In November, 2021, our Prime Minister, Shri. Narendra Modi launched the Lifestyle for Environment (“LiFE”) initiative at UN Climate Change Conference COP26 (“UNFCCC”) held in Glasgow. In the Union Budget 2023-24, Minister of Finance, Smt. Nirmala Sitharaman, again introduced LiFE to spur movement of environmentally conscious living to reach net-zero carbon emission by 2070. Following the introduction of LiFE, the Ministry of Environment, Forest and Climate Change, Government of India vide notification dated June 26, 2023 (“Notification”) has released the draft rules.

The Notification proposes an innovative market-based mechanism by introducing Green Credit Programme (“GCP”).

Green Credit:

The financial innovation known as ‘Green Credit’ (hereinafter referred to as “GC”) represents the sustainable growth of the economy and society. GC in the Notification is defined as a single unit of an incentive offered, tradeable in market, for a specific activity in the identified sectors that has a beneficial environmental impact.

The meaning to ‘Green’ used in the Notification has not been kept limited to trees or plantation, but it has been given wide connotation by including water, air, building and infrastructure, waste management, agricultural practices and promotion of use of ecomark label by the manufacturers.

GCs will be generated from a variety of sectors and organisations, from small-scale ones like individuals, farmer producer organisations, cooperatives, forestry enterprises, and sustainable agriculture enterprises to those being developed at the level of urban and rural local bodies as well as private sectors, industries, and organisations. GCs will have a market value and serve as incentives. GCs will first be made accessible to individuals and entities who engage in selected activities and make environmental initiatives.

The activities generating GCs may also get ‘Carbon Credits’ under the Indian carbon market.

Green Credit Programme:

This proposed national level programme, GCP has been established in order to leverage a competitive market-based approach for GCs and encourage varied stakeholders to take voluntary beneficial environmental actions that might be related to creating or acquiring GCs.

The GCP is proposed to be implemented in a phased manner where initially two or three activities will be considered for designing and piloting of GCP and more activities will be added in subsequent phases. The initial sectors identified for GCs are Tree Plantation-based; Water-based; Sustainable Agriculture based; Waste Management based; Air Pollution Reduction based; Mangrove Conservation and Restoration based; Ecomark based; and Sustainable building and infrastructure based.

It is proposed that the GCs be generated based on benchmarks and thresholds assigned to each activity, and that they be in compliance with all legal requirements. The environmental outcome will be dependent on numerous specified criteria, and depending on all such parameters, one unit of GC will be allocated in order to preserve the fungibility across all sectors. Additionally, it is proposed to create and implement digital procedures for self-evaluation of GC-eligible tasks, activity registration, GC issuance, and performance monitoring.

There is a suggestion to set up national committees and authorities to give effect to the idea.

GCP and the organisational framework for its operation established by the Notification have the potential to boost India’s dedication to the LiFE movement and is a step into the right direction. This will put numerous individuals and private sector companies / industries to improve their focus on environment by incentivising generation and trade of GCs. A wide range of responsibilities have been imposed on The Indian Council of Forestry Research and Education, the proposed Administrator of GCP to making it very crucial to achieve the objectives of GCP. Further, the steering committee has also been proposed to be introduced to grant approvals, make recommendations to Government and review & monitor the implementation of GCP.

It may be observed that, the Notification does not establish any authority / body to resolve dispute between registered entities, authorities established and the platforms. Further, the connection of generation of ‘Carbon Credit’ with generation of GCs has not been captured clearly in the Notification. Also, the establishment of infrastructure for the implementation of GCP without the help of any established regulator such as SEBI or RBI, seems time taking. Lastly, existing bodies like NeSL could be considered as the registry for faster implementation.

Rajesh Narain Gupta is Managing Partner while Rachit Munjal is Associate of SNG & Partners