India bets on green credits, but could they reward deforestation?

Men on a boat row past mangrove trees encircling the island of Satjelia in the Sundarbans, India, December 15, 2019. REUTERS/Anushree Fadnavis

Men on a boat row past mangrove trees encircling the island of Satjelia in the Sundarbans, India, December 15, 2019. REUTERS/Anushree Fadnavis

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Companies that clear forest may end up profiting from the Green Credit Programme, which aims to protect the environment

  • Indian firms that clear forest must grow tree plantations
  • Plantations will generate 'green credits' under new scheme
  • Critics fear forest-clearers could profit from programme

NEW DELHI – When Indian Prime Minister Narendra Modi showcased the country's Green Credit Programme at COP28 in Dubai, he billed it as a new tool in the fight against climate change that "goes beyond the commercial mindset associated with carbon credits".

But as officials hone the methodology for awarding tradeable credits for green actions - initially just planting trees and water conservation - environmental campaigners say the initiative could end up profiting businesses responsible for deforestation.

That is because the Green Credit Programme (GCP) will allow credits to be generated by privately owned tree plantations grown to compensate for the clearance of natural forest in line with India's forest laws, official documents show.

That risks - at the very least - the large-scale privatisation of forested land in India, said Tushar Dash, an independent researcher on forest rights. That would violate legislation protecting communities' forest rights, he added.

"At worst, it would benefit companies profiting out of diverting natural forests by rendering the compensatory afforestation rule completely meaningless," Dash said. 

India's Environment Ministry, which is developing the programme, did not respond to a request for comment.

Globally, the voluntary carbon market allows companies and countries striving to shrink their carbon footprint to buy offsets through funding pollution-reducing projects such as forest or savannah preservation.

But the trade is facing mounting scrutiny, with some critics calling it a form of greenwashing, and saying a smarter way to pay for protecting nature would be to hold accountable those responsible for damaging it.

India's programme seeks to replicate the carbon offset mechanism to include a wider range of environmentally friendly actions - aiming to incentivise green initiatives by businesses, individuals, village councils, city authorities and other entities.  

They would then be able to sell the credits they generate to companies seeking to reduce their carbon footprint, counter other environmentally damaging activities such as heavy water consumption or to boost their environmental, social, and governance (ESG) scores.

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Plantations vs forests

Under India's Forest Conservation Act, if forest land is cleared to make way for a mining project, business development or new infrastructure, the company or project developer must carry out "compensatory afforestation". 

But due to a controversial rule change in 2022, they can now simply buy up existing, privately owned plantations in a practice known as Accredited Compensatory Afforestation (ACA).

Now, under the terms of the GCP released on Feb. 24, companies will simply be able to buy green credits from privately grown plantations to meet their compensatory afforestation compliance goals.

As a result of that mechanism, forest resource experts said companies that engage in deforestation could potentially generate credits from their own compensatory afforestation - granting them two potential financial benefits.

They said that if an entity that wanted to clear natural forests - for instance, a mining firm - raised its own plantations by establishing a separate company, it could sell green credits to others or use them to meet its own compliance needs, considerably reducing its costs and efforts.

Government documents seen by Context show the steering committee spearheading the GCP ignored advice by another committee to exclude ACA plantations from the programme to reduce the risk of companies profiting from compensatory tree-planting.

The current framework opens a door for companies engaging in deforestation to attain a double benefit, said Shomona Khanna, a Delhi-based lawyer who focuses on the land and forest rights of India's Indigenous peoples and Dalits.

"What are the mechanisms in place to check such activities?" she added.

Poor forest replacement

Besides the questions over the GCP, critics have long said tree planting is a poor replacement for the loss of mature forests, even if it does eventually help cut CO2 emissions.

"These (plantations) will be known for their carbon potential and exchange value rather than biodiversity, livelihood rights or cultural association," said Kanchi Kohli, a law and policy researcher based out of India.

She said that if compensatory afforestation were integrated with the GCP it could "legitimately encourage" businesses involved in clearing natural forest to also gain credits from offset plantations.

There is also concern that the programme overlooks other flaws in the India's compensatory afforestation law, such as the widespread failure of many tree plantations or fraudulent reporting of non-existent plantations, said Forrest Fleischman, an assistant professor at the University of Minnesota who specialises in forest resources.

Fleischman said that it is "unlikely" that the values being lost in felling of a natural forest are being replaced through the compensatory plantation process.

"My view is that likely all compensatory afforestation in India is greenwashing," said Fleischman, who co-authored a 2021 study that studied tree planting on government lands in parts of the Himalayan state of Himachal Pradesh.

"We found that the average effect of the plantations we studied on the percent of tree cover was zero," he said.

"In other words ... plantations did not lead to a long-term improvement in tree cover, essentially implying that a lot of plantations failed."

(Reporting by Bhasker Tripathi; Editing by Helen Popper.)

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