Environmental issues such as climate change, biodiversity loss, water scarcity, air pollution, and waste management are some of the most pressing challenges facing the world today. To address these challenges, various policies and regulations have been implemented by governments and international organizations. However, these measures are often insufficient or ineffective due to various barriers such as lack of awareness, compliance, enforcement, and financing.
In the pursuit of a greener and sustainable future, the Indian government has introduced a new initiative called the Green Credit Programme. The Green Credit System is designed to incentivize voluntary environmental actions undertaken by individuals, private sectors, small scale industries, cooperatives, forestry enterprises and farmer-produce organizations for their environmental actions.
What is the Green Credit System?
The Green Credit System is a mechanism that complements the domestic carbon market. While the domestic carbon market focuses solely on CO2 emission reductions, the Green Credit System aims to meet other environmental obligations as well, incentivizing sustainable actions by various stakeholders.
- The Green Credit System is based on the concept of ‘Green Credit’, which means a singular unit of an incentive provided for a specified activity, delivering a positive impact on the environment.
- The Green Credit can be generated by undertaking any of the following activities:
- Tree Plantation-Based Green Credit: Supporting initiatives to increase greenery through tree planting and related efforts.
- Water-Based Green Credit: Promoting water conservation, harvesting, efficiency, and wastewater treatment and reuse.
- Sustainable Agriculture-Based Green Credit: Encouraging natural farming methods, land restoration, and improving soil health and food quality.
- Waste Management-Based Green Credit: Promoting sustainable waste management practices, including collection, segregation, and treatment.
- Air Pollution Reduction-Based Green Credit: Supporting measures to reduce air pollution and other pollution control activities.
- Mangrove Conservation and Restoration-Based Green Credit: Promoting efforts to conserve and restore mangrove ecosystems.
- Ecomark-Based Green Credit: Encouraging manufacturers to obtain the ‘Ecomark’ label for their products and services.
- Sustainable Building and Infrastructure-Based Green Credit: Supporting the use of sustainable technologies and materials in construction projects.
The stakeholders’ actions will generate Green Credits (GCs) through specific calculations verified physically. For instance, the draft on tree plantation projects specifies that 100 GCs will be allocated to eligible applicants annually for planting 100 trees over a period of 10 years.
Green Credits earned can be traded, allowing holders to sell them on a proposed domestic market platform. Buyers can utilize these credits to meet their obligations under other legal frameworks or to enhance their environmental credentials.
The Green Credit System is a mechanism that complements the domestic carbon market. While the carbon market focuses on reducing CO2 emissions, the Green Credit System goes further by tackling other environmental duties. It encourages people to take eco-friendly actions. At its core is the idea of ‘Green Credit,’ which rewards activities that help the environment.
Administrative Mechanism for the Green Credit Program (GCP)
Individuals and entities must register their activities through the central government’s dedicated app/website to obtain Green Credits. The administrator will verify the activity through a designated agency. Upon verification, the administrator will issue a Green Credit certificate, tradable on the Green Credit platform.
The Indian Council of Forestry Research and Education (ICFRE) serves as the Green Credit Program (GCP) Administrator, responsible for program implementation, management, monitoring, and operation. Initially, the GCP focuses on water conservation and afforestation. The ICFRE, in collaboration with experts, is developing the Green Credit Registry and trading platforms to facilitate registration, buying, and selling of Green Credits.
Many leading tech companies in India have pledged to achieve carbon neutrality by 2050. Some have already reduced emissions through mitigation measures or offset them by purchasing carbon credits from the carbon market. A Green or Carbon Credit represents one tonne of carbon dioxide equivalent removed from or prevented from entering the atmosphere. Afforestation and preventing deforestation are significant generators of carbon credits globally, especially in Africa, Asia, and Latin America.
Similar to the carbon market system, where organizations trade carbon credits, entities can claim Green Credits for environmentally positive actions and trade them for financial benefits on a domestic market platform. The Green Credit system complements the carbon credit system, with activities eligible for Green Credits also eligible for carbon credits if they lead to carbon emission reduction or removal. However, Green Credits generated or acquired due to legal obligations cannot be traded.
With the risk of large-scale and irreversible environmental changes increasing, it is important to focus not only on preserving but also restoring natural resources. So the green credit system is a significant step taken towards reshaping financial systems for a more sustainable future.
Green Credits for Tree Planting
The Green Credit Programme (GCP) draft on tree plantation projects specifies that 100 Green Credits (GCs) will be allocated to eligible applicants annually for planting 100 trees over a period of 10 years. The requirement for qualifying under the tree plantation-based Green Credit is the plantation of a minimum of 100 trees per hectare, with a maximum of 1,000 trees per hectare.
