Having recently surpassed China as the world’s most populous country, India has myriad reasons to double down on its efforts to mitigate climate change. The South Asian country is the world’s third-highest carbon emitter and half of its border is situated vulnerably on the coastline. According to the New Delhi–based Council on Energy, Environment and Water, India faces significant exposure to flood, drought, and cyclones, with 75 percent of India’s 806 administrative districts at risk of facing an extreme climate event. Worsening air quality, particularly in north India, adds to India’s list of environmental concerns. Against this backdrop, India’s government will need to work creatively to address the threats posed by climate change.
To date, India has set an impressive example by adopting a range of climate-friendly policies. With emphasis on solar, wind, and large hydropower, India has made sizable investments in renewable energy, which now accounts for around 45 percent of its installed energy capacity—195 gigawatts—with plans to reach 500 gigawatts by 2030.
Building on this progress, India’s Ministry of the Environment, Forest and Climate Change (MOEFCC) recently launched a Green Credit Programme (GCP), originally drafted in June 2023 and formally unveiled by Prime Minister Narendra Modi at COP28 in Dubai in December 2023. According to Modi, the GCP presents a holistic alternative to the “lack of a sense of social responsibility in the system of carbon credit[s]” that has overcommercialized climate change mitigation. In contrast to traditional offset markets, which track carbon reductions and removals, India’s Ministry of External Affairs defines the GCP as “a mechanism to incentivize voluntary pro-planet actions, as an effective response to the challenge of climate change.”
The GCP will add community-targeted environmental projects—including tree planting, water conservation and treatment, sustainable agriculture and land restoration, improved waste management, reduction of air pollution, conservation and restoration of mangroves, obtaining an Ecomark (a label for environmentally friendly products), and sustainable construction—to India’s list of pro-environmental activities that will generate green credits. The GCP establishes a new financial market wherein individuals can register the completion of these climate-friendly activities to earn tradable credits that offer financial rewards, with a fixed value for each designated activity. The program’s objectives are to improve sustainable habits, move toward a greener India, and avoid some of the issues traditionally associated with voluntary offset markets.
If the program is well integrated into local communities, this approach has the potential to stimulate new attitudes toward consumption and environmental responsibility, which in turn could help ensure sustainability. Other community-based climate projects have proved successful when embraced by locals, so this could be a good opportunity. However, India’s framework for green credits is still nascent and reveals gaps that require careful attention.
Carbon Markets
India has established a goal to reach net zero emissions by 2070. Meeting this target will require cutting emissions where possible, but in hard-to-abate sectors like cement, steel, and chemical manufacturing, carbon markets will likely play an important role. One type of carbon compliance market is emissions trading systems (ETSs) like the European Union (EU) ETS. The EU ETS was established in 2005 and covers Scope 1 (direct) emissions from the power sector, manufacturing, industry, and intra-EU aviation. It is a cap-and-trade system through which polluting entities receive a government-issued allotment of emission allowances. If these caps are exceeded, entities can buy unused allowances on the market or pay a steep fine.
There are also voluntary carbon markets (VCMs), which entities can opt into. Project developers upload their credits (generated by emissions reduction, removal, and avoidance projects) to the market platform, and entities looking to offset their emissions or improve their environmental profiles can buy credits through an entirely elective process. One credit is earned for each ton of carbon removed from the atmosphere or not emitted, but credits are worth different prices depending on their nature. According to one major trading platform, pricing differences are based on a project’s size, location, age, methodology, and quality. For example, credits for improved cookstoves, which have dual benefits (lower emissions and higher quality of life), are generally worth more than credits generated by REDD+ (reducing emissions from deforestation, forest degradation, and other activities), which has been proven to have issues with leakages, quality, and permanence.
As Modi alluded to, VCMs have their flaws. A Guardian investigation found that over 90 percent of rainforest credits registered to one of the leading traders were “phantom credits” that had not generated a real carbon reduction. Another emerging issue is that of “carbon cowboys”—developers who take advantage of Indigenous peoples’ land rights, registering communities’ carbon sink resources on a VCM with little or nothing to show for these communities. In sum, there is widespread concern that VCMs can be both highly exploitative and largely unproductive.
