India’s Carbon and Green Credit Mechanisms: Unlocking A Greener Economy - CSR

India’s Carbon and Green Credit Mechanisms: Unlocking A Greener Economy

1. What are Carbon Credits

A Carbon Credit, also known as a carbon offset, is a tradeable permit or certificate that represents the reduction or removal of one metric tonne of carbon dioxide equivalent (CO2e) from the atmosphere. Carbon credits can be produced by any activity or project which has the potential of reducing GHG emissions. Companies that produce fewer emissions than their limit can sell the excess credits to other companies that exceed their emissions limit.

Carbon credit was first introduced under the Kyoto Protocol, 1997. It was the first international treaty that established legally binding obligations for reducing GHG emissions. Under this agreement the companies that exceed their emission reduction limit can sell the surplus carbon credits to the companies who are struggling to meet their limits. The Paris Agreement, 2015 replaced the Kyoto Protocol and broadened the scope of emission reduction efforts. The Paris Agreement required all the countries to set their own climate change target known as Nationally Determined Contributions (NDCs).

2. Carbon Credits Trading Scheme, 2023

The Indian Government revised its NDCs by raising its target to 45% reduction in GHG emissions by 2030 from 2005 levels and achieving net-zero by 2070. To develop the Indian Carbon Market and to meet the above set targets, the Carbon Credit Trading Scheme (CCTS) was introduced by the Government of India in June 2023. It is the first step in making the Indian Carbon Market a reality.

• Governance and Oversight Bodies
  • Bureau of Energy Efficiency (BEE) will be the administrator.
  • The Grid Controller of India Limited will be the designated agency for the maintenance of the ICM Registry and will register the obligated entities and maintain the record of the transactions among the obligated entities.
  • The Central Electricity Regulatory Commission (CERC) will be the regulator for the trading of carbon credit certificates. They will safeguard the interests of the buyers and the sellers, decide on the frequency of trading, and take action to prevent fraud or mistrust.
• Compliance Mechanism
  • The planned compliance mechanism under the CCTS shall be based on an intensity-based ‘baseline-and-credit’ scheme, with mandatory GHG emissions intensity targets set for obligated entities in each year. 
  • The obligated entities shall be notified by the Ministry of Power based on the recommendations from the BEE.
  • The obligated entities under CCTS are required to comply with the annual GHG emission targets within the compliance cycle of 3 consecutive years.
  • An obligated entity which exceeds that targeted GHG emission in a compliance year becomes eligible for issuance of Carbon Credit Certificate (CCC). It shall be calculated based on the difference between the achieved and targeted GHG emissions.
  • An obligated entity which fails to achieve the target can purchase the CCC. The Compliance Mechanism also allows non-obligated entities to register their projects to trade CCCs.

3. What are the Green Credits:

Green credits are an environmental incentive mechanism aimed at promoting sustainable practices by rewarding individuals, organizations, and industries for their eco-friendly activities. These credits encompas a broader range of environmental benefits, including afforestation, water conservation, waste management, and biodiversity protection. The objective is to create a structured system that encourages sustainability while ensuring measurable ecological impact.

4. Green Credit Rules, 2023

The Green Credit programme has been introduced under the Green Credit Rules, 2023.

• Introduction to Green Credit Program:
  • The concept of green credits emerged as part of global efforts to combat climate change and environmental degradation. While the idea has been discussed in international environmental policy frameworks, India has taken a significant step by introducing the Green Credit Programme (GCP) under the LiFE (Lifestyle for Environment) movement, which was announced in 2023 by the Ministry of Environment, Forest, and Climate Change (MoEFCC).
  • The GCP aims to promote sustainable lifestyles and environmental conservation.
  • Its goal is to lay an emphasis on sustainability, reduce waste and improve the natural environment. The GCP introduces a market-based approach to incentivise 8 identified environmental activities. 
• Activities included under Green Credit Program: The Green Credit Program encompasses of certain important activities which are aimed at enhancing environmental sustainability. These are as follows:
  • Tree Plantation
  • Water Management
  • Sustainable Agriculture
  • Waste Management
  • Air Pollution Reduction
  • Mangrove Conservation & Restoration
  • Eco-Mark Labelling
  • Sustainable Building & Infrastructure

While distinct, the Carbon Credit Trading Scheme and the Green Credit Program are complementary initiatives in India’s broader environmental policy landscape.

These evolving mechanisms enable businesses, institutions, and even individuals to:

• Generate verified credits for eco-positive actions.
• Sell surplus credits in national or international markets for real financial returns.
• Offset internal emissions and enhance ESG ratings attracting premium investors.

This isn’t just policy it’s a blend of 3Ps – People, Planet & Profit. The question is no longer if you should act, but how fast you can position yourself to benefit.