Union Budget 2023-24: The Green Credit Programme- An In-Depth Analysis

Mangesh Gadewar IIM Rohtak

Ten years ago, we couldn't have imagined getting monetary credit for planting trees or choosing a sustainable alternative. Well, it's a reality now. In the Union Budget of 2023-24, the government launched the Green Credit Programme as a part of their push towards Green Growth in the 7 priorities (Saptarishi) outlined as a vision for the Amrit Kaal. So what exactly is this ‘Green Credit Programme’ all about?

The Green Credit Programme or GCP is a scheme where individuals, industries and even local and state governments will get credits for adopting green or sustainable practices. In simple words, if any person adopts a sustainable practice, they will get rewarded for it. But the GCP doesn’t end here. Once you earn a green credit, you can trade it online on a platform that will be created by the government.

The GCP is focused on improving the general environment and reducing climate change through encouraging efficient energy usage and environment conservation practices. Isn’t this something really cool and futuristic?

Indeed it is. India is the first country in the world to announce such an extensive programme spanning over six sectors; water, agriculture, waste management, air pollution reduction, forestry and mangroves. But how does India’s Green Credit Programme compare to other countries?

● The United States of America is a leader in ‘green bonds’. Green bonds are those instruments that support environmentalorclimate-relatedprojects.Forexample,infrastructureprojectstobuildsolarplantsorwind farms. According to (John & Rapp, 2022), the issuance of green corporate bonds has grown rapidly in recent years, totaling almost $400 billion in 2021.

● In 2016, a G20 Summit was held in Hangzhou, China where every state head agreed on the promotion of green finance strengthening China’s pursuit of pursuing a green finance policy.

● According to a report by the World Economic Forum, in 2019, the UK government is working with the industry to set up a Sustainable Finance Standard that will act as a regulatory framework and give improved access to improved finance for green projects.

● Countries like Japan, Canada, Mexico and European Union member nations are at the forefront of green bonds. The following chart shows the amount of green bonds issued in 2021 (in billion US Dollars)

But the GCP is not just about green bonds. Let’s have a look at some possible green credit use cases for different stakeholders.

● For individuals:

Let’s say we install a rain-water harvesting system in our house. This would entail building a storage tank, inlet and outlet pipes, etc. If GST was paid for the purchase of these items, we can claim input tax credit while filing returns. Thus, the government is rewarding us for our sustainable efforts.

● For corporates: In addition to the existing green bonds, corporates will form the majority of investors who will be buying these green credits on the trading platform. These can be used to offset any environmental emissions or penalties that could be levied on them.

● For local governments: In Feb 2023, the city of Indore issued a green bond which got an overwhelming response as it was oversubscribed by investors. Through this, the municipal government will be building a solar plant that will generate 60 MW of electricity. This idea could be further extended to various sustainable measures like conservation of mangroves or handling waste.

● For farmers: Farmers who would shift to crops which are water-resilient like cotton, millets instead of water intensive crops like sugarcane and paddy will be awarded green credits or direct monetary benefits.

With things looking good for GCP, according to me, there is one problem which could be a deterrent in this vision. Through the GCP trading platform, anybody could buy these credits. A legally correct but morally incorrect practice here could be that companies which are cash rich could buy green credits and get away from environmental obligations. In my opinion, the government should issue guidelines that would prevent them from doing so.

It will be interesting to see if the Green Credit Programme really brings about a behavioural change amongst residentsofourcountry.Withthisglobalgreenmovement,wecansoonseecompaniesaccountingfor‘Carbon Emissions’ in their Balance Sheets.

Let’s strive to be pro-planet, pro-people individuals!