| Reference Date | Version | May 1, 2024 | 1.0 |
| Keywords | Green credits, carbon credits, trading platform, tree plantation, carbon emissions |
| Legislation(s) | The Environment (Protection) Act, 1986; Green Credit Rules, 2023; The Energy Conservation Act, 2001; Carbon Credit Trading Scheme, 2023 |
| Jurisdiction | India |
Introduction
The Green Credit programme has been introduced under the Green Credit Rules, 2023 (‘2023 Rules’).
The Central Government has framed the 2023 Rules under the Environment (Protection) Act, 1986.
The 2023 Rules provide a framework for implementing the Green Credit programme.
The Green Credit programme is structured to incentivise positive environmental actions through a market-based mechanism and generate green credits, which would be tradable and made available for trading on a domestic market platform.
This Program is intended to promote ‘LiFE’ – ‘Lifestyle for Environment’.
LiFE is envisaged as a global movement to effect a paradigm shift from mindless and destructive consumption towards mindful and deliberate utilisation of national resources.
The Green Credit programme is independent of the carbon credit under the Carbon Credit Trading Scheme, 2023 formulated under the Energy Conservation Act, 2001.
An environmental activity generating green credit may have climate co-benefits, such as reducing or removing carbon emissions.
An activity generating green credit under the Green Credit programme may also get carbon credit from the same activity under the said Scheme.
An experienced environmental law firm would be able to assist in navigating through the various schemes and programmes in relation to Green/Carbon credits.
This article sets out the process, mechanism and implementation of Green Credits.
It also discusses potential challenges that may arise while implementing the green credit system and the way forward.
The Green Credit Programme – Implementation
Administrator
The Indian Council of Forestry Research and Education (‘ICFRE’) is declared the Administrator responsible for the effective implementation of the Green Credit programme, including its management and operation as per the 2023 Rules.
The Green Credit programme envisages registration of activities that are undertaken for the purposes of protecting, preserving or conserving the environment.
Such activities include tree plantation, water management, waste management, sustainable building and infrastructure etc.
For inclusion of activities and sectors in the Green Credit programme, the Steering Committee is required to review the programme and accordingly make recommendations to the Central Government.
The ICFRE is required to determine the manner of registration of activities and details required for such purposes.
The ICFRE may determine the methodology for evaluating and verifying the activities for calculating green credits.
Responsibility of Administrator
The ICFRE, as Administrator, is tasked with the responsibility to:
- Develop guidelines, processes and procedures for implementation of the Green Credit programme under the 2023 Rules.
- Develop methodologies, registration process, guidelines and associated measurement, reporting and verification mechanism.
- Establish methodologies and processes for issuance of green credit including digital green credit.
- Develop guidelines for the establishment and operation of the Green Credit Registry and trading platform.
- Establish or designate the Green Credit Registry and trading platform service provider.
- Develop guidelines for the Green Credit programme portal, knowledge platform and fee structures.
- Develop guidelines for filing annual returns and progress reports.
- Develop guidelines for market stability mechanism for trading of green credits.
- Regulate matters relating to trading of green credit certificates and safeguard the interests of sellers and buyers.
The Registry is an electronic database that includes common data elements relevant to registration and issuance of green credits.
The functions of the Registry include registration of activities, issuance of green credits, accurate accounting of issuance and maintaining a secure database.
Steering Committee for Monitoring Implementation
The Central Government is required to constitute a Steering Committee comprising representatives from Ministries, Departments, environmental experts, industry experts and other relevant stakeholders.
The Steering Committee will be responsible for monitoring and implementing the Green Credit programme.
It is also tasked with recommending measures for generating demand for green credits.
The Steering Committee shall review the programme from time to time and make recommendations regarding:
- Inclusion of activities and sectors in the Green Credit programme
- Any matter referred to it by the Central Government
Technical Committee for Each Activity
Based on recommendations of the ICFRE, the Central Government may constitute a Technical Committee for any activity.
The Technical Committee may comprise members from Ministries, Departments, Organisations and experts from the relevant field.
It shall make recommendations to the ICFRE regarding:
- Methodology for calculating one unit of Green Credit.
- Mechanism for registration, verification, evaluation, measurement and reporting process.
The Technical Committee is also required to assist the ICFRE in implementation of the Green Credit programme and advise on matters referred to it.
The Green Credit Programme – Participation
Application for Registration
Participation in the Green Credit programme is intended to be voluntary.
