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Carbon Credit Programmes for farmer’s Benefitqrcode

Apr. 18, 2023

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Apr. 18, 2023
Dr Ratna Kumria

Dr Ratna Kumria

Director- Agricultural Biotechnology, Alliance for Agri Innovation

Federation of Seed Industry of India (FSII)

India has announced long-term plans to reach net-zero emissions by 2070 as a part of achieving global climate goals. This is expected to have a positive impact on India's natural resources, public health and economy. Policies formulated and decisions taken towards clean energy transition will lead to investment for sustainable and inclusive development which in turn would ensure new jobs, flourishing livelihoods, and better health. The decarbonisation process will boost the carbon market in India, allowing rural communities to earn an additional income, while improving their farms and resources.   

With the 2070 net-zero target backed by the demand of USD 1 billion in climate finance, India is diligent about acting on climate change mitigation without hurting its economic growth prospects. Net zero or carbon neutrality will be achieved when the balance between earth-warming greenhouse gas emitted, and the equivalent amount eliminated from the atmosphere is reached. It is very important to keep the global temperature below 1.5 degrees Celsius to stabilise climate change. But all data shows that we are off track in limiting global warming. The United Nation’s Intergovernmental Panel on Climate Change (IPCC) reports that emissions over the past decade have reached their highest level in human history. This demands urgent action to reduce greenhouse gas emissions to zero. Therefore, carbon trading has become a fundamental component for achieving net zero emissions.

Carbon has become a tradable good and now can be exchanged for carbon credit. This allows industries, corporates, and nations to adopt environment-friendly initiatives such as afforestation, climate smart farming etc. in order to compensate for the greenhouse gas emissions beyond the permissible limits. Carbon credits have fueled the development of green assets across the globe, thus encouraging renewable projects and helping achieve Nationally Determined Contribution (NDC) goals. The projects that generate carbon credits are generally also associated with socio-economic benefits for local and rural communities.

In carbon farming, carbon dioxide has to be stored in a soil carbon pool. This means farmers have the leverage to earn carbon credits easily as the agriculture practices allow them to go for carbon sequestration. Afforestation, reforestation, and regenerative farm practices help soil capture carbon dioxide from the atmosphere. One carbon credit is generated when one metric ton of carbon dioxide is sequestrated in soil or removed from the atmosphere.

In 2030, the global demand for CO2 offset of about 1.1 Gt is expected to exceed carbon credit supply, as a result a significant price increase of voluntary carbon credits is expected for industry and corporates to meet their committed targets. Although, predicting prices for voluntary carbon credits remains difficult, as many factors will play a role in pricing and demand, Institute of International Finance (IIF) and McKinsey, estimate carbon credits demand to go up 15 times by 2030 and be worth $50 billion.  In India, one carbon credit is valued from Rs 400-800 for carbon sequestrated in the soil while they can fetch up to Rs 1,600-2,600 for tree-based carbon. These are direct cash-based incentives for farmers. Tree planting is a vital solution to combat the negative effects of climate change. Tree plantation is cheap, quick, and easily manageable. Trees are a crucial carbon sink. Farmers can earn higher value carbon credit through tree plantation.

The intensive application of pesticides and fertilizers has harmed overall soil health substantially. It has also caused soil carbon levels to go down, which has translated into a reduction in water absorption and retention capacity of soil. Planting of climate resilient crops that require minimal water and chemical inputs and following farming practices that help retain the soil carbon will support the cause. Plant breeders are using both traditional and innovative technologies to develop crops that are input efficient, disease resistant and have enhanced photosynthesis to capture higher amounts of CO2. Therefore, efforts to generate carbon credits would also help farmers improve soil health and optimize production costs. The additional revenue from carbon credits will have a positive impact on the social, economic, and environmental aspects of the rural sector.

There are a few problems though. Farmers alone cannot operate a carbon credit programme and the majority of farmers are small-land holders. However, many agri-tech groups and start-ups have entered the carbon trading market. The involvement of private groups and support from the government would make it easier for farmers to go down this route. Farmers can be made aware of the benefits and challenges associated with carbon credits. Technological innovations can make the processes of implementation, measuring, and verifying carbon credits efficient. The cost and risk associated with the programme will be minimized if farmers form clusters.  The verification of quality of credits will be an important step for getting higher prices, hence verification methodologies need to be strengthened and processes streamlined for development of a carbon market and benefit of the farmers. Currently, the carbon market has minimal financing and management services, and restricted data availability. In order to expedite decarbonization efforts, practical and predictable regulations for generation, verification of voluntary carbon credit will be critical to ensure adequate compensation to the farmer.

The government of India is focusing on non-fossil fuel energy sources and carbon trading towards its commitment of net-zero emissions by 2070. The recently amended Energy Conservation Act, which aims to boost renewable energy infrastructure, has great potential to benefit Indian farmers. As the government facilitates carbon credit certificates, it will enable the carbon market at the domestic level, help industries and businesses with their carbon offsets, farmers in enhancing their incomes, and our nation in combating climate change.

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