Green Credit Rules: The New Gold Rush?

Implementation of the Green Credit Rules, particularly with respect to technical aspects like registration of activity and interplay with other schemes, require expert assistance from environmental law firm/sustainable energy legal advisor.

Introduction

The Green Credit programme has been introduced under the Green Credit Rules, 2023 ('2023 Rules'). The Central Government has framed the 2023 Rules under the Environment (Protection) Act, 1986.

The 2023 Rules provide a framework for implementing the Green Credit programme. The Green Credit programme is structured to incentivise positive environmental actions through a market-based mechanism and generate green credits, which would be tradable and made available for trading on a domestic market platform. This Program is intended to promote 'LiFE'- 'Lifestyle for Environment'. LiFE is envisaged as a global movement to effect a paradigm shift from the mindless and destructive consumption to the mindful and deliberate utilisation of national resources. The Green Credit programme is independent of the carbon credit under the Carbon Credit Trading Scheme, 2023 formulated under the Energy Conservation Act, 2001. An environmental activity generating green credit may have climate co-benefits, such as reducing or removing carbon emissions. An activity generating green credit under the Green Credit programme may also get carbon credit from the same activity under the said Scheme. An experienced environmental law firm would be able to assist in navigating through the various schemes and programmes in relation to Green/Carbon credits.

This article sets out the process, mechanism and implementation of Green Credits. It also discusses potential challenges that may arise while implementing the green credit system and the way forward.

THE GREEN CREDIT PROGRAMME – IMPLEMENTATION

Administrator: The Indian Council of Forestry Research and Education ('ICFRE') is declared the Administrator responsible for the effective implementation of the Green Credit programme, including its management and operation per the 2023 Rules.

The Green Credit programme envisages registration of activities that are undertaken for the purposes of protecting, preserving, or conserving the environment. Such activities include tree plantation, water management, waste management, sustainable building and infrastructure etc. For inclusion of activities and sectors in the Green Credit programme, the Steering Committee is required to review the programme and accordingly make recommendations to the Central Government.

The ICFRE is required to determine the manner of registration of activities and details required for such purposes. The ICFRE may determine the methodology for evaluating and verifying the activities for calculating green credits.

Responsibility of Administrator: The ICFRE, as Administrator, is tasked with the responsibility to;

(a) develop guidelines, processes and procedures for the implementation of the Green Credit programme under the 2023 Rules;

(b) develop methodologies, registration process, guidelines and associated measurement, reporting and verification mechanism. The Administrator shall, if it requires, have access to inputs from the Technical Committee in this regard, as detailed below under the head 'Technical Committee for each activity';

(c) establish methodologies and processes for issuance of green credit (including issuance of digital green credit), and equivalence of green credit generated from each identified activity. The Administrator shall, if it requires, have access to inputs from the Technical Committee in this regard, as detailed below under the head 'Technical Committee for each activity';

(d) develop guidelines for the establishment and operation of the Green Credit Registry and trading platform; for self-certification or third-party certification for the registration of an activity for issuance of green credits and its inspection and verification by designated agency, for empanelment of auditors and audit by such auditors;

(e) establish or designate the Green Credit Registry, and trading platform service provider in accordance with the approved guidelines;This Registry is an electronic database which will include common data elements relevant to the registration and issuance of green credit.

The functions of Registry include registration of activities, issuance of green credit, accurate accounting of issuance, maintaining a security database with essential security protocols in place and any other function assigned by the ICFRE.

(f) develop guidelines for the green credit programme portal, the knowledge and data platform, and for the fees from the registered entities. In order to provide transparency on activities undertaken and for reporting sectoral progress under the 2023 Rules, the ICFRE with approval of the Central Government is required to develop and maintain a knowledge and data platform. The platform may collect key data points generated from Registry and other information such as sectoral achievements, information on capacity building etc.;

(g) develop guidelines for filing of annual returns and progress reports by designated agency, registry, trading platform and knowledge and data platform. The ICFRE with the approval of the Central Government is required to establish and maintain a trading platform. The trading platform will perform functions in respect of trading of green credit in accordance with the guidelines framed by the ICFRE with the approval of the Central Government;

(h) develop guidelines for the market stability mechanism for trading of green credit.

(i) regulate matters relating to trading of green credit certificates and to safeguard interest of sellers and buyers; and take preventive and corrective actions to prevent fraud or mistrust.

Steering Committee for monitoring the implementation: The Central Government is required to constitute a Steering Committee comprising representatives from Ministries/Departments, environmental experts, industry experts and other relevant stakeholders as considered appropriate by the Central Government.

The Steering Committee will be responsible for monitoring and implementing the Green Credit programme and is tasked with recommending measures for generating demand for green credit.

