Green Credits Are Not Carbon Credits

What a green credit actually is

The Green Credit Programme was created by the Green Credit Rules, 2023, notified on 12 October 2023 under the Environment (Protection) Act, 1986. It is administered by the Indian Council of Forestry Research and Education.

Its purpose is to incentivise voluntary environmental action through a market-linked reward, beginning with tree plantation and designed to extend over time to other environmental activities.

The 2025 revision, and why it matters

This is the part of the story that most published material misses, and getting it wrong produces exactly the confusion this article exists to clear.

As originally designed, the Green Credit Programme was a market. The Rules as notified on 12 October 2023 contemplated a Green Credit Registry and a trading platform, with market stability mechanisms, and green credits were intended to be tradable domestically. Commentary from that period described green credits as tradable because that was the design.

The methodology notified in February 2024 built on that. It required planting at a density of 1,100 trees per hectare on degraded forest land, with credits issued two years after plantation.

A revised notification of 29 August 2025 changed the basis on both counts.

• Basis of award; February 2024 methodology: Planting density of 1,100 trees per hectare; Revised, 29 August 2025: Canopy density outcome
• Threshold; February 2024 methodology: Plantation established; Revised, 29 August 2025: Minimum 40 per cent canopy density in the parcel
• Timing; February 2024 methodology: Credits issued after two years; Revised, 29 August 2025: One credit per surviving tree more than five years old
• Tradability; February 2024 methodology: Tradable and transferable; carbon market linkage contemplated; Revised, 29 August 2025: Non-tradable and non-transferable, except transfer between a holding company and its subsidiaries; carbon market linkage removed

The stated ecological reason for the shift is sound. A fixed density of 1,100 trees per hectare applied indiscriminately risks damage to grasslands and savannah ecosystems, where high tree density is not the appropriate restoration outcome. Measuring canopy achieved after five years, on surviving trees, is a better proxy for restoration than counting stems planted.

The removal of tradability is the change with the commercial consequence, and it is the reason any financial model built on the 2023 or 2024 design is now wrong.

How a green credit is earned, as the position now stands

The mechanism runs through degraded forest land rather than private plantation.

State forest departments identify degraded land, in parcels reported at a minimum of five hectares.

An entity funds restoration of an identified parcel.

The parcel must achieve a minimum 40 per cent canopy density.

One green credit is awarded for each surviving tree more than five years old, with designated agencies verifying tree survival and canopy through third-party verification before issuance.

On scale: early reporting recorded 13 states offering 387 parcels totalling 10,983 hectares, while the Government reported in February 2025 that over 57,000 hectares of degraded forest land had been marked for the scheme. Figures of this kind move, and the later number should be preferred over the earlier one.

What you can do with a green credit

This is where the difference from carbon credits is sharpest.

Since the 2025 revision, green credits are non-tradable and non-transferable, with one express exception: transfer between a holding company and its subsidiary companies. They may be exchanged once and cannot be reused. There is no secondary market, no exchange trading and no price discovery.

The permitted uses reported are exchange, once, against:

• compensatory afforestation requirements under the Forest (Conservation) Act regime;
• corporate social responsibility obligations; and
• project-linked obligations.

Exchange extinguishes the credit, and the drafting is precise about how much. On exchange for any permitted purpose the credit is deemed extinguished to the extent it has been used, and to that extent cannot be used again. That formulation matters for a company holding a large block: a partial exchange does not burn the whole holding, only the portion applied. It also forecloses the double-count that would otherwise arise from reporting the same credit against both a compensatory afforestation obligation and an ESG commitment. Reporting against ESG commitments is where most corporate interest lies, and it needs care. A green credit is something a company can report; outside the compensatory afforestation route it is not something that discharges a distinct statutory obligation in the way a carbon credit certificate does.

What a carbon credit certificate is

The carbon credit certificate is the unit of India's compliance carbon market, the Carbon Credit Trading Scheme, administered by the Bureau of Energy Efficiency under the Energy Conservation Act, 2001 as amended in 2022.

It works in an entirely different way.

It measures emissions. A certificate corresponds to greenhouse gas emissions reduced or avoided, measured against an entity's notified emission intensity target or, under the offset mechanism, against an approved project methodology.

It is a compliance instrument. The scheme covers nine hard-to-abate sectors, and obligated entities in the seven with final notified targets carry binding greenhouse gas emission intensity targets. Iron and steel and fertiliser remain at draft stage, so entities in those two carry no binding target yet. An entity that beats its target earns certificates. One that falls short must buy and surrender them, and may additionally face environmental compensation at twice the average certificate price.

It is tradable. Certificates are issued and retired through a registry connected to Grid Controller of India Limited, with secondary trading through a power exchange interface using exchanges regulated by the Central Electricity Regulatory Commission.

It has a price. Because it trades, it has a market value, which is what converts emissions intensity into a balance sheet item.

Why the confusion happens, and what it costs

Three reasons the two get conflated.

The names are similar and both are described as "credits" in general commentary.

Both are environmental market mechanisms made under Indian law in the same period, and both were introduced as part of the same broad policy push.

Both connect to corporate ESG reporting. SEBI's circular of 28 March 2025 added a voluntary green credit disclosure to the BRSR, which places green credits inside the same reporting document that carries emissions data.