However, there are also some serious reservations about the programme. As it aims to boost forest cover by rewarding tree planting, but for true impact, strategies tailored to local ecology and socio-economic realities are crucial. Despite the seemingly positive rationale of incentivising voluntary action for sustainable environmental practices through a payment system or tradable green credits, tree-plantation programmes warrant a more critical examination of their modus operandi and outcome. This is particularly important when considering factors such as instances of high mortality rates of plantations, sub-optimal use of financial resources, and unclear benefits to local communities.
The GCP aims to generate tradable green credits for activities such as increasing forest cover for which the government has issued guidelines. However, knowledge asymmetries and mismatched expectations of stakeholders may cause bottlenecks in its implementation, leading to ineffective outcomes. The guidelines have generated both concerns as well as criticism from environmental experts, researchers, and conservationists.
To begin with, the payments, or green credits, do not indicate the objective of the tree-planting activities and, therefore, it is not clear what the measurable outcome is for which the credit is generated. If, however, the objective is carbon sequestration, the outcome should be the amount of additional carbon sequestered. Large-scale tree planting, for instance, does not guarantee the desired outcomes. It will require a strong monitoring and evaluation mechanism where the outcomes and success indicators are clearly defined. Historical experience tells us that high monitoring and evaluation costs have been the bane of all market-based forest carbon sequestration schemes, and these costs need to be factored into the GCP at the very beginning for effective implementation.
The GCP rules also outline species lists based on rainfall zones. Although this is a good starting point, it also needs to consider other crucial factors such as soil quality, water availability, and topographical features.
Another key issue is that the guidelines propose a standardised recommendation of 100-1,000 trees per hectare. This is unreasonably high for the subhumid, semi-arid, and arid regions of India, necessitating a reconsideration.
Some Potential Issues
India has dabbled with similar mechanisms to drive down energy consumption and is now moving into the trade of carbon credits while setting up its domestic carbon market.
Even tracking carbon credits, which focuses on just one gas, is a complex exercise that is challenging to regulate. Extending that same method to other ecosystems and pollution areas creates a strong risk of greenwashing – the practice of making deceptive or exaggerated claims regarding environmental sustainability to portray a positive image. Although the concept of Green Credits appears promising, experts have voiced concerns about the risk of greenwashing within this market-based mechanism without actually delivering substantial environmental benefits.
But unlike a carbon market – which prices a standard unit of per tonne carbon emitted – the GCP does not yet have a standard unit of measurement for the benefits accrued across various activities, which range from tree plantations to sustainable infrastructure. The GCP is envisioned to function as a separate market mechanism but may overlap with the carbon market if the “green credit” also results in the reduction of carbon emissions, notes the programme draft.
Without proper oversight or strong regulatory mechanisms, the green credit scheme could open the door to greenwashing or double counting, experts warn. There is uncertainty over details of how the credits will be calculated, measurement of benefits and what happens if the credits are fraudulent.
There’s apprehension that certain companies or entities might engage in superficial activities solely to accrue Green Credits, without genuinely addressing environmental concerns. Moreover, doubts linger regarding the effectiveness of these mechanisms in achieving immediate emissions reductions. Some argue that resources might be better directed toward more transformative government-led initiatives rather than solely focusing on monitoring and preventing fraud within the Green Credit system.
It also raises serious questions about how rigorous the monitoring will be and who should take responsibility for pollution reduction and biodiversity savings. Any programme, regardless mandatory or voluntary, needs robust process, involving technical support, good measurement tools and more importantly proper monitoring at the source level. Since green credit or for that matter carbon market are new programmes for Indian companies, these would work well with process support involving awareness to monitoring.
The Way Forward
The environment ministry has come out with two separate methodologies for generating such credits through water harvesting and tree plantation projects in different states/UTs, and buying/ selling it through a centrally-managed dedicated platform.
Going forward, we need an ecologically sensitive approach that accounts for India’s diverse bio-geographic zones. There is an opportunity to cultivate a dynamic, more extensive, and non-prescriptive list of tree species, drawing insights from local knowledge documented in People’s Biodiversity Registers.
This approach aims to enhance ecological suitability and provide users with a broader range of choices. The list could incorporate ‘no-go rules’, particularly excluding exotic or non-native species. The vision therefore is to create a system that becomes a beacon for sustainable practices within the complex fabric of India’s environmental landscape.
