New Delhi: In October 2023, intense discussions were underway at the Union Ministry of Environment, Forest and Climate Change (MoEFCC). Prime Minister Narendra Modi was preparing to attend the United Nations’ annual climate change conference, a gathering of global leaders and diplomats.

Since 2015, Modi has leveraged this platform to position himself and India as leaders in environmental stewardship. This occasion was no exception. Two promotional videos were to be commissioned for Modi to do the same this year.

The ministry scrambled to identify a budget source to allocate approximately Rs 35 lakh for the videos’ production. The Modi government’s preferred Ahmedabad-based advertising agency, Moving Pixels Private Limited, was swiftly engaged for the task. Within weeks, the two videos were completed.

PM Modi, with the videos as the backdrop, announced to the world the Global Green Credit Initiative.

“Today I am calling for another, pro-planet, proactive and positive initiative from this forum. This is Green Credits Initiative,” PM Modi said at the UN meeting before world leaders on December 1, 2023. He invited all countries to join the initiative. 

For Modi to present something new and green to the world, the initiative had been hastily spun off from his government’s domestic version, the Green Credit Program. 

The Green Credit Program offers industries a simpler and more cost-effective way to meet their obligations under India’s environmental and corporate social responsibility laws. 

Instead of meeting their environmental commitments themselves, companies can purchase credits earned by others who carry out specific eco-friendly activities, such as afforestation, water conservation, waste management, or air pollution reduction. In essence, it establishes a market-driven mechanism for trading environmentally beneficial actions.

The Reporters’ Collective trawled through hundreds of pages of government records and stitched it with publicly available information to find that the global initiative Modi announced in December 2023 remains stillborn. The domestic program launched in October of the same year, riddled with operational and fundamental problems, is going nowhere fast.

Of the seven different actions it promised that industry could buy green credits against, discussions have not got off the ground on all but one. 

And on that one, planting trees, documents show, the environment ministry tried to help the industry by lowering the standards for earning green credits. It did so, bypassing the expert body, the Indian Council of Forestry Research and Education (ICFRE), which it had legally mandated to set the norms and standards. 

When caught at this illegal bypass by the law ministry and faced with stricter and detailed recommendations of ICFRE, the ministry instead pushed through a generic set of regulations that would allow it to later tinker with the standards. 

With the regulations, standards and rules still in work, the ministry put the cart before the horse. It attempted to set up an online trading platform in haste to trade the credits that were yet to see the light of the day. The private entity hired for the job had delayed work on the program, ICFRE complained. 

Then the ministry went ahead of itself and convinced government-owned companies, such as Indian Oil Corporation Limited (IOCL) and Steel Authority of India Limited (SAIL) to give money for a scheme which had not yet taken off. 

While the government went to town talking about the program’s successful takeoff, IOCL complained internally that they were being asked to keep paying money to green up forests under the scheme in return for carbon credits, which were nowhere in sight. 

Some of the twists, turns, and challenges have been previously reported. You can read them here, here , here ,and here. A lot of the hype about the program has, quite naturally, found plenty of press. 

This investigation brings out fresh evidence based on detailed internal records of the government to draw a granular picture of Modi’s pet idea to reduce industry’s environmental obligations, which remains a movie in slow motion for 17 years, mired in conceptual flaws, operational failures, and also a legal challenge. 

The website of the global initiative Modi launched in 2023 as India’s flagship green initiative for all 198 countries to join remains dead. In its ‘knowledge repository’ sits one report and one purported case study. The links to both lead you to a blank page. 

The corporate world is still waiting for the Modi government to ease its environmental obligations on this count. 

We sent detailed queries to the environment ministry and its expert body, ICFRE. We have not received a response so far. The questionnaire can be read at the end of the story.

Modi’s dream

In 2008, Narendra Modi, then the CM of Gujarat, announced green credits as a “new beginning”, beyond carbon credits, to avert the “wrath of nature”.

By 2014, he had become the Prime Minister of India. His idea was sown within the Union government.

Industry has been facing problems regarding one of its biggest environmental responsibilities. Under law, if an industry or a project is set up on forest land, the project promoter has to buy an equal area of non-forest land and afforest it. If that’s not available, it has to pay for greening double the area of the project in forest land that is degraded.

This requirement of ‘compensatory afforestation’ has always been a thorn in the side of developers who want to raze forests for setting up their industries or dig them under for mines.

Compensatory afforestation has not worked well while forests have been cut for industries, mining and infrastructure projects at a steady pace over past years. 

In 2015, with Modi in the saddle in Delhi, the BJP government in Gujarat proposed the Green Credit Scheme as an alternative. Reports note, the ministry debated involving private players in raising “plantations in advance” on degraded forests and non-forest land. Those raising these plantations could trade them with entities that were required to undertake compensatory afforestation.

It went against a principled stand governments, cutting across political divides, had taken till then: Forestlands should not be privatised because millions of people have recognised and unrecognised rights over these forests. 

