In the era of environmental challenges and sustainable development goals, India has launched Green Credit Program. This initiative aims to encourage eco-friendly activities across different sectors that promote environmental preservation and advances economic growth. This article explores implementation, impact, and future business prospects of the Green Credit Program, emphasising on its role to achieve net zero target by 2070.
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Abstract
This research focuses on studying the recently implemented program by the Indian government, the Green Credit Program. The program is a crucial step to adopting sustainable practices across different sectors while encouraging stakeholders from private-sector enterprises and public-sector undertakings to engage in environment-friendly activities. This study further focuses on combining economic growth with sustainability. It analyses the implementation, current scenario, and the future of the green credit program in India. It aims to contribute to India’s climate goals and sustainable development goals.
Introduction
Environmental degradation has become a global issue. Still, about half of the world’s population depends on agriculture as a main occupation of living. Environmental degradation leads to poverty, affecting people’s lives in rural areas. To access resources from the forests, people overharvest, leading to deforestation. Environmental degradation affects the soil’s quality, increases salinity, and affects the ability of plants to absorb water and nutrients. Environmental degradation is also a contributor to climate change as habitats are destroyed, and free plants are available to absorb carbon dioxide.
From land degradation to the extension of biodiversity, countries worldwide are experiencing the aftermath of industrial activities. In this fight, business firms and industries play a crucial role. Considering the harm caused to the environment, the Green Credit Program has been launched. The Green Credit Program highlights the importance of waste reduction, environmental protection, and sustainable practices.
India aims to achieve a net zero target by 2070 and took a step by developing Green Credits. Led by the Indian government, the Green Credit Program (GCP) aims to fulfil the objective of Mission LiFE by focusing on environment-friendly activities. The GCP rewards the voluntary efforts of organisations that focus on sustainable practices across various sectors, from private to farmer-produce.
India launched Mission LiFE, a global initiative to address climate change and achieve sustainable development goals. The concept, with its global reach, was introduced in 2021 during the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow. The mission revolves around the P3 model: Pro Planet People. The model focuses on ‘Reduce, Reuse, and Recycle’, balancing development, economic growth, and sustainability. The mission inspires people to make sustainable choices and encourages markets to adopt eco-friendly practices and products.
The Ministry of Environment, Forests, and Climate Change (MoEFCC) made the “Green Credit Program” draft implementation guidelines for 2023 public. The announcement states that the Green Credit Program will motivate businesses in the private sector to fulfil their legal obligations by engaging in activities that align with the creation or purchase of Green Credits, which prove good for the environment.
What is the ‘Green Credit Program’
The Indian government started a voluntary initiative, the Green Credit Program, to encourage various stakeholders, such as business organizations, industrialists, and individuals to support sustainable practices and environmental preservation. The Green Credit Program complements the domestic carbon market, which focuses only on CO2 reduction. It aims to meet environmental obligations and sustainable practices by companies and local bodies. The Green Credit Scheme is independent of the Carbon Credit Trading Scheme of 2023.
There are 8 activities involved in the Green Credit Program-
- Tree Plantation: Encourages activities to increase the green cover in the country.
- Water Management: Encourages the harvesting, treatment, and reuse of wastewater as well as water conservation, efficiency, and savings.
- Sustainable Agriculture: Promotes natural agricultural practices and promotes soil health, natural value of food, and productivity.
- Waste Management: Encourages collection, segregation, and treatment of waste.
- Air Pollution Reduction: Discourages pollution abatement activities and air pollution.
- Mangrove Conservation and Restoration: Promotes measures to conserve and restore mangroves.
- Ecomark: Encourages manufacturing of eco-friendly goods and services.
- Sustainable Building and Infrastructure: Promotes the use of sustainable technologies and materials in the construction of infrastructure such as buildings.
These regulations establish a system to promote voluntary environmental positive acts through the granting of green credits. In its first phase, voluntary tree planting is intended to begin on degraded land, wasteland, watershed areas, etc., with forest agencies overseeing and managing the project.