The cost of confusing them is real.

A company cannot meet a carbon market obligation with green credits. An obligated entity under the CCTS that falls short of its intensity target must acquire and surrender carbon credit certificates. Green credits will not discharge that obligation.

A company cannot trade green credits to monetise them. Any financial model treating green credits as a saleable asset is wrong.

A company should not describe green credits as carbon offsets. They do not measure emissions, and presenting them as though they do is an environmental claim that would need substantiation under the greenwashing regime that now applies to consumer-facing claims.

The criticism of the green credit mechanism

The programme has attracted substantive criticism, and a knowledge hub that omitted it would be presenting only half the picture.

The methodology has been questioned. Experts have raised concerns about the basis on which green credits are calculated and whether a per-tree unit captures ecological value in a meaningful way.

Tree count is a weak proxy for ecological restoration. Counting stems rewards planting rather than ecosystem outcomes. Survival rates, species appropriateness and biodiversity value are not directly captured by a per-tree metric.

The measurement basis has already had to be rebuilt once. The original 1,100 trees per hectare requirement was criticised for risking damage to grasslands and savannah, where high tree density is not an appropriate restoration outcome, and the 2025 revision replaced it with a canopy density test. That was the right correction, but a scheme whose central metric changed within two years of its first methodology is not yet a settled measurement regime, and a canopy threshold applied uniformly carries some of the same landscape-blindness in a milder form.

Five years may be too short a permanence test. Commentary on the revision has questioned whether survival to five years is sufficient evidence of durable restoration.

The relationship with compensatory afforestation is contested. Allowing green credits to be exchanged against compensatory afforestation obligations raises the question whether restoration funded voluntarily is being used to satisfy a duty arising from forest diversion.

None of this makes the programme worthless. It does mean a company should treat a green credit as evidence of a funded restoration activity rather than as a quantified environmental outcome.

What a company should actually do

Never model green credits as tradable. They are not, and any assumption of resale value is unfounded.

Do not assume carbon credit certificates are freely fungible either. They trade, which green credits do not, but whether an obligated entity may buy certificates generated by a non-obligated entity under the offset mechanism is unresolved on the face of the instruments. The Energy Conservation Act defines the certificate uniformly and all certificates trade on the same power exchange, which suggests fungibility; but Regulations 8 and 9 of the CERC Regulations categorise obligated and non-obligated certificates separately and allocate them to distinct compliance and offset market segments. So the correct contrast is not "tradable against non-tradable" but tradable, subject to an unresolved boundary, against not tradable at all.

Do not use them in carbon compliance planning. Carbon market obligations require carbon credit certificates.

Report them accurately. The BRSR green credit disclosure is voluntary. Where made, it should describe what was funded and what was received, not imply an emissions outcome.

Check the current methodology before committing. The calculation basis and the timing of award have been revised, and the mechanics described in older commentary may be superseded.

Keep the two credit types separate in internal systems. Companies that log both in a single "environmental credits" line invariably end up misreporting one of them.

Frequently asked questions

What is the difference between a green credit and a carbon credit? A carbon credit certificate measures greenhouse gas emissions reduced or avoided and is a tradable compliance instrument under India's carbon market. A green credit rewards voluntary environmental activity, initially tree plantation, is measured per tree, and is non-tradable and non-transferable.

Can green credits be traded? Not since the revision notified on 29 August 2025. They are non-tradable and non-transferable, except for transfer between a holding company and its subsidiary companies. They may be exchanged once and cannot be reused. The Rules as originally notified in October 2023 did contemplate a trading platform, which is why older material describes them as tradable.

Who administers the Green Credit Programme? The Indian Council of Forestry Research and Education, under the Green Credit Rules, 2023 notified on 12 October 2023 under the Environment (Protection) Act, 1986.

How are green credits earned? Through funding restoration of degraded forest land identified by state forest departments. Under the methodology revised on 29 August 2025, the parcel must achieve a minimum 40 per cent canopy density, and one credit is awarded for each surviving tree more than five years old, subject to third-party verification.

What changed in the Green Credit Rules in 2025? The basis of award moved from a planting density of 1,100 trees per hectare with issuance after two years, to canopy density of at least 40 per cent with one credit per surviving tree over five years old. Tradability and the carbon market linkage were removed.

What can green credits be used for? They may be exchanged once, against compensatory afforestation requirements under the Forest (Conservation) Act regime, corporate social responsibility obligations, or project-linked obligations.

Can green credits meet a carbon market obligation? No. An obligated entity under the Carbon Credit Trading Scheme that misses its emission intensity target must acquire and surrender carbon credit certificates. Green credits will not discharge that obligation.

Are green credits carbon offsets? No. They do not measure greenhouse gas emissions. Describing them as offsets would be an environmental claim requiring substantiation.

Does the BRSR require green credit disclosure? SEBI's circular of 28 March 2025 introduced a voluntary green credit disclosure in the BRSR. It is not mandatory.

What is the criticism of the Green Credit Programme? That the calculation methodology has been questioned by experts, that a per-tree unit is a weak proxy for ecological restoration outcomes, and that permitting exchange against compensatory afforestation obligations raises questions about what the credits are actually substituting for.