The environment ministry said forest-dependent communities would have access to only 10-15 per cent of the degraded forests where ‘advance plantation’ was being done.

The tribal affairs ministry, which is mandated to protect the rights of forest dwellers, baulked at the idea. The plan was dropped. Temporarily, it seems. 

By 2023, the idea was back on the table in a different and even more ambitious avtar. The government named it the Green Credit Program. In October 2023, the government notified the rules providing the broad strokes of the program.

In public, the program was pitched verbosely as a great green idea.

“The green credit program shall incentivise environmental positive actions through market-based mechanism and generate green credit, which shall be tradable…The green credit program shall encourage industries, companies and other entities to meet their existing obligations or other obligations under any law for the time being in force…”

Records show the government had set another criteria for the program that it didn't announce to the public. It should not cost the industry anything extra. 

Internal government notes say the “salient features” of the scheme include “not putting any additional burden on any stakeholder, including private sector industries and companies.”

Anyone who undertook the seven environmentally beneficial activities would be able to generate green credits which they could sell to companies that had legal obligations to be environmentally sound. The credits could be traded on a platform – bought and sold at prices determined by demand and supply.

In the run up to the formal notification, in September 2022, the ministry had tasked its autonomous forestry body, Indian Council of Forestry Research and Education (ICFRE) to set standards for how green credits would be earned from planting trees, saving water and solid waste management.

ICFRE was allocated Rs 10 crore from a fund that is collected from industry for chopping down forests, called the Compensatory Afforestation Fund. This was ironic because the green credit scheme was meant to weaken the obligations industries face to undertake compensatory afforestation.

“Using these funds shows that the ministry's real intention was to ease the obligation of compensatory afforestation for industries. They have included other activities in the green credit program but that is just a shiny film,” said Prakriti Srivastava, a former Indian Forest Service officer.

ICFRE was made the legal administrator of the program, tasked to establish methodologies for calculating how much of a green activity would generate how many credits, how entities would register and trade the credits, and how the green actions would be verified and reported.

According to the rules, the Central Government would “on the recommendation of the Administrator” notify the methodology for calculating green credits from different activities.

Cast Aside

Ten days after notifying the broader set of rules, the union ministry published its own draft methodology for tree plantation-based credits on 23 October 2023. In breach of rules, it bypassed ICFRE.

In December 2023, the ministry sent the draft methodology for plantation-based credits to the Ministry of Law and Justice for mandatory legal vetting. It said that the methodology had been finalised based on comments by stakeholders and the approval of the minister, Bhupender Yadav.

In its response, the law ministry noted that the environment ministry had “neither placed on record the recommendation of the Administrator” nor “made reference to the recommendation in the draft notification”. 

It said that the omission was despite the rules mandating that “the methodology for evaluation and verification of the activities undertaken for the purpose of calculation of green credit shall be such as may be determined by the Administrator”.

The law ministry asked the environment ministry to revise the proposal and place ICFRE’s recommendation on the record.

Soon after, ICFRE said it was going beyond what it had been immediately tasked with and suggesting some “unavoidable changes” in the draft methodology for tree-plantation credits. ICFRE is commanded by the environment ministry. It could not have used more blunt language. 

The ministry had proposed, in its draft, that planting merely 100 trees in a hectare would suffice for the industry to earn green credits. ICFRE increased this to a minimum of 1,000 trees per hectare, going by the criteria of the existing compensatory afforestation scheme.

The environment ministry eventually agreed with ICFRE that at least 1,100 trees should be planted per hectare to generate green credits. One credit would be issued for every tree.

There were other substantive differences between the standards ICFRE recommended and what the ministry preferred. We reviewed the standards in detail. ICFRE’s standards were more onerous. 

And, the ministry was stuck with ICFRE’s recommendations. Going by the regulations the ministry had notified, the ministry had limited options. It had to either adhere to ICFRE’s recommendations or go through a long drawn debate internally on how to scuttle them. 

The environment ministry found a not-so-innovative way out of the impasse. Postpone the decision. Instead of going with ICFRE’s recommendations or contesting them to establish holistic operational guidelines, the ministry notified a rulebook in February 2024 that omitted details altogether. 

How would officials identify which degraded forests are right for the plantations? Who would audit the plantations and how before giving credits to corporates? How many credits would a company need to buy in order to meet its legally set target of compensatory afforestation? The answer to these and many other critical questions have been postponed. 

The rigmarole over these incomplete tree plantation standards is just one episode in a multi-season series that promises not to end anytime soon. Other six green credit activities are nowhere in sight, nearly two years after the launch of the program.

A Dubious Purpose

The argument over who sets the standards for the Green Credit Program might sound like a bureaucratic turf war at first sight. Underneath it lies buried the fundamental debate that PM Modi’s pet idea rakes up: The focus on finding low or zero-cost solutions for industry to meet its legal obligations towards sustainability. And, whether such solutions come at the cost of environmental integrity.