Implementation of Green Credit Program
As a step towards reaching its long-term target of net zero by 2070, India submitted its five critical elements of climate action at the 26th session of the COP, which was held in Glasgow, United Kingdom. The Prime Minister of India initiated the idea of Lifestyle for the Environment, or “LiFE,” as part of the “Non-Quantified Goal.” He here requests mindful and deliberate utilisation instead of indulging in mindless and destructive consumption.
On October 12, 2023, the Environment Protection Act of 1986 was referred to inform the public of the Green Credit Rules, 2023 (Chambers and Partners, 2024). The Green Credit Program’s governance structure includes the steering committee members from the relevant ministries/departments, specialists, and institutions.
UAE President Sheikh Mohammed bin Zayed Al Nahyan and Indian Prime Minister Narendra Modi co-hosted a high-level event on the “Green Credits Program” at COP-28 in Dubai on December 1, 2023. H.E. Mr Ulf Kristersson, Prime Minister of Sweden, H.E. Mr Filipe Nyusi, President of Mozambique, and H.E. Mr Charles Michel, President of the European Council, attended the occasion (Press Information Bureau, 2023).
Indian Council of Forestry Research and Education (ICFRE), Dehradun, is responsible for implementing and managing the Green Credit Program. The Green Credit Program’s digital process includes a web platform and a Green Credit registry to streamline processes. Registration, accounting, and Green issuance monitoring guarantee accountability and transparency of the GCP (Press Information Bureau, 2023).
Significance of the Green Credit Program
Economic growth is crucial for a developing economy like India, but not at the cost of the environment. The country’s gross domestic product (GDP) rises, but the cost of those activities is the downfall of the environment, like irregular rainfalls, high temperatures, and continuous floods and droughts. Various businesses get involved in production activities that harm the environment, and instead of fulfilling their responsibility towards the environment, they do nothing.
Sustainable Responsibilities
The Green Credit Program will enable companies to meet their responsibilities towards the environment and its preservation. Their actions involve activities that earn them green credits.
Tradeable Green Credits
Green credits are tradeable, so by engaging in the eight activities mentioned in the program, companies can earn green credits and sell them to the companies that require them, earning them profit. This would improve the condition of the environment while carrying on the production activities.
Green Credit Program to Farmers
Organic farmers and Farmer Producer Organizations (FPOs) would benefit from the guidelines, which include methods for quantifying and supporting ecosystem services. This tool values and incentivises various ecosystem services. These activities would enhance the farmers’ skills and knowledge in sustainable agriculture. The farmers could benefit from engaging in sustainable practices and generate additional income.
The green credit program encourages climate-resilient farming activities, supporting farmers in mitigating risks posed by climate change, such as water scarcity and extreme weather conditions. This results in long-term agricultural sustainability.
Current Scenario of Green Credit Program in India
The Green Credit Program invites Public Sector Undertakings (PSUs), private companies, and non-profit organisations (NGOs) to voluntarily engage in environment-friendly activities such as waste management, afforestation and water conservation, among others (Indian Express, 2024). Investors in these projects will receive tradeable green credits in exchange for the environmentally friendly activity.
State departments identify plots after interested parties register on a government portal. ICFRE approves the final proposal once a plantation plan and cost estimate are provided. State forest authorities have identified around 10,000 hectares of degraded land where the greening efforts would occur. This would help restore the land through soil improvement, afforestation, and erosion control. The land will be brought to its productive state and bring survival to ecosystem services.
The Environment Ministry has been meeting with PSUs over the past few months to press for registration under the scheme. It initially focused on states like Chhattisgarh, Madhya Pradesh, and Odisha, where sizable, wooded areas have been diverted for mining.
Third-Party Verification
Officials from the government agency stated that ICFRE is developing a system for independent third-party verification of green initiatives (Indian Express, 2024). The green credit regulations may designate an organisation as a “designated agency” to verify actions carried out under the program. This will help verify the activities carried out by corporations to earn green credits. A senior government official stated that discussions are also taking place to develop a transparent system connecting the green credits to the businesses’ compensating afforestation compliance.