It shall review the programme from time to time and make recommendations to the Central Government in respect of:

• Inclusion of activities and sectors in the Green Credit programme
• Any matter referred to it by the Central Government.

Technical Committee for each activity: Based on the recommendations of the ICFRE, the Central Government may constitute a Technical Committee for any activity comprising members from Ministries, Departments, Organisations and experts from the field related to the activity.

It shall make recommendations to the ICFRE in respect of:

• methodology for calculating 1 unit of Green credit, based on equivalence of resource requirement, parity of scale, scope, size and other relevant parameters required to achieve the desired environmental outcome.
• mechanism for registration, verification, evaluation, measurement and reporting process.

The Technical Committee is also required to assist the ICFRE in the implementation of the Green Credit programme with respect to the activity and advise on any matter referred to it by the ICFRE.

THE GREEN CREDIT PROGRAMME – PARTICIPATION

Application for registration: Participation in the Green Credit programme is intended to be voluntary. Any person or entity desirous of obtaining green credit can register the activity (as may be specified under Rule 4(2) of the 2023 Rules) with the ICFRE electronically through awebsite. Engaging a skilled sustainable energy lawyer or sustainable energy legal advisor may be considered to ensure proper registration and adherence to sustainable energy laws and policies.

Any Government Institutions, PSUs, NGOs, Private Companies, Philanthropies, Individuals, registered groups of individuals may register the activity for grant of green credits.

'Activity' means any measure for protection, preservation or conservation of the environment. It is defined in an inclusive manner and includes tree plantation, water management, sustainable agriculture, waste management, air pollution reduction, mangrove conservation and restoration, ecomark label development and sustainable building and infrastructure.

Verification by designated agency: The ICFRE, upon receipt of application, will cause the activity to be verified by a designated agency.

The designated agency will make a report verifying activities undertaken by the applicant, in accordance with guidelines.

Submission of Report: The designated agency will submit the report to the ICFRE verifying activities undertaken by the applicant.

Certificate of Green Credit: ICFRE will grant a certificate of green credit upon receipt of such a report.

Methodology for calculation of green credit: The methodology for calculating green credit with respect to various activities would be notified by the Central Government on the recommendation of the ICFRE.

Methodology for calculation of green credit in respect of tree plantation: As of date the methodology for calculation of green credit in respect of tree plantation has been notified, and it includes:

(i) Guidelines for taking up tree plantation and other activities for eco-restoration of degraded forests.

(ii) Identification of degraded land parcels, including open forest and scrub land, wasteland and catchment areas, (size being 5 hectares or above and free from all encumbrances) by Forest Department of every State and Union territory, which shall be made available for tree plantation for the purpose of generating Green Credit.

The terms such as 'degraded land' and 'wasteland' might bring within its ambit lands that may have significant ecological value. These terms need to be defined carefully and precisely to reduce uncertainty and promote uniformity in approach.

(iii) Cost estimations for eco-restoration of degraded forest lands. The said guidelines state that tree plantation includes planting of shrubs, herbs, grasses, taking up soil and moisture conservation works, terracing, rain-water harvesting and other measures as may be required as per site conditions for eco-restoration. Fencing may also be provided if protection against anthropogenic pressures is necessary at a given site. Preference is to be given to indigenous species. To ensure healthy growth of planted species, seedlings of high quality should be planted. Naturally growing seedlings are to be retained.

(iv) Entity/Person desirous of undertaking tree plantation may apply to the ICFRE. ICFRE shall assign the land to the applicant and require him to submit a proposal for undertaking tree plantation.

(v) On receipt of such a proposal, the ICFRE shall prepare and issue a demand note to the applicant. The demand note will include the cost of tree plantation and administrative expenses, which are to be paid to the ICFRE within a specified period. The Applicant may pay the amount by such means of payment as decided by the ICFRE.

(vi) On receipt of such an amount, the ICFRE will direct the Forest Department to carry out the activity, i.e., tree plantation in line with the management plan. Such activity shall be completed within 2 years from the date of the payment.

(vii) The Forest Department will submit a report to the ICFRE on completion of the tree plantation. A certificate of completion will be issued to the Applicant by the concerned Forest Department.

(viii) On receipt of the report, the ICFRE will evaluate and verify the activity and thereafter may generate and issue Green Credit to the applicant, based on the total number of trees planted in the said land parcel along with the report and certification of completion of the activity.

(ix) The Green Credit will be calculated at the rate of 1 (one) Green Credit per tree growing through the tree plantation on such land parcel, based on the local Silvi-climatic and soil conditions and the certification of completion of tree plantation.