Additionally, offset markets can appear performative, a method of flaunting emissions reduction efforts in corporate environmental, social, and governance (ESG) programs and greenwashing marketing campaigns. Despite initial optimism, the imagined benefits of VCMs’ climate finance and resulting emissions reductions have not actually been realized. In light of this and other controversies surrounding existing VCMs, the MOEFCC’s idea could be a worthwhile alternative.
However, given the larger amount of time and resources invested in the VCM, it is likely that its issues will be even more prevalent in the GCP, whose methodology is still being defined. Additionally, the scheme’s critics have stressed the necessity of robust accounting measures and highlighted gaps in addressing electricity-production and transport-related emissions. Another concern is that there is no standard unit of measurement for a GCP credit. In carbon credit markets, only the reduction, avoidance, and removal of carbon and other greenhouse gases are considered. Because the GCP’s range of activities goes beyond carbon, the MOEFCC will encounter difficulties when trying to equate, for example, one credit of conservation to one credit of wastewater management. There are also concerns over how this framework will navigate the complex regulation and verification that existing markets have needed. The forestation part of the scheme has been kicked off by the Indian Council of Forestry Research and Education, but the rest of the methodologies remain incomplete and activities are pending.
The Crisis of Double-claiming
There is another issue with the GCP that may undermine its well-intentioned grassroots approach: the Carbon Credit Trading Scheme (CCTS), India’s planned dual compliance and voluntary carbon credit market. In late December 2023, India’s Ministry of Power (MOP) and Bureau of Energy Efficiency (BEE) announced an amendment to the Energy Conservation Act of 2001 that introduced a voluntary mechanism to the CCTS. With the implementation of this market, certain obligated entities have their emissions capped. When they exceed these, they can purchase the voluntarily uploaded credits. The BEE and MOP plan to bring the CCTS online between 2025 and 2026.
Unfortunately, the GCP rules note that projects registered on the CCTS can also be registered under the GCP if they result in carbon reduction or removal. This dual registration allows for projects to be claimed twice.
Critics have noted the absence of regulatory measures to adequately check double-claiming. The opportunity to double-claim emissions reductions, and thereby acquire double the financial benefit, will destroy the GCP’s credibility. If the intention of the GCP is to propose an alternative to the current VCM with all its baggage, the program could be doomed from the start. It could also preemptively tarnish other efforts to mobilize climate finance in India or abroad through a similar framework. Given the vital role carbon markets play in decarbonization strategies, this would be an unfortunate setback.
Moving Forward
To avoid this fate, the CCTS and the GCP should be kept separate. While there is not yet information from the BEE about transferring existing VCM carbon credit projects onto the CCTS or the GCP, an onslaught of carbon credit projects from the VCM would suck up financial resources from the MOEFCC and detract from the GCP’s mission. According to the University of California, Berkeley’s Voluntary Registry Offsets Database, India is home to the largest number of carbon credit projects in the world. Depending on how the MOEFCC configures pricing, dual credits could bleed the agency dry.
Additionally, keeping the programs separate may improve supply and resilience by encouraging developers to add new climate projects and sustain them through community networks. Dropping CCTS credits would further the MOEFCC’s mission and climate impact by freeing up more resources to go toward the agency’s goal of creating and encouraging community-based climate activities.
The GCP is in its infancy. A project of this ambition in a country of 1.4 billion is bound to face hurdles, so the MOEFCC should proceed cautiously. Above all, the agency should consider changes that would prevent GCP projects from being double-claimed under the CCTS to retain the former’s integrity and mission.
Hinging climate change mitigation entirely on the commercialization of pro-environment efforts is unrealistic, but in a capitalist society the problem may also point to a solution. While India awaits the full implementation of the GCP, other countries may also consider similar schemes—ensuring robust validation for climate action to guarantee communities can benefit from a safer, healthier environment while enjoying financial benefits. That said, especially in countries with significant existing carbon credit project infrastructures, activities generating green credits should remain distinct from carbon markets.
Acknowledgments
The author would like to thank Milan Vaishnav, Noah Gordon, and Jonathan Kay for their thoughtful comments and Anjuli Das for thorough revisions and editorial assistance.