Updates on Greening Projects
According to authorities knowledgeable about the development, the Centre has approved 12 greening projects under the Green Credit Program (GCP). The officials stated that 24 proposals submitted by several state forest departments are being evaluated (The Indian Express, 2024).
Senior officials from the forest departments of Maharashtra, Chhattisgarh, and Madhya Pradesh stated that PSUs like the National Thermal Power Corporation (NTPC) have registered for the greening initiative in all three states. Other PSUs registered in these states include Western Coalfields Ltd. and Power Grid Corporation of India in Maharashtra; Southeastern Coalfields Ltd. and Indian Oil in Chhattisgarh; and Coal India in Madhya Pradesh. This initiative motivates other PSUs and corporations to fulfil their environmental responsibility and provide them with benefits for their existing business.
Green Credit Program in China
Environmental problems are not restricted to one country but worldwide. China, due to rapid economic growth, has experienced environmental degradation on a high scale. To resolve the issue, China’s government initiated various programs and policies, one of them being the Green Credit Policy.
The Green Credit Policy aligns financial institutions’ lending practices with environmental protection and sustainable development. The primary goal of GCP is to protect the environment from harmful industrial activities. It grants loans to industries and businesses after an environmental risk assessment, that is, after analysing the environmental risks the industrial activities would cause.
To combat the environmental issues, the China Banking Regulatory Commission (CBRC) in 2012 issued Green Credit Guidelines to encourage banking institutions to develop green credits and adopt a socially solid risk management approach. However, the Green Credit Policy was first proposed in 2007 in the Opinions on Implementing Environmental Protection Policies and Regulations to prevent credit risks. The former State Environmental Protection Bureau, The People’s Bank of China, and the former China Banking Regulatory Commission, jointly issued this.
By 2017, China’s 21 Banking Institutions’ green credit balance reached 7.5 trillion yuan, whereas the fund supply of green credit dropped into the ocean (Zhang, 2023). China took preventive measures to avoid the risks that could be faced while implementing green credits for energy—or emission-intensive firms.
Green Credit Policy is responsible for environmental protection, cleaner production, an ecological environment, and good infrastructure development. It also involves prohibiting loans from heavily polluting industries and withdrawing them to firms that do not follow the green development goals (Gao et al., 2022). The policy promotes innovation in heavily polluting firms, further encouraging green innovation and improving the condition of the environment.
China’s financial system is bank-centric, and the only way for firms to get external financing is through banks. After implementing the Green Credit Policy, the banks became more cautious while lending to heavy-polluting or non-polluting firms. This created difficulty for the heavily polluting firms to get loans (Xie et al., 2021). China’s step of green credit policy ensured that heavily polluting firms engage in environmentally sustainable activities to sustain themselves in the market. The heavy polluting firms carry out green innovation to reduce their costs as the non-availability of loans raises their costs and, thus, their profits.
The green credit policy did not achieve the expected results, whether in terms of loan amount or duration. Uncertainties are due to a lack of environmental information and unclear policy standards. The rigid demand for goods globally and investment also weakens the success of the green credit policy (Wang et al., 2019).
Concerns regarding the Green Credit Program
Greenwashing
Greenwashing occurs when exaggerated or false claims about environmental sustainability are made to show a good image of the company while failing to provide positive environmental benefits. Experts have raised concerns that the Green Credit Program may lead to a rise in greenwashing cases as people engage in superficial activities to earn green credits and continue with their industrial activities.
Experts are concerned about companies making less dedicated efforts to address environmental issues by engaging in superficial activities. This demands robust methodologies and actions to ensure the program’s success and prevent its misuse.
Quantification of Green Credits
The Technical Committee is responsible for developing and suggesting the technique for determining one unit of green credit based on the size, scope, parity of scale, and other pertinent factors, as well as the equivalency of resource requirements to the Administrator. Calculating or quantifying one unit of green credit will be difficult (Chambers and Partners, 2024).
