By Shashank Pandey, The author is a lawyer and researcher based in New Delhi
The national capital is facing one of its worst pollution crises, with the air quality index consistently exceeding 450 and remaining in the “severe-plus” category across most areas. The crisis has triggered the highest level of emergency response under Graded Response Action Plan IV, prompted the Supreme Court to advise hybrid hearings and work-from-home arrangements, and renewed calls for bipartisan parliamentary debates on solutions.
Delhi’s predicament is far from unique. Thirteen of the world’s 20 most polluted cities are in India. Although the National Clean Air Programme aims to reduce particulate pollution by 40% by 2026, progress has been uneven. Inadequate financing for industrial emission control has been a major constraint, as well as the limited engagement of private capital.
A potential solution exists in a policy form but remains underutilised. The Ministry of Environment, Forest and Climate Change (MoEFCC) notified the Green Credit Programme (GCP) on October 12, 2023, under the Environment (Protection) Act, 1986. Its objective is to promote environmentally beneficial actions through market-based incentives. Air pollution reduction is one of the seven sectors eligible for generating green credits.
But operational guidelines have so far been issued only for tree plantation, an area that has attracted criticism for unscientific methodologies, ecological risks, and conflicts with tribal and forest rights. The plantation guidelines, notified in February 2024, had to be revisited within months.
Air pollution presents a far stronger case for consensus-based market intervention. The public health rationale is unequivocal, emission sources are identifiable, and measurement and monitoring technologies are mature. The MoEFCC must thus move swiftly to issue clear guidelines on how green credits for curbing air pollution will be generated, verified, and traded.
First, the guidelines must identify quantifiable credit-generating activities. Large industrial units should be eligible to earn credits by deploying advanced pollution control technologies—like electrostatic precipitators, wet scrubbers, and baghouse filters—that achieve emission reductions beyond statutory needs.
Fuel switching from coal to cleaner alternatives, process optimisation that reduces particulate matter and nitrogen oxides, installation of Continuous Emissions Monitoring Systems (CEMS) with public data disclosure, and adoption of cleaner production technologies by MSMEs should also qualify. Each activity must be assessed against defined baseline emission norms to ensure credits represent genuine gains.
Second, the programme’s credibility will depend on robust monitoring and verification. All participating facilities should be required to install CEMS with real-time data transmission to pollution control boards. Emission cuts must be certified by accredited third-party auditors using standardised methodologies. The Indian Council of Forestry Research and Education, as the programme administrator, should manage a transparent digital registry through the Green Credit Portal. Integration with satellite monitoring and ambient air quality data would further boost confidence that credited cuts translate into atmospheric improvements.’
Third, a functional market requires both supply and demand. While voluntary corporate ESG (environmental, social, and governance) commitments will generate initial demand, regulatory drivers are essential for scale. In this context, Sebi’s March circular, which amends the Business Responsibility and Sustainability Reporting framework, is significant. Under Principle 6, listed entities are required to disclose green credits generated or procured by themselves and their top 10 value chain partners, applicable from FY25. It effectively transforms green credits from optional ESG initiatives into material sustainability indicators for over 1,000 listed firms, creating strong reputational and investor-driven demand.
Demand can be deepened by allowing air pollution green credit purchases to qualify as CSR expenditure under Section 135 of the Companies Act, 2013, given the clear link to public health. Industries operating in non-attainment cities may be required to offset an increasing proportion of their emissions through the purchase of green credits. Credits could also be permitted to substitute a portion of environmental compensation payments, converting punitive liabilities into constructive market participation.
The experience with plantation-based credits offers important lessons. Credit must be linked to sustained, verified emission cuts, with periodic recertification rather than one-time installations. Baseline methodologies must be robust enough to prevent gaming, and full public disclosure of emissions data and transactions should be mandated to enable independent scrutiny by civil society and researchers.
To ensure credibility and smooth implementation, the MoEFCC should form a multi-stakeholder task force to finalise operational guidelines within six months, drawing on expertise from industry, pollution control boards, air quality scientists, financial regulators, civil society, and legal experts. Pilot projects must be undertaken in three-five non-attainment cities representing diverse industrial profiles for 12-18 months before a phased India rollout.
Delhi’s recurring air quality emergencies expose the limits of command-and-control regulation. Air pollution reduction cannot remain the missing component of the GCP while controversies over plantation credits persist, especially when the regulatory framework exists under the 2023 Rules, and the public health imperative is undeniable. As Delhi endures yet another winter of toxic air and Parliament debates long-term solutions, the MoEFCC has a viable policy instrument at its disposal.
Operationalising green credits for air pollution reduction can mobilise private capital, complement regulatory enforcement, and deliver measurable health and economic benefits. The cost of further delay will not just reflect policy failure, but also cost lives and livelihoods.