Emissions Trading Scheme (ETS)

Emissions Trading Scheme (ETS): The world’s first-ever market for trading particulate emissions in Surat helped reduce pollution by 20–30% in an industrial cluster through a market mechanism.

• About Emissions Trading Scheme (ETS): It is used to cut greenhouse gas emissions while offering financial incentives to industries.
• Cap on Emissions: Regulators set a cap on total emissions that can be released into the air.
• Permit Allocation: Industries receive emissions permits or allowances instead of facing fines or notices.
• Cap-and-Trade Mechanism: The system is called ‘cap-and-trade’ as permits can be traded among industries.
• Pollution Limit: Each permit allows release of a specific quantity of pollution like a kg of PM or ton of CO₂.
• Trading Incentive: Plants using pollution-reducing technology can save and sell permits to other plants.
• Compliance Support: Plants with fewer resources get time to shift to cleaner technology while staying within the cap.
• Price Band: A minimum floor price and maximum ceiling price are set to ensure market stability.
• Cap Adjustment: Regulators may tighten the cap using pollution monitoring data.
• Penalty for Breach: Industries breaching caps face penalties per tonne and may need to surrender permits.