Budget 2023-24: Green Credit Programme Affirms Commitment to Green Growth

The expectations from Union Budget 2023 were high with regard to the country's green growth agenda and energy transition. Living up to the expectations, the budget has made key declarations affirming its vision for ‘Lifestyle for Environment (LiFE)’, 'panchamrit' and net-zero carbon emissions by 2070. The green growth provisions outlined in the budget place the country on a steadfast path towards meeting its sustainability goals.

One noteworthy announcement is the establishment of regulations for the Green Credit Programme, which will be governed by the Environmental Protection Act. Let's dig deep into the likely provisions and impact of this programme.

Role of Green Credits in Ecosystem Sustainability

The green credit programme will be designed to help mitigate climate change, build adaptive capacity and improve the overall state of the environment by increasing energy and resource use efficiency and encouraging environmental conservation among other measures. The aim is to encourage behavioural change.

This is a welcoming move by the government as the global climate action is in full swing and countries across the globe are taking serious actions to reach their net-zero goals. The green credit programme will also incentivize the distribution of additional resources for adoption of environmentally sustainable & responsive technologies and processes by companies, individuals and local bodies; and provide fiscal incentives.

Further, the programme aligns with the vision for “LiFE”, or Lifestyle for Environment, which, was introduced by Prime Minister Narendra Modi at COP26 in Glasgow, calling upon the global community to drive LiFE as an international mass movement towards “mindful and deliberate utilisation, instead of mindless and destructive consumption” to protect and preserve the environment. It will incentivize sustainability and climate action related to air quality, waste management, forest and ecosystem services, water quality and access.

LiFE promotes an environmentally conscious lifestyle and circular economy, mandating everyone to live a life that is in tune with Earth and does not harm it. Green credits shall be created from environmental services and ecosystem services from different sectors and activities that support LiFE. The green credit programme supports the Government of India's LiFE initiative, promoting a pro-planet, pro-people way of life.

Stakeholders such as private sector corporates can use green credits generated from activities that create sustainable outcomes to meet their carbon neutrality or net-zero goals/commitments.

Indicative Approach for Developing a Green Credit Mechanism

To create a significant impact and steadfast path towards a net-zero future, the green credit programme will need a mechanism (Policy and Regulation) aligned with the domestic and international carbon market. An indicative green credit mechanism shall include legal frameworks or legislations in addition to high-quality projects in priority sectors like forest ecosystem services, water, waste management and transport. The Carbon component of green credits could be supplied under Article 6, CORSIA and domestic/international voluntary carbon market.

The market infrastructure shall also be revamped to facilitate green credit trade or transfer. A national ‘mega-registry’ could be set up for all carbon instruments which could be potentially linked to international registries. Existing trading infrastructure should enable trade of green credits, demand side management strategies should ensure market stability and MRV protocols should be aligned to global best practices.

Potential types of credits under green credit programme could be Forest & Ecosystem Credits, Air Quality Credits, Water Quality and Access Credits, Waste Management Credits, Energy Efficiency Credits and Renewable Energy Generation Credits among others. These credits are additional to domestic (Indian) emission trading system carbon credits under EC Act 2022, international voluntary carbon credits, Article 6 carbon credits under Paris Agreement and plastic credits under EPR Regulations.

A Step Closer to Net-zero Future

This Budget 2023 builds on our focus on green growth. It presents a promising outlook for steering the country towards a low-carbon development path with impressive initiatives and declarations. The government's efforts in supporting all aspects of green growth are commendable and are aimed at advancing India's sustainability goals. With capital inflow and support from the government in the form of regulations and initiatives such as Green Credit Programme, GOBARdhan Schemes for waste management and recycling, support for Natural Farming, Mangrove Initiatives, Micro Fertilizers Manufacturing and Distribution Network, and exemptions on customs duties for green mobility, the future looks promising and sustainable.

(The author is MD and Chairman EKI Energy Services Ltd)