Any person or entity desirous of obtaining green credit can register the activity electronically with the ICFRE through the official website .
Engaging a skilled sustainable energy lawyer or sustainable energy legal advisor may be considered to ensure proper registration and adherence to sustainable energy laws and policies.
Government Institutions, PSUs, NGOs, Private Companies, Philanthropies, Individuals and registered groups of individuals may register activities for grant of green credits.
‘Activity’ means any measure for protection, preservation or conservation of the environment.
It includes tree plantation, water management, sustainable agriculture, waste management, air pollution reduction, mangrove conservation and restoration, eco-mark label development and sustainable building and infrastructure.
Verification by Designated Agency
The ICFRE, upon receipt of application, will cause the activity to be verified by a designated agency.
The designated agency will submit a report verifying activities undertaken by the applicant in accordance with prescribed guidelines.
Certificate of Green Credit
ICFRE will grant a certificate of green credit upon receipt of the verification report.
Methodology for Calculation of Green Credit
The methodology for calculating green credit with respect to various activities would be notified by the Central Government on recommendation of the ICFRE.
Methodology for Tree Plantation
As of date, methodology for calculation of green credit in respect of tree plantation has been notified.
The methodology includes:
- Guidelines for undertaking tree plantation and eco-restoration of degraded forests.
- Identification of degraded land parcels by Forest Departments.
- Cost estimations for eco-restoration of degraded forest lands.
- Submission of proposals for tree plantation.
- Issuance of demand notes including plantation and administrative costs.
- Implementation of plantation activities through Forest Departments.
- Submission of completion reports and certification.
- Evaluation and verification by ICFRE.
- Issuance of Green Credits based on number of trees planted.
Green Credit will be calculated at the rate of one Green Credit per tree growing through tree plantation.
The terms such as ‘degraded land’ and ‘wasteland’ need to be carefully defined to reduce uncertainty and promote uniformity.
Use of Green Credits Generated Through Tree Plantation
- Green Credits can be exchanged for meeting compliance requirements relating to compensatory afforestation under the Van (Sanrakshan Evam Samvardhan) Adhiniyam, 1980.
- Green Credits may also be used for reporting under ESG leadership indicators or Corporate Social Responsibility initiatives.
Concern
Significant concerns have been raised by environmental and human rights organisations regarding implementation of the 2023 Rules.
It has been argued that allowing market forces to dictate the Green Credit programme may not ensure genuine environmental protection.
Critics argue that industries may continue polluting the environment while prioritising financial contributions over actual environmental impact.
Viewpoint
The thrust towards sustainability is evident in Government policy documents and the regulatory regime that has evolved during the last decade.
There is an urgent need to promote and incentivise sustainability activities.
There is also an equally urgent need to identify and address consequential challenges such as land and resources, double counting and inequitable impact due to geographical constraints.
India may take cues from challenges faced by developed countries in implementation of green measures.
The Central Consumer Protection Authority has circulated draft Guidelines for Prevention and Regulation of Greenwashing, 2024 .
By implementing these guidelines in sync with the 2023 Rules, India may create an effective system that recognises genuinely sustainable efforts while incentivising movement toward net-zero.
Conceptually, carbon credits are a subset of green credits because the scope of green credits extends beyond carbon emissions.
Carbon credits focus on greenhouse gas emissions whereas green credits focus on broader environmental factors including waste management and water conservation.
The Green Credit programme can become a potent approach to protect, preserve and conserve the environment.
Reduction of carbon emissions may often be incidental to broader sustainability measures.
The synergy between carbon credits and green credits is apparent and a unified regulatory framework may become necessary.
A bundled credit approach may improve transparency, environmental finance and responsible consumption of natural resources.
However, implementation of a unified regime has multiple challenges including:
- Dual regulatory regime and legislative overlaps between Centre and States.
- Potential impact on the constitutional right to life and healthy environment under Article 21.
- Need for transparent market infrastructure and fraud prevention mechanisms.
- Need for equitable distribution of benefits across geographical and community groups.
The Green Credit programme is undoubtedly a step in the right direction and, if correctly implemented, may contribute significantly toward India’s net-zero ambitions by 2070.
It can become a powerful sustainability tool provided careful implementation ensures genuine environmental progress.
Legal Support for Green Credit Implementation
Alaya Legal Team, Suniti Kaur (Ms), Priyanshi Aggarwal (Ms) and Ashwini Panwar (Mr)
Co-Founder & Managing Partner at Alaya Legal
Associate at Alaya Legal