The quantification of activities that could earn green credits is a critical task. Without this, confusion may persist, leading to inaccurate outcomes, potentially undermining the effectiveness of the program. We must provide clear instructions and guidelines for quantifying these activities. This will ensure the effectiveness of the program and inspire people to work for the environment.
Future Business Prospects
The Green Credit Program is a positive move for the decarbonization goals of India. The effectiveness of this program will depend on how well-defined the procedures and methods are for issuing and exchanging green credits. Before the green credits are issued and traded, the central government must ensure that the regulatory environment necessary to execute GCP has changed (Chambers and Partner, 2024).
The implementation of the green credit program brings business opportunities with it.
Getting Engaged in the Specified Activities
The Indian government has outlined eight activities through which firms can earn green credits, including tree planting, water management, sustainable agriculture, waste management, air pollution reduction, mangrove conservation and restoration, ecomark, and sustainable building and agriculture. Firms can register on the portal and engage in these activities to earn green credits. The potential for these firms to trade their green credits for profit adds a compelling incentive to participate in the GCP.
Become a Third Party Verifier
The Indian Council of Forestry Research and Education (ICFRE) is looking for a designated agency to become a third-party verifier. The role would involve timely verification of the firms’ activities to earn green credits. ICFRE takes this initiative to ensure no firm engages in superficial activities to earn green credits and reduce costs. As a third-party verifier, you will regularly verify the activities of the firms.
Involve with heavy pollutant industries
If a firm is involved in environmental protection activities, it can partner with any heavy pollutant industries. Heavy pollutant industries must engage in government-specified activities as it would help them reduce production costs. Suppose, if none of the above-mentioned activities is done, they will get loans at a higher rate of interest in comparison to the industries that are fulfilling their responsibilities towards the environment.
There are significant financial benefits for both parties in a partnership between environmental firms and heavy pollutant industries. This collaboration presents an opportunity for growth and development. Environmental firms can help heavy pollutant industries meet their responsibility towards the environment, reducing their production costs and helping them secure loans at a lower interest rate. Besides this, the environmental firms can generate revenue from this partnership.
Recommendations
The Green Credit Program is a step taken towards a green environment, however, a few things can be taken care of to ensure proper implementation of the Green Credit Program.
Educational Campaigns
Some individuals and businesses aren’t aware of the green credit initiative. There is a need to organize awareness campaigns targeting businesses and industries. This could include workshops, seminars, and outreach programs in both rural and urban areas. The digital platform of GCP can be made user-friendly for easy registration, monitoring, and trading of green credits. Detailed FAQs can be provided to make the doubt-resolving process easy.
Financial Support
The government can introduce taxes and subsidies to engage more individuals and industries in GCP. Subsidies provided to the firms engaged in environment-friendly activities will motivate more firms to engage themselves in sustainable practices. A rise in the tax rate for industries harming the environment will raise their cost of production, and to minimize its costs, the individuals or firms will involve themselves in activities earning them green credit and reducing their costs.
Training and Programs
Conducting training programs for the stakeholders could be beneficial. They could be taught about various tips, tricks, and methodologies towards sustainable practices, green technologies, and project management. Also, businesses can be provided with the technical and consultancy support to implement GCP policies effectively.
Conclusion
Green Credit Program is a transformative initiative. Nowadays, almost every productive activity leads to environmental degradation; GCP is an initiative to promote economic growth along with environmental protection. Through its focus on incentivizing green initiatives, including agriculture, manufacturing, and infrastructure, the green credit program not only helps to reduce environmental degradation but also enhances resilience against the impact of climate change. Despite the challenges, like greenwashing and a robust need for methodologies, the Green Credit Program is a crucial pathway to achieve India’s net zero ambitions by 2070. To enhance the program’s effectiveness, it will demand transparency, accountability, and innovation.
India’s Green Credit Program: Draft Rules Unveiled to Incentivize Carbon Reduction Initiatives