The Green Credit generated by undertaking tree plantation can be:

• Exchanged for meeting the compliance requirements of the compensatory afforestation in case of diversion of forest land for non-forestry purposes under the Van (Sanrakshan Evam Samvardhan) Adhiniyam, 1980 as applicable.
• Used for reporting under the environmental, social and governance leadership indicator or corporate social responsibility.

Concern: Significant concerns have been highlighted by environmental and human rights organisations to roll back the 2023 Rules due to concerns that letting the market forces dictate the Green Credit programme would not ensure environment protection in the true sense. It has been argued that these measures would only lead to the environment protection getting undermined even further as industries continue to pollute the environment without any genuine accountability, since there is potential for prioritisation of financial contributions over a genuine environmental impact.

VIEWPOINT

The thrust towards 'sustainability' is evident in the Government of India's policy documents and the regulatory regime that has evolved in the past decade. There is an urgent need to promote and incentivise sustainability activities, and equally urgent is the need to identify and address the consequential challenges, such as land and resources, double counting, inequitable impact of such steps due to geographical constraints. India may take cues from the issues being faced by the developed countries in the effective implementation of 'green' measures. In India, the Central Consumer Protection Authority has circulated thedraft Guidelines for the Prevention and Regulation of Greenwashing, 2024, which lays down the definitions and disclosure requirements concerning greenwashing by companies. By implementing these guidelines in sync with the 2023 Rules, India could create an effective and efficient system that recognises truly green environmental efforts while incentivizing companies to move towards net-zero, rather than just offsetting it. The combined effect would ensure credibility and transparency of green credits, thereby increasing public trust and leading to increased financial investment as well.

Conceptually, carbon credits are a subset of green credits because the scope of green credit is beyond just carbon. Carbon credits focus on reducing greenhouse gas emissions (i.e., natural and artificial gases in the earth's atmosphere that trap heat, primarily carbon dioxide, nitrous oxide, water vapour, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride). Green credits focus on all environmental factors, including waste management and water conservation. The Green Credit programme can be a potent approach to protect, preserve, and conserve the environment. Reduction of carbon emissions is incidental. To illustrate, tree plantation activity that earns green credits for enhancing biodiversity is likely to also involve capturing and storing atmospheric carbon dioxide.

The synergy between carbon credits and green credits is quite apparent – a unified regulatory body for both carbon credits and green credits may thus be a necessity. A bundled credit approach is likely to address environmental concerns holistically. The bundled credit is likely to introduce transparency and accuracy concerning all 'sustainability measures', leading to the development of an appropriate index, positively influencing environmental finance, and ultimately leading to the responsible consumption of natural resources.

However, implementing a unified regime for carbon and green credits has its challenges, which we must be prepared to address. Challenges include;

• Dual regulatory regime on account of concurrent powers and potential legislatory overlaps: Both Central Government and State Governments have law-making powers with respect to. :

Entry 15. Vagrancy; nomadic and migratory tribes. The regulatory framework relating to green credits will likely affect the nomadic and migratory tribes, which rely on access to forests for firewood, hunting and other activities.

Entry 17. Prevention of cruelty to animals. The regulatory framework relating to green credits should consider the well-being of animals and ensure that activities do not adversely affect the well-being of animal life.

Entry 17A. Forests. The absence of a unified approach may result in focusing on the quantity of trees over the quality of trees, which may raise issues of monoculture and reduce ecosystem diversity.

Entry 17B. Protection of wild animals and birds. Land acquisition for green initiatives may displace and destroy animal habitats.

Entry 42. Acquisition and requisitioning of property. Land acquisition activities may lead to conflicts with local communities.

While a promising solution, the proposed unified regime would necessitate a framework at the Centre and supplemental legislation by the States. This could lead to delays and inconsistencies in implementation, a factor we must consider and address.

• Trading credits v. right to life: The right to a healthy environment is read into Article 21 of the Constitution of India, which guarantees every citizen of India the right to life and personal liberty. While trading carbon/green credits is likely to boost sustainable practices, arguably, trading credits would tell in some arenas and adversely affect citizens, thereby violating the right to life guaranteed under the Constitution of India.
• Regulatory Architecture: The market infrastructure for carbon credits and green credits must address issues such as fungibility of credit, transparency in the pricing mechanism, potential fraud, and anti-competitive practices.
• Specific geographical and community challenges: Benefits from the unified regime should be equitably distributed, considering geographical and community challenges, especially in rural areas.

The Green Credit programme is undoubtedly a step in the right direction and, if correctly implemented, is likely to play its part in India's endeavour to achieve net-zero by 2070. It can be a very useful tool, but it requires careful consideration to ensure the desired goals are being met and genuine progress towards sustainability is made.

Legal Support for Green Credit Implementation

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