Environmental issues such as climate change, biodiversity loss, water scarcity, air pollution, and waste management are some of the most pressing challenges facing the world today. To address these challenges, various policies and regulations have been implemented by governments and international organizations. However, these measures are often insufficient or ineffective due to various barriers such as lack of awareness, compliance, enforcement, and financing.
To overcome these barriers and create a mass movement around environmental positive actions, the Indian government has proposed a novel initiative called the Green Credit System. The Green Credit System is designed to incentivize voluntary environmental actions undertaken by individuals, private sectors, small scale industries, cooperatives, forestry enterprises and farmer-produce organizations for their environmental actions.
The Green Credit System was first announced in the 2023-24 Union Budget and the draft implementation rules were notified by the Ministry of Environment, Forest and Climate Change (MoEFCC) in June 2023.
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What is the Green Credit System?
The Green Credit System is a mechanism that complements the domestic carbon market. While the domestic carbon market focuses solely on CO2 emission reductions, the Green Credit System aims to meet other environmental obligations as well, incentivizing sustainable actions by various stakeholders1.
The Green Credit System is based on the concept of 'Green Credit', which means a singular unit of an incentive provided for a specified activity, delivering a positive impact on the environment.
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Activities
The Green Credit can be generated by undertaking any of the following activities:
- Tree Plantation-Based Green Credit: To promote activities for increasing the green cover across the country through tree plantation and related activities.
- Water-Based Green Credit: To promote water conservation, water harvesting and water use efficiency / savings, including treatment and reuse of wastewater.
- Sustainable Agriculture-Based Green Credit: To promote natural and regenerative agricultural practices and land restoration to improve productivity, soil health and nutritional value of food produced.
- Waste Management-Based Green Credit: To promote sustainable and improved practices for waste management, including collection, segregation and treatment.
- Air Pollution Reduction-Based Green Credit: To promote measures for reducing air pollution and other pollution abatement activities.
- Mangrove conservation and restoration-based green credit: To promote measures for conservation and restoration of mangroves.
- Ecomark-based Green Credit: To encourage manufacturers to obtain 'Ecomark' label for their goods and services.
- Sustainable Building and Infrastructure-based Green Credit: To encourage the construction of buildings and other infrastructure using sustainable technologies and materials.
The Green Credits will be tradable and those earning it will be able to put these credits up for sale on a proposed domestic market platform. The buyers of the Green Credits can use them to meet their existing obligations under other legal frameworks or to enhance their environmental reputation.
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How will the Green Credit System work?
The Green Credit System will be administered by the Indian Council of Forestry Research and Education (ICFRE), which will develop guidelines, processes and procedures for the implementation of the programme. The ICFRE will also establish thresholds and benchmarks for each Green Credit activity based on scientific criteria and best practices.
The participants of the Green Credit System will have to register themselves with the ICFRE and submit their proposals for generating or buying Green Credits. The ICFRE will evaluate the proposals and approve them if they meet the eligibility criteria. The ICFRE will also monitor and verify the implementation of the approved proposals and issue Green Credits accordingly.
The participants will be able to trade their Green Credits on a domestic market platform that will be developed by the ICFRE in collaboration with other stakeholders. The platform will facilitate transparent and efficient transactions of Green Credits among buyers and sellers. The platform will also maintain a registry of all the transactions and provide information on the supply and demand of Green Credits.
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What are the benefits of the Green Credit System?
The Green Credit System is expected to have multiple benefits for both the environment and society. Some of the benefits are:
It will create a competitive market-based approach to environmental actions, thereby encouraging innovation, efficiency, and cost-effectiveness among participants.
It will provide additional incentives for voluntary environmental actions that go beyond compliance with existing regulations or standards.
It will enable participants to meet their environmental obligations in a flexible and convenient manner by buying or selling Green Credits as per their needs.
It will enhance the environmental reputation of participants by showcasing their contribution to environmental sustainability.
It will generate additional income for participants who generate or sell Green Credits, especially for those who belong to marginalized or vulnerable sections of society.
It will create awareness and education among participants and society at large about the importance of environmental conservation and restoration.
It will support India's net zero goal of 2070 by reducing greenhouse gas emissions and enhancing carbon sinks.
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What are the challenges of the Green Credit System?
The Green Credit System is a novel and ambitious initiative that faces several challenges in its implementation and operation. Some of the challenges are:
It requires a robust and reliable system of measurement, reporting and verification (MRV) of the environmental impacts of the Green Credit activities. This may involve high costs, technical complexities, and data uncertainties.
It requires a clear and consistent definition and classification of the Green Credit activities and their eligibility criteria. This may involve trade-offs between environmental effectiveness, economic efficiency, and social equity.
It requires a fair and transparent mechanism of setting the prices of the Green Credits and ensuring their market liquidity. This may involve market risks, price volatility, and speculation.
It requires a strong and effective governance structure and regulatory framework to ensure the credibility, integrity, and accountability of the Green Credit System. This may involve legal disputes, institutional conflicts, and enforcement challenges.
It requires a high level of awareness, participation, and trust among the stakeholders of the Green Credit System. This may involve communication gaps, information asymmetry, and behavioral barriers.
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Key takeaways
The Green Credit System is a pioneering and unique initiative by the Indian government to incentivize voluntary environmental actions by various stakeholders. The Green Credit System has the potential to create a mass movement around environmental positive actions and realize the vision of 'Mission LiFE' through pro-planet people and entities.
The Green Credit System also aims to complement the domestic carbon market and support India's net-zero goal of 2070. However, the Green Credit System also faces several challenges in its implementation and operation that need to be addressed carefully and effectively.
(Copyright @ India CSR)
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