Cart before horse

More thinking needed on domestic emission trading

Even as some major environment polluting countries have chosen to put on hold their plans for introducing domestic greenhouse gas (GHG) emission trading, India seems set to go ahead with it, disregarding the imperfections in a market-based emission reduction mechanism. No doubt, some well-conceived initiatives and incentives are badly needed to encourage polluting industries to cut down harmful emissions. But, a government-run emission trading system may not yield sufficient gains. The scheme mooted for this purpose by the Union environment ministry, to be tried out initially on a pilot basis in Tamil Nadu and Gujarat, envisages setting ceiling on permissible emissions of individual industrial units and issuing permits to them in accordance with their pollution quota. The industries which do not limit their pollution level can offset their default by buying permits from others. This essentially means that cash-rich polluting units can continue to pollute and yet claim compliance with pollution control requirements. Few countries outside Europe have gone in for domestic emission trading. Even Japan, one of the world’s largest polluters which had planned to introduce such trading, has now developed cold feet. The US, which has launched several kinds of market-based pollution control schemes, has also shown caution on domestic trading of all GHG emissions. It has chosen to limit such trading to only the oxides of sulphur and nitrogen that are believed to cause acid rain. The European Union has an elaborate internal emission trading system in place and is prodding other countries to also go in for it.

The genesis of market-based approaches for pollution control is traceable to the international carbon trading introduced under the clean development mechanism (CDM) of the Kyoto protocol on climate change. But even CDM has not sufficiently impacted the overall global GHG emission levels. Of course, carbon trading has led to transfer of some resources from the rich and polluting nations to the poor but low emitters. But, this has happened without the much-needed transfer of pollution mitigation technologies. Little wonder then that the recent Cancun summit on climate change failed to end uncertainty over the future of carbon trading-based CDM. To be successful, any domestic emission trading instrument will require technologically sound and an absolutely transparent system to fix pollution caps and the amount of emission permits to be allotted to each polluting unit. Besides, the actual pollution levels of each unit will need to be monitored regularly to work out their tradable emissions. Any error by the regulators in estimation of emission permits or actual emissions can distort the emission market apart from unfairly benefiting or penalising different industrial units.

The existing pollution control boards, in their present avatars, do not seem capable of undertaking this arduous task. This would require either creation of new institutions or revamping and strengthening of existing ones. Moreover, ways and means would have to be found to minimise, if not wholly plug, the scope for malpractices, corruption and harassment. Clearly, more thinking is needed before a domestic emission trading system is put in place.