Potential And Pitfalls Of Having A Green Credit System In The Indian Context

Green Credits is an incentive framework or a reward-scheme for environmental-friendly behaviour, envisioned by Dr. Ron Dembo, CEO of Zerofootprint, Toronto. While there are many ways of rebuilding the Green Credits system in the Indian context, using various approaches and frameworks, it becomes integral in assessing the potential opportunities and benefits such a system can accrue upon execution, and in also being wary of the potential pitfalls, gaps and limitations of such a system in the Indian context. 

Starting with the advantages, the main benefit of having a Green Credits system is its simplicity in understanding. With a reward-scheme model like frequent flyer miles, with incentives clearly defined, it becomes easy for an average citizen to opt-in for such a scheme, as opposed to complex environmental schemes like carbon trading or REC. With clear incentives in the form of redeemable cash or tax cuts, with a clear definition of a value of the Green Credit, it becomes easy for participants to adopt and adapt their behaviour as per the incentives to become more eco-conscious. However while rebuilding Green Credits in the Indian context, it is important to note that the value of a Green Credit will differ as per context, per participant, per income group and so on, but within each individual vertical, the incentive (the value of the Green Credit and the activity it is meant as a reward for) will be clearly defined. Through positive reinforcement, the Green Credits system will be rewarded only upon verifiable action taken, hence with each Green Credit redeemed, there is a verified action taken by a participant, with a measurable ecological and social impact (in most cases). By having a single currency which replaces a lot of wasteful environmental subsidies which may have negative spill-overs, it can be adapted and tweaked to for incentivizing almost any green initiative or any individual activity geared towards sustainable development. While theoretically, it may not burden the tax-payer if it is funded by ‘future savings’ (like the negation for the need of an energy power plant, or additional waste-plants or garbage trucks or intangible long-term environmental and economic benefits of sustainable agroforestry/fishing and so on), there may be administrative costs, but given that such a system will promote a ‘green culture’ and trigger a mass-wide movement, it may have a net positive benefit. 

Some of the drawbacks, potential pitfalls and gaps of the Green Credit system are mainly from the lack of knowledge regarding the marginal impact on planetary thresholds and social foundation by implementing such a system. While it is easy to declare that such a system will have intangible positive spill-overs, in order for such a program to be executed, proper cost-benefit analysis will demand more information regarding the complex environmental and social linkages in Raworth’s framework (of planetary thresholds and social foundation). Other than this, the Green Credit system in certain verticals, like Waste Management will become increasingly complex to implement and monitor, or even assess its impact on a grass-root level due to difficulty in measurability of activities for rewarding Green Credits. Even in the energy and water sector, the Green Credit system will depend on a seamless flow of information, or at the minimum, with electricity and water meters installed at a household level. While independent agencies can conduct research to design incentives for sustainable agroforestry and fishing using ‘best practices’, again the threat of ‘isomorphic mimicry’ which is a failure to adapt it to local contexts, which may deem the incentive framework design as a failure.

With respect to labelling and information transparency too, the difficulty in monitoring and investigating every level of the supply chain, and awarding Green Credits on every level, (maybe even till the consumer) will not only be costly but will require extensive research and academic dispersion, both of which will mount costs. The idea of funding it from ‘future savings’ again requires a multidisciplinary cost-benefit analysis, and as mentioned before, the difficulty in quantifying various intangible positive spill-overs for the environment and society make the funding prospects for such a system extremely challenging.

While there still remain many unanswered questions regarding the exact methodology about implementing such a system in the Indian context, it is safe to say that the benefits outweigh the costs in stimulating the ‘green’ shift in mindset, culture and behaviour our country desperately requires.

Anurit Kanti

BW Reporters The author is correspondent at BW Businessworld, he has a keen interest in sustainability and environmental economics