Ironically, one of the contradictions of the tree plantation credit system was raised even by the government-owned Steel Authority of India Limited (SAIL).

Environment ministry initially said credits would be given out in parts over a 10 year period after repeated verification of the health of the plantations. This was to ensure the planted trees were growing well and healthy before the companies took credit for them. 

But the ministry did away with the safety latch in the finalised standards. Now, companies can avail all the credits for plantations after merely two years of the trees being planted. 

“A two-year timeframe for completing tree plantation may not be sufficient for ensuring proper growth and survival of the trees,” SAIL wrote. It requested that the period be extended depending on the size and location of the plantations.

Once the green credit has been issued to a company, the responsibility for ensuring the trees grow sits with the forest department and not the buyer of the credit. Experts we spoke to asked what would happen to the credits if the plantations they were generated from, failed to take off eventually, in full or part. 

Tree plantations have a notorious reputation in India. No public record worth the scrutiny exists of how many have survived after millions of hectares being planted over decades. 

“There is nothing to ensure the survival of the plantation. This was an opportunity to correct the ailing mechanism of compensatory afforestation, but the green credit program has made things easier for private players as well as the forest department,” said Chetan Agarwal, an independent environmental and forest policy analyst.

Agarwal also noted that there is no clarity on how the plantation or ecorestoration of degraded forests will be done. “The guidelines don’t mention any baseline study to record existing rootstock and seedlings and how to plant trees or herbs, keeping the baseline in mind.” 

A Cop Out

The tree plantation segment of the program, even as it tumbles on, faces some higher-order questions. 

The original compensatory afforestation scheme requires project developers to preferably replace the denuded forestland with an equivalent non-forest patch to green up over time. The new credit scheme does not require a land swap. It asks the project proponents to plant trees in existing forestlands controlled by the forest department. As a result, over time, the overall land under forests in India could potentially be reduced. 

Former Indian Forest Service officer Prakriti Srivastava, along with others, has challenged the legality of the plantations component of the green credit scheme in the Supreme Court in May 2024. 

They contended that the scheme violates the fundamental ‘land for land’ principle underlying the compensatory afforestation mechanism. They say if the companies are permitted to use plantation credits under the new scheme to meet their obligations of compensatory afforestation that would cause “destruction twice over” of forests. First, through the diversion of forestland for projects and next, by the use of existing forests for plantations for industries.

In February this year, the Supreme Court ordered that no steps would be taken to reduce the area already identified as forest unless compensatory land is provided for afforestation. This has put in question the use of green credits from degraded forests for compensatory afforestation.

Making it Creditworthy

If and when the government gets past this legal challenge, it still has to contend with two questions surrounding the idea of fungible credits. One, does it help the environment to begin with if the standards set for generating them are lax. Two, how does it operate as a market-based tool if the government’s promise (kept buried in internal records) is to ensure that the corporate world does not have to bear any additional costs for it. 

A real market-based mechanism requires that the price of the credit is decided by the demand and supply of such credits in an unregulated form. The supplier of these credits - an organisation that does the plantations to sell it to companies that need it, would only see business in it if the credits are priced well. But, the companies that need the credits to meet their legal obligations would want them priced the lowest possible - something the government is internally aligned with.

The one way to keep the green credits worthwhile is to either set a floor price or to put higher compensatory afforestation targets for project developers who cut existing forestland. But, that runs contrary to Modi’s green credit idea, which is to ease the burden on companies who have been complaining of even existing environmental obligations. 

India has experimented in the past with such a fungible credit system to achieve energy efficiency in the industry and partly failed because there was never enough demand for the credits. 

The green credit scheme has been sold as one that will generate both, green credits and potentially carbon credits. The latter refers to credits generated for abating greenhouse gas emissions. 

The government, records suggest, has yet again put the cart before the horse. The mechanism for the green credits and the carbon credits is nowhere in sight.

Indian Oil Corporation Limited, a government-owned company, had booked plantations to fund under the green credit program.

But, in August 2024 it raised doubts. It approached the environment ministry, asking if and how the plantations would generate carbon credits. It did not receive an answer. 

In December of the same year, in a letter to the Director General of Forest and Special Secretary of the environment ministry, it wrote that IOCL had released Rs. 56.02 crores for 21 plantation blocks “based on the understanding that confirmation and modalities would be received in due course of time. However, the guidance on the same has not been received on the same so far”.

In January this year, IOCL informed the ministry that they were unable to process the next payment for green credit plantations “due to non-clarity on accrual of carbon offsets or sequestration”.

The ministry responded. It said that “active discussions” to clarify carbon offset rights, modalities for plantation and carbon sequestration methodologies were underway.

Seventeen years after Narendra Modi first formally floated the idea to help the corporates, 11 years after him having helmed it within the Union government, one a half year after he sold it to the international community as a global environmental solution, the Green Credits Program’s status remains that of a goods train that still isn't ready to leave the station. And concerns linger over what goods the train is meant to carry in the first place.