Green Credit Only After Achieving 40% Canopy Cover Over 5 Years: Environment Ministry

The Union Ministry of Environment, Forest, and Climate Change (MoEFCC) has issued a notification introducing a strict benchmark for awarding Green Credits. Under this framework, an applicant will only be eligible for Green Credit after achieving 40% canopy density on a degraded forest land parcel, following a minimum of five years of restoration activities.

The move is part of the government’s broader Green Credit Programme, designed to incentivize ecological restoration, encourage corporate participation in afforestation efforts, and link environmental performance with Environmental, Social, and Governance (ESG) reporting.

Green Credit Rules 2023: Legal Basis and Objective

The Green Credit Rules, 2023, were notified in October 2023 under Sections 3, 6, and 25 of the Environment (Protection) Act, 1986. The rules empower companies, private entities, and other stakeholders to take up plantation and restoration projects on degraded land, including open forest areas, scrublands, wastelands, and catchment zones identified by forest departments.

The aim is to create a tradable Green Credit system that not only promotes reforestation but also integrates environmental initiatives with corporate social responsibility (CSR) obligations and compliance with other environmental regulations.

New Thresholds for Claiming Green Credit

The latest notification introduces specific eligibility conditions for earning Green Credits:

  • A minimum five-year period of forest restoration is required before making a claim.

  • The restored land parcel must achieve at least 40% canopy density.

  • Applicants must submit a claim report in the specified format to the Green Credit Administrator.

  • A verification fee, determined by the Administrator in consultation with the Central Government, must be paid to evaluate and verify restoration activities.

The Green Credit will be calculated based on vegetation growth, canopy density improvement, and the number of surviving trees aged more than five years. One Green Credit will be awarded for each qualifying tree.

Verification and Issuance of Green Credits

Once a claim is filed, designated agencies will evaluate the restoration efforts, after which the Administrator may generate and issue Green Credits.

Key points include:

  • Green Credits earned for compensatory afforestation or plantation activities will be non-tradable and non-transferable, except between a holding company and its subsidiary entities.

  • Restoration activities will undergo third-party evaluation to ensure compliance with environmental standards.

Permitted Use of Green Credits

The notification specifies that Green Credits can be exchanged once for the following purposes:

  1. Compensatory Afforestation Compliance: Meeting obligations related to diversion of forest land for non-forestry purposes under the Van (Sanrakshan Evam Samvardhan) Adhiniyam, 1980.

  2. Corporate Social Responsibility (CSR): Offsetting CSR requirements based on the cost incurred towards restoration projects.

  3. Project-Specific Plantation Compliance: Satisfying obligations for tree plantation tied to environmental clearance of specific projects.

Once exchanged, the credits will be extinguished to the extent they are used, ensuring there is no double counting.

Additionally, Green Credits earned through plantation activities can also be showcased in ESG leadership reporting under relevant laws.

Strengthening Accountability in Corporate ESG

The new rules are expected to drive greater accountability in corporate sustainability practices. By linking Green Credit eligibility to measurable canopy growth and tree survival rates, the government aims to curb tokenistic or short-term afforestation drives. This will push corporations to adopt long-term restoration strategies and integrate environmental considerations into their business operations.

Furthermore, these credits can enhance ESG ratings, giving companies a competitive edge in global markets where sustainability metrics are increasingly influencing investment decisions.

Implications for India’s Environmental Goals

India has committed to creating an additional 2.5 to 3 billion tonnes of carbon sink by 2030 under its Nationally Determined Contributions (NDCs) to the Paris Agreement. The Green Credit Programme, with its focus on degraded land restoration and corporate participation, could play a significant role in achieving this target.

By setting a 40% canopy cover threshold and mandating a five-year minimum restoration period, the government is reinforcing its vision of sustainable and verifiable environmental progress rather than symbolic plantation drives.

Conclusion

The Green Credit Programme represents a transformative shift in India’s environmental governance, linking corporate accountability with tangible ecological outcomes. The newly introduced benchmarks ensure that restoration is not just a one-time exercise but a sustained effort towards building climate resilience and biodiversity conservation.

With rising global focus on ESG performance, these measures could make India a leader in market-linked environmental restoration initiatives while also supporting the country’s climate action goals.


Location: Pune, Maharashtra, India

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