Real-Time Data and Market-Based Solutions to Reduce Air Pollution in India

The use of air quality monitoring networks to inform urban policies is critical especially where urban populations are exposed to unprecedented levels of air pollution. Pande, Subramanian, Sudarshan and co-authors describe a high-precision spatio-temporal prediction model that can be used to derive fine-grained pollution maps.

High pollution persists in many developing countries despite strict environmental rules. In collaboration with an Indian environmental regulator, authors Green, Duflo, Pande and Ryan increased the frequency of environmental inspections of factories and randomized their application – and found only a slight increase in compliance. Counterfactual simulations show that discretion in targeting helps enforcement: inspections that the regulator assigns cause three times more abatement than would the same number of randomly assigned inspections.

More than 660 million Indians breathe air that fails India’s National Ambient Air Quality Standards. Authors Greenstone, Harish, Pande, and Sudarshan draw lessons from a review of empirical evidence as well as data from Delhi’s program to ration driving and industrial emissions in Gujarat and Maharashtra. They make the case that market-based policy instruments may solve several problems with existing regulation in India, and have the potential to reduce air pollution and cut compliance costs at the same time.

Using a combination of ground-level measurements and satellite data, authors Greenstone, Nilekani, Pande, Ryan, Sudarshan, and Sugathan estimate that reducing pollution in these areas of India that exceed the National Ambient Air Quality Standard for fine particulate pollution would increase life expectancy for these Indians by 3.2 years on average. They outline directions for environmental policy to start achieving these gains.

In many regulated markets, private, third-party auditors are chosen and paid by the firms that they audit, potentially creating a conflict of interest. Authors Duflo, Greenstone, Pande, and Ryan collaborated with the pollution regulator in an Indian state on a two-year experiment to curb conflicts between third-party auditors and the firms they audit. They find that reformed incentives for third-party auditors can improve their reporting and make regulation more effective.

In the Indian state of Gujarat, authors Duflo, Greenstone, Pande, and Ryan study differences in the quality of environmental auditors. They find a substantial range of auditor quality, and give suggestive evidence that plants demand reputable auditors as a signal to insulate themselves against regulatory action.

The goal of environmental regulation is to protect human health and livelihoods from environmental harms. This paper discusses how a market-friendly scheme can reduce particulate emissions from stationary sources and contribute to the improvement of human health. Authors Greenstone, Krishnan, Pande, Ryan, and Sudarshan suggest that Indian regulators may adopt market-friendly regulation in a pilot form, in order to scientifically measure the effect of this regulatory tool on environmental and economic outcomes in the Indian context.

This Concept Note reflects on the experience of existing emissions trading programs, such as the U.S. Acid Rain program. Authors Duflo, Greenstone, Pande, and Ryan explore the lessons for implementation of a potential Trading Pilot Scheme in India.