Addressing administrative and market-based concerns is crucial for the success of Green Credit Program

On October 13, 2023, the Ministry of Environment, Forest and Climate Change introduced a groundbreaking initiative, the Green Credit Program (GCP), which highlighted India’s pro-active stance in promoting eco-conscious endeavours and is aimed at advancing the ‘LiFE: Lifestyle for Environment’ programme announced by the Prime Minister in 2021. The web portal for the GCP was launched at COP 28 in Dubai and the initiative garnered support from around the globe.

The GCP resonates with the government’s commitment to foster ‘green growth’ and achieve ‘net zero by 2070’, as outlined in the union budget. Three governing bodies oversee the GCP: the inter-ministerial Steering Committee for governance framework; the Indian Council of Forestry Research and Education, which is tasked with implementation, monitoring and administrative responsibility; and the technical committees which are responsible for the registry of organisations and issuance of credits.

Economic Growth

The GCP incentivises voluntary environmental actions through a market-based mechanism percolating across multiple sectors and stakeholders. It is similar to the carbon credit trading mechanism within the cap-and-trade system and seeks to extend the approach to various environmental actions. Businesses and individuals can earn green credits for carbon emissions reduction and environmentally beneficial activities. These green credits have a pre-assigned monetary value and can be sold on the GCP web portal (https://www.moefcc-gcp.in/registry/overview) once they have been validated by the Steering Committee. The credits can also be traded among organisations via a domestic market platform.

The GCP encompasses eight sectors aimed at enhancing tree cover, embracing natural and sustainable agricultural practices, advocating for water conservation, implementing efficient waste management strategies, improving soil health and nutritional value of food, and mitigating air pollution.

The GCP also extends its ambit to other nations through the Global Green Credit Initiative, an international platform for dialogue, collaboration and the exchange of environmental instruments with a resolution of sharing technical expertise, experiences and policy instruments across borders, while also supporting the implementation of projects and activities within the same marketplace.

Prime Minister Narendra Modi emphasised, “Carbon credits, driven by a commercial mindset, have limited scope and lack associated responsibility. We need to move away from a destructive mindset that prioritises personal benefit.” The primary objectives of the initiative include encouraging voluntary tree plantation across the country, building a land inventory for allocation of areas suitable for afforestation, meeting CSR and ESG (environmental, social, and governance) compliance requirements of businesses, ensuring transparency in the issuance of credits, promoting inclusivity by involving stakeholders of all sizes and rewarding effective environmental stewardship. Therefore, the GCP attempts to intertwine environmental conservation with personal growth.

Specifically with regard to afforestation, the land inventory for plantations can facilitate the registration of degraded land by respective forest departments. This process can ensure that voluntary plantation efforts are directed towards lands that contribute most effectively to ecological restoration. Another aim of the GCP is to encourage government institutions, NGOs, private companies, public sector undertakings, communities, philanthropists and individuals registered under the Societies Registration Act to voluntarily select plantation blocks for afforestation. The entire process of afforestation is incentivised by the issuance of green credits and streamlined via a digital registration, verification and monitoring system. The ultimate vision is to offer a rewarding alternative to punitive measures, aiming to catalyse positive environmental outcomes across the country.

Scope, Future Direction

Evidently, the GCP holds immense promise in advancing India’s sustainable development goals, enhancing the forest and tree cover in the country and fulfilling its commitments under several multilateral environmental agreements, primarily the Paris Agreement. The initiative holds significant potential for widespread applicability, as evidenced by the ever-increasing funding for environmental causes in India. For instance, in FY22, India’s CSR (corporate social responsibility) spending on the environment doubled to approximately Rs 2,837 crore compared with FY21. The GCP has immense scope for implementation within India, can bolster India’s “green growth” and also strengthen its position as a global leader in combating climate action. It holds tremendous potential to positively impact the lives of the masses by ensuring a cleaner, greener and healthier sustainable environment.

The success of GCP holds on the future directions on five key points: aligning more closely with global environmental standards and national policies; expanding to include more ecosystems and communities, especially in vulnerable areas; leveraging technology for better monitoring, reporting and transparency in the programme; strengthening public-private partnerships to pool resources, expertise and efforts; and focus on capacity building and education to empower participants with the knowledge and skills needed.

Sustainable Alternative

The GCP has the potential to catalyse a paradigm shift in fostering green growth in India by aligning economic development with environmental sustainability. By incentivising businesses and individuals to invest in eco-friendly practices, it encourages a shift from traditional models of growth to more sustainable alternatives.

Therefore, it not only supports India’s climate action goals but also promotes the development of green industries, job creation in the environmental sector and the conservation of natural resources. As more organisations and institutions participate and invest in green initiatives, the GCP can drive a widespread cultural and economic shift towards sustainability. This approach could eventually transform India’s economic landscape, making sustainability a central pillar of growth, development, and innovation.

The GCP has also been afflicted by several criticisms and concerns. The concerns about administrative issues and its effectiveness, uncertain market mechanisms, lack of guidelines for credit tradability, liquidation and valuation can complicate market functionality. However, integration with other initiatives like the Carbon Trading Credit Scheme 2023 and the Accredited Compensatory Afforestation scheme to prevent overlaps and conflicts will be helpful in implementing the programme. The monetary association with green credits may incentivise companies to engage in ‘greenwashing’, ie, the practice of making products and/or activities seem more environmentally friendly or less environmentally damaging than they actually are to earn “hot-air credits” (claiming benefits that lack real value).

The GCP possesses immense potential to drive positive environmental outcomes and supports India’s stands on achieving climate goals. However, addressing challenges concerning its efficacy will be crucial for its success. Ensuring robust regulatory frameworks, effective implementation and stringent verification processes will be key to realising the initiatives with full potential. The GCP can not only drive economic growth via sustainable pathways but also help in achieving Sustainable Development Goals and realising India’s long-term objective of attaining net-zero emissions by 2070.

Authors: Arushi Arora is studying at FLAME University. Dr. Barun Kumar Thakur is a Faculty of Economics at FLAME University.