The government is launching pilot projects in Tamil Nadu and Gujarat with the help of a leading US institute to implement market-based trading mechanism for controlling industrial emissions.

"We will start the system from most advanced states -- Tamil Nadu and Gujarat -- which have already started online monitoring of air pollution, a key for implementing the trading mechanism," environment minister Jairam Ramesh told reporters on Tuesday.

Talking about the scheme's concept, he said, "those people who are meeting the standards can sell to those people who are not meeting the standards. But for this you require 24x7 online monitoring which will be done gradually."

Ramesh said that a team from Massachusetts Institute of Technology (MIT) will be associating with the two states in implementing the projects to be supported by the environment ministry.

"Once it is fully operationalised in these states the system will be extended to other states as well... once they introduce real-time monitoring," Ramesh said adding that as of now the scheme is voluntary in nature.

The idea has been borrowed from the United States.

Ramesh also referred to the Perform Achieve and Trade (PAT) initiative being introduced under the National Mission on Energy Efficiency.

It is a market-based mechanism to enhance cost effectiveness of improvements in energy efficiency in energy-intensive large industries such as cement through certification of energy savings that could be traded.

Noting that the pollution control bodies urgently needed complete overhauling in view of increasing environment awareness, he said, the ministry is finalising a major World Bank Project in this regard for institutional strengthening of the Central Pollution Control Board and State Pollution Control Boards.

"It is a Rs 1300 crore project spread over next five years for strengthening and overall reforms of the PCB and all SPCBs. Discussions are going on with the finance ministry and the World Bank in this regard," he added.

This will be the third world Bank project for the ministry, the first being a Rs 1200 crore project for coastal zone management project, and the second of a Rs 350 crore project for contaminated site remediation project, both approved in June this year.