greenstone is the 3M Professor of Environmental Economics at the Massachusetts Institute of Technology.

Professors Pande and Greenstone, with their colleagues in India, last year prepared a working plan for the Ministry of Environment and Forests. Much of their early thinking is contained in a Discussion Paper released by the Indian Ministry of Environment and Forests, entitled "Towards an Emissions Trading Scheme for Air Pollutants in India" (August 2010). In the Forward to this Discussion paper, India’s Minister of Environment and Forests, Jairam Ramesh, observes that “An ETS [Emissions Trading Scheme] for Air Pollution would have the benefit of enabling lower pollution levels at lower overall costs of compliance. It would allow the regulator to set a cap on the aggregate level of pollution permitted, and then allow a self-regulating system to ensure that pollution does not exceed this cap.”

Minister Ramesh officially launched the program on March 24, 2011—though it will not go into effect until 2012. Ramesh, in a Times of India article on that date, described the program as “a necessary step” in addressing global climate change. The trading program will be rolled out with the collaboration of State Pollution Control Boards in Gujarat, Maharashtra, and Tamil Nadu, the three most industrialized Indian states, which have all indicated strong interest in using emissions trading as a regulatory instrument to reduce emissions from point sources. Notably, this is the first large-scale national environmental policy in India—and one of the first anywhere—that has an experimental evaluation designed into its roll-out. Professors Greenstone and Pande will direct the evaluation of the program.