The Ministry of Environment, Forest and Climate Change has notified the Draft Green Credit Programme Implementation Rules, 2023 (hereinafter referred to as "Draft Rules") on 26th June, 2023. The proposed Green Credit Programme is a national level program in pursuance of Government of India's mission titled 'LiFE – Lifestyle for Environment' which seeks to combat climate change, enhance environment actions to propagate a healthy and sustainable way of living based on traditions and values of conservation and moderation, and for sustainable and environment-friendly development. The Draft Rules have been circulated after almost seven months of the Energy Conservation (Amendment) Act, 2022, which introduced the enabling provisions for implementing a carbon credit trading scheme in the country.

The Draft Rules introduce the concept of Green Credit which has been defined as a singular unit of an incentive provided for a specified activity, delivering a positive impact on the environment. The Draft Rules identify various sectors such as tree plantation, water conservation/ harvesting/ saving activities, sustainable agriculture, waste management, air pollution reduction, mangrove conservation and restoration, ecomark and sustainable building and infrastructure as Green Credit generating activities. Since, these sectors also result in reduction or removal of carbon, the Draft Rules have distinguished Green Credits from Carbon Credit and provide that an activity generating Green Credit under the Green Credit Programme may also get Carbon Credits for the same activity under the carbon market. The implementation of Green Credit programme will be in a phased manner, and initially only two or three of the identified activities will be considered for designing and piloting the programme.

The proposed Green Credit Programme is aimed at leveraging a competitive market-based approach for Green Credits so as to encourage private sector industries and companies to meet their environmental obligations and to incentivise voluntary environmental actions taken by various stakeholders.

The Draft Rules propose the creation of Green Credit Registry, Trading Platform, and a Knowledge and Data Platform with the following functions:

  1. Green Credit Registry (hereinafter referred to as ("GCR") – will be a standardised electronic database which would contain data such as issuance, holding, transfer and acquisition of Green Credits.
  2. Trading Platform – The trading platform will be an exchange of Green Credits created and managed by a Trading Service Provider.
  3. Knowledge and Data Platform – The knowledge and data platform would be an online platform reporting the sectoral progress from various activities under the programme and will base its reporting on the data generated from the Green Credit Registry.

In order to achieve the objectives of the programme the Draft Rules envisage the creation of a Steering Committee, Green Credit Programme Administrator and Technical Committee. The roles and functions assigned to these entities are as follows:

  1. Steering Committee - The Steering Committee is tasked with the overall governance, monitoring and review of the programme and it would be the final authority granting approvals regarding the implementation of programme, guidelines for measurement, reporting and verification. It can make recommendation to the Central Government on new activities and sectors to be included in the programme or measures to be taken to create demand for the programme.
  2. Green Credit Programme Administrator (herein after referred to as "Administrator") – The Indian Council of Forestry Research and Education is the Green Credit Programme Administrator and is responsible for the management, monitoring and operation of the Programme. It has the overall responsibility of developing guidelines, methodologies, accreditation, protocols etc. which are essential for the implementation of the programme. The Administrator is tasked with framing the guidelines and granting accreditation for Green Credit Verifies, Green Credit Registries, Trading Platforms etc. The Administrator may also constitute technical or sectoral committees for each activity for developing methodologies, standards and processes for registration of Green Credit activities and grant of Green Credits.
  3. Technical Committee – The Technical Committees may be constituted by the Administrator which shall develop and make recommendation on any of the issue which may be referred by the Administrator and includes the methodologies for allocation of one unit of Green Credit on the basis of environmental action in case of each activity so as to ensure fungibility and equivalence of Green Credits. It also has the responsibility to prepare a mechanism for measurement, reporting and verification in respect of each activity.

The Green Credit Programme which is aimed at incentivising various stakeholders ranging from individuals, farmer producer organisations, cooperatives, forestry enterprises, sustainable agriculture enterprises, urban and rural local bodies, private sectors, industries and organisations for undertaking environment positive actions is a novel approach. The Draft Rules propose to mandate all the entities registered for Accredited Compensatory Afforestation under the MoEF&CC Guidelines to register with the Green Credit Registry. These entities are eligible for consideration as Compensatory Afforestation for diversion of forest land.

However, the initiative lacks clarity on the following aspects which may require clarification in the final notification:

  1. The Draft Rules do not provide clarity on the impact that the generation of Green Credit will have on the Nationally Determined Contributions (hereinafter referred to as "NDCs"). Although the Draft Rules distinguish and clarify that the generator of Green Credit can also generate Carbon Credit and can claim benefits under both the schemes, it would have been helpful had clarity been provided on the interrelation of Carbon Credit and Green Credit to avoid duplicity while determining the compliance status of NDCs.
  2. The Draft Rules do not address the issue of conversion of Green Credit into Carbon Credits which is now an internationally exchanged commodity. The definition for Green Credit provided under the Draft Rules do not contemplate the ability to convert the Green Credits.
  3. The Draft Rules propose a voluntary mechanism. Given that the Green Credit trading scheme is at a nascent stage as compared to the voluntary Carbon Credit market which was already in place and is now coming under the regulation of the Government, the Draft Rules should propose incentives for various sectors to integrate Green Credit activities in addition to the Carbon Credit creating activities. The absence of such incentives would make stakeholders rely solely upon double counting instead of creating any additional environmental benefit.

The Draft Rules do not envisage the prospect of export of Green Credits. The Minister of Power while addressing the Rajya Sabha during the discussion for Energy Conservation (Amendment) Bill, 2022 had clarified that the export of carbon credits would be allowed only after India meets its NDCs. Although the Introduction to the Draft Rules state that the Green Credits shall be available for trading in the domestic market, MoEF&CC may consider the prospect of allowing export of green credit which could act as an incentive. The export of Green Credits would also require a methodology for conversion of Green Credit to carbon credit which is commonly traded in the international market.

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