Working mechanism of Indian Green Credit Program
India’s Ministry of Environment, Forests, and Climate Change has taken a significant step toward launching the Indian Green Credit Program, a voluntary market mechanism aimed at promoting environmentally friendly behavior. The ministry issued rules under the Environment Protection Act to implement the program on June 27.
The draft rules will be open for public scrutiny and feedback for 60 days. This development follows the announcement of the Green Credit Programme by Finance Minister Nirmala Sitharaman in her union budget speech in February.
The primary objective of the Green Credit Program is to incentivize individuals, private sector producers, farmers, small-scale industries, cooperatives, and forestry enterprises to undertake positive environmental actions through a competitive, market-based system.
The program will cover eight sectors, primarily focused on rural areas, including initiatives to increase tree cover, promote water conservation, adopt natural and regenerative agricultural practices, improve soil health and nutritional value of food, manage waste effectively, and reduce air pollution.
Under the Green Credit Program, individuals or entities can earn green credits for environmentally beneficial actions. For example, planting trees can generate green credits, which can then be sold on a trading platform after validation by a steering committee. Local government bodies can also earn green credits for developing waste management infrastructure. Each green credit will have a monetary value assigned to it.
Experts believe that the incentive-based scheme of the Green Credit Programme could drive positive environmental outcomes while being economically viable. They highlight successful policies like India’s Production Linked Incentive Scheme, which provides financial incentives for high-performance solar panel manufacturing, resulting in a significant increase in domestic module manufacturing capacity. The Green Credit Programme aligns with India’s domestic carbon market goals and incentivizes a broad range of environmentally friendly actions, potentially providing an additional revenue source for companies.
However, some experts express reservations about the scheme’s scalability and efficiency. They highlight the need for a critical mass of participants for the trading platform to function optimally and the importance of ensuring liquidity and integrity in transactions. Concerns are also raised about the establishment of a robust mechanism to award and validate green credits, considering the prevalence of corruption and bureaucratic challenges in India. The funding source for the Green Credit Programme is questioned, as it was not allocated funds in the 2023 union budget. Suggestions are made to implement the program as a grant for environmental projects, allowing for stringent checks before project commencement.
Environmental activists adopt a cautious approach, awaiting the establishment of the credit value and an efficient and transparent mechanism for awarding credits. Despite the challenges, the Green Credit Programme holds potential as a market-based solution to incentivize positive environmental actions and reduce carbon emissions in India.
What is Green Credit Program?
The Green Credit Program (GCP) is a market-based initiative launched by the Government of India in 2023 to incentivize sustainable actions by various stakeholders. The GCP allows participants to earn ‘green credits’ for their environmentally positive endeavors. These credits can then be traded on a proposed domestic market platform.
The GCP is still in its draft form, and the final implementation rules are yet to be released. However, the government has stated that it expects the GCP to become a full-fledged program by the end of 2023.
The GCP will cover a wide range of activities, including:
- Renewable energy generation
- Energy efficiency measures
- Water conservation
- Sustainable agriculture
- Green Transportation
- Waste management
The GCP is expected to have a significant impact on India’s efforts to achieve its climate goals. By incentivizing sustainable practices, the GCP can help to reduce greenhouse gas emissions, improve air quality, and protect natural resources.
The GCP is also expected to create new business opportunities and jobs in the green economy. As the demand for green credits grows, businesses will be able to invest in sustainable technologies and practices to earn credits. This will help to create a more sustainable and prosperous India in the future.
Here are some of the key features of the Green Credit Program:
- It is a market-based approach to incentivizing sustainable actions.
- It covers a wide range of activities, including renewable energy, energy efficiency, water conservation, sustainable agriculture, green transportation, and waste management.
- The green credits earned under the program can be traded on a proposed domestic market platform.
- The plan is expected to become a full-fledged program by the end of 2023.
The Green Credit Program is a significant step forward for India in its efforts to achieve its climate goals. The program has the potential to create new business opportunities and jobs in the green economy, while also helping to reduce greenhouse gas emissions, improve air quality, and protect natural resources.