Green Credit Programme must have robust standards and real carbon reduction targets

If the intention is to lure more companies with market incentives to engage in green activities, then it is important to recall India’s previous failed attempt to incentivise via market measures. A similar carbon market experiment called Perform Achieve and Trade (PAT) scheme of the Bureau of Energy Efficiency using energy savings certificates failed because it had such low standards for delivery that demand plummeted and certificates flooded the market.

Experts also point to the global critique and long-standing complaints about the efficiency of the measurable, reportable and verifiable aka MRV frameworks in practice today by voluntary markets. A recent investigation undertaken by the Guardian and  SourceMaterial, into Verra, the world’s leading carbon standard for the rapidly growing $2 billion (£1.6 billion) voluntary offsets market, has found that more than 90 percent of their rainforest offset credits — among the most commonly used by companies — are likely to be “phantom credits” and do not represent genuine carbon reductions.

Slow Progress

However, it is no secret that we need to halve emissions within the next decade and become a net-zero world by 2050 to avoid climate change. It’s also no secret that India has an uphill task ahead to deliver on its various international climate commitments. Joining the Bonn challenge in 2015 with a pledge to restore 13 million hectares of degraded and deforested land by 2020, India later revised its restoration target to 26 million hectares by 2030. The contribution of businesses towards restoration efforts in India as reflected in its report on the Bonn challenge has not been so encouraging — out of 98.11 lakh hectares of the total area brought under restoration in six years, only 1.93 lakh hectares was reported to be done by private companies.

Truth is, we need every resource and strategy brought into play. Effective action will require concerted and sufficient investment, knowing also that the costs of inaction will be far higher. Developing countries will need up to $6 trillion by 2030 to finance not even half of their climate action goals (as listed in their Nationally Determined Contributions, or NDCs).  The latest IPCC report finds all countries are falling way short, with financial flows three to six times lower than levels needed by 2030. Carbon finance will be key for the implementation of the NDCs, and the Paris Agreement enables the use of such market mechanisms through Article 6.

That’s why, around the world, interest in carbon markets is growing — 83 percent of NDCs state the intent to make use of international market mechanisms to reduce greenhouse gas emissions. In 2021, the voluntary carbon market grew at a record pace, reaching $2 billion — four times its value in 2020 — and the pace of purchases is still accelerating in 2022. By 2030, the market is expected to reach between $10 billion and $40 billion.

For the Indian GCP to succeed, the government must first expand the scope of the programme to encourage and implement new and innovative decarbonisation strategies for the industry and hard-to-abate sectors.
More importantly, it has to ensure that the methodology and the standards are robust and the MRV protocols are inspired by the global best practices for the viability and stability of the market.

There is no doubt that carbon credits could have a role to play in the climate transition if they allow companies to channel finance to projects without claiming that this makes them “carbon neutral”. Such offsetting creates a false impression that polluting activities can continue without harming the climate or raising global temperatures, providing a licence for business as usual.

Shailendra Yashwant is a senior advisor to Climate Action Network South Asia (CANSA). Twitter: @shaibaba. Views are personal and do not represent the stand of this publication.