Effluents Market for Better Management of Industrial Effluents: A Pilot Study in Gujarat, India

Effluent treatment is costly and depends on the technoeconomic feasibility of installing treatment systems at individual industrial sites. Small and medium enterprises often rely on Common Effluent Treatment Plants (CETPs), which provide an opportunity to design and test a market-based effluent trading scheme within a closed-loop system between industries and the treatment plant. Building on Gujarat’s experience with an emissions trading system, researchers aim to pilot an effluent market that introduces volumetric pricing at CETPs to improve cost-effectiveness and reduce water pollution.

Gujarat faces water scarcity and high levels of industrial pollution. Current CETP charging systems rely on fixed operational fees that do not incentivize pollution reduction or efficiently distribute treatment costs across industries. The Tapi River system in Surat, which receives treated and untreated wastewater from multiple discharge points, illustrates the need for improved management strategies. The proposed pilot will implement a dynamic volumetric trading system across four CETPs in Surat, each serving about 75 to 100 industries. Permits will be allocated and traded based on effluent volume. Auction-based price discovery and defined compliance periods will be supported by continuous monitoring. A randomized rollout will allow a credible evaluation of cost, discharge, and operational outcomes.

The study will generate evidence on whether market-based regulation can reduce pollution while lowering treatment costs. Findings will inform future policies on water quality trading across industrial clusters and build on a long-standing partnership with the Gujarat Pollution Control Board, which has implemented emissions trading across more than 450 industries since 2019.