May 05, 2024

Green Credit Programme: About Money or Environment?

Tapan Mishra, Raghu

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A GREEN Credit Programme (GCP) was notified by the ministry of environment, forests and climate change (MoEFCC) on October 12, 2023 covering a range of activities by corporates or other entities that would be eligible for “green credits.” This came and came to the fore again recently when the first set of rules pertaining to one of the major activities covered, namely afforestation, were notified on February 26, 2024. This set off a storm of protests including a public statement by over 500 peoples movements, civil society organisations, environmentalists and experts calling for a roll back of the rules and reassessment of the programme itself.

We may recall that the GCP was conceived as a scheme under the overarching concept championed by the prime minister called Lifestyle for Environment or LIFE envisaged as a grassroots movement to protect and conserve the environment by adopting and encouraging actions that embrace these goals. However, the draft of the scheme itself, as initially notified in June 2023 inviting public response, was aimed mostly at corporates, industries and similar entities, although details will only be known when the rules for each of the sectors covered are notified. The idea was that “green credits” could be earned by engaging in activities that promoted environmental conservation, improvement and sustainability in a range of sectors namely tree plantation, water management, sustainable agriculture, waste management, reducing air pollution, mangrove conservation and restoration, labeling and development, and sustainable buildings and other infrastructure. At present, rules have only been notified for afforestation through tree plantation. Before dealing with the specifics as regards afforestation, a closer look at the overall scheme is in order.


The scheme envisages a “competitive market-based approach for incentivising environmental actions of various stakeholders.” The Indian Council for Forestry Research and Education (ICFRE) is designated as the administrator for the scheme, underlining the primacy given to afforestation among all the other identified sectors. ICFRE would appoint sectoral technical committees to assist it for different sectors.

Under this scheme, “green credits,” somewhat like carbon credits, could be earned as per standards and norms to be decided upon for each sector and normalised across the different sectors. For instance, as now notified in the rules for afforestation, one tree planted would generate one green credit. Subsequent rules would lay down equivalent norms for, say reduction of air pollution that would earn one credit, such that green credits earned from any sector could be traded in a uniform and level playing field.

These green credits may be traded through a “Green Credit Registry,” a mechanism and market-place that would be created under the scheme. However, credits earned through any activity that the entity is obliged to perform under prevailing laws, such as compensatory afforestation, would not be tradable but could be used in other ways. For instance, such green credits could be used to offset corporate social responsibility (CSR) obligations. A further stipulation under the scheme is that green credits cannot be earned on activities that also generate carbon credits. However, additional carbon credits could be earned for the carbon-saving co-benefit or component of an activity that generates green credits.

It is clear straightaway that the GCP is a money-spinning opportunity for corporates, who can add earnings through green credits to their usual earnings. For example, even though green credits generated through compensatory afforestation cannot be traded, it generates earnings through funds saved from CSR. It also remains to be seen how norms for industries are framed. Would transport companies earn green credits if they transition from fossil-fuel to electric vehicles (EV)? 

One of the major criticisms of the GCP is that it would be utilised for “greenwashing” of their activities by corporations engaged in environmentally harmful activities by showing compensatory activities elsewhere as “green,” proof of which would be green credits granted to them by obliging audit or monitoring authorities.

With all its flaws and limitations, especially the market mechanism as discussed below, the GCP can only be as good as the environmental regulatory system allows. It is by now well known that environment regulations in India have been totally captured by the State acting on behalf of corporate cronies. As such, green credits would be used to game the system, increase corporate earnings even while destroying the environment elsewhere, and provide a respectable veneer of environmental-friendliness.


It is now widely recognised that carbon credits and trading through the Clean Development Mechanism (CDM) have generated considerable earnings for industries and companies in different parts of the world, notably in China and India, but the benefits for the environment and especially for emissions reduction are uncertain or negligible. The initial idea under CDM was that only additionalities, that is, emissions reduction over and above what would normally be achieved in industry, would be eligible for carbon credits. Yet, as technologies have developed and been upgraded, what was earlier considered novel or an additionality have become industry standard now, but are seen to still be earning carbon credits!

This problem would be magnified manifold with green credits. How would you define “sustainable agriculture” or, even more tricky, how would you put a value to it compared to, say, one tree, if that itself is a standard, since a tree planted along a highway performs less ecological services than a tree or a cluster of trees in a forest? Should an incineration-based waste management plant generate green credits when it emits toxic gases into the air and nearby neighbourhoods?

Another very important aspect learned from carbon trading, which would apply even more to trading of green credits, is that carbon trading works best when there are ceilings or caps which drive industries to buy or sell carbon credits. What is the “competitive” incentive to trade green credits except money itself? If the green credit is priced too low, there is little incentive to earn it leave alone trade it. And if the green credit is priced too high, it will distort the market which will crash under its weight.


The recent notification relates to rules for afforestation, and suffers from numerous flaws especially as regards to its supposed main goal, namely conservation and restoration of forests.

The rules state that “degraded land parcels (of 5 hectares or more), including open forest and scrub land, wasteland and catchment areas” would be identified by state forest departments for tree plantation under this scheme. It is also stipulated that plantation would be undertaken with density of 1100 trees per hectare.

This very starting point itself is highly problematic. Scrub land, grasslands, shrubbery and arid forests are valuable ecosystems in their own right, and should not be considered “degraded.” Further, such lands would not support the kind of tree density stipulated. In fact, the scheme exposes forest ecosystems to double jeopardy. On the one hand, the scheme would encourage clearing of thinned-down or other natural forests with low tree cover and other ecosystems inside forest areas to facilitate tree plantation to earn green credits. On the other hand, various natural ecosystems supporting large varieties of flora and fauna besides providing local people with fuel, fodder and other resources would be denuded and replaced with unsuitable trees, probably monocultures. The very purpose of the scheme would be defeated.

It should be noted that the earlier draft notification of GCP had provided for eco-restoration of various types of land inside designated forest areas, acknowledging that tree plantation is not the only way forward and that different types of ecosystems in forest areas had their own benefits and ecological services. But this has been abandoned in the latest rules in favour of simple to administer tree plantation, however unsuitable or ecologically unsustainable or unsound it may be.

Further, most so-called degraded forest lands are currently used and managed by tribal and other forest-dwelling communities either by virtue of the Forest Rights Act or the Joint Forest Management programme. There is no mention in the rules about forest rights, or about usufruct rights of tribals and other forest-dwelling communities as regards non-timber forest produce, or even their very right to lives and livelihoods in habitats inside forest areas. There must be explicit recognition of these rights, guarantees against evictions in the name of the GCP, and recognition of the role played by forest-dwelling communities in conservation and protection of forests.

All in all, there are serious concerns that the GCP could lead to profiteering by corporates, greenwashing, and further degradation of forests and diverse ecosystems. The almost complete capture of the environmental regulatory system by the government acting on behalf of corporates will call into question the norms, prices and trading mechanism for the so-called green credits.




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