Strengthening the roots of an Agri-Carbon Market

Introduction to Carbon Markets and Carbon Pricing

• Carbon Markets: Carbon markets have the potential to transform Indian agriculture by making sustainable farming practices financially rewarding while combating climate change.
• Carbon Pricing: A critical tool for climate change mitigation, carbon pricing operates through:
  • Compliance Markets: Regulated by governments or international bodies like the United Nations.
    • This operates under a cap-and-trade system.
    • Companies exceeding emission caps must either:
      • Purchase carbon credits from mitigation projects (e.g., agroforestry, sustainable agriculture).
      • Pay carbon taxes for extra emissions.
  • Voluntary Markets: Unregulated markets where organizations trade carbon credits through mechanisms like:
    • Clean Development Mechanism (CDM)
    • Verra
    • Gold Standard
    • Eg., an airline company that wants to claim carbon neutrality can calculate how many carbon emissions they are unable to get rid of.
      • They can then purchase an equivalent amount of carbon offset credits by investing in a regenerative farming project in Brazil.

Principles of Carbon Markets

• Additionality: Emission reductions must occur only due to the adoption of carbon credits.
  • Farmers using pre-existing sustainable practices are not eligible for credits.
• Permanence: Ensures the long-term durability of benefits (e.g., carbon stored in soil must not be lost through practices like conventional ploughing).

Recent Developments in Carbon Markets

• COP29 (November 2024): A centralized carbon market under the United Nations received approval.
• India’s Initiatives: Announced plans for compliance and voluntary carbon markets.
  • NABARD (National Bank for Agriculture and Rural Development) has listed five agriculture carbon credit projects in collaboration with the Indian Council of Agricultural Research and state universities under Verra.

Challenges Identified

A recent study analyzed seven carbon farming projects in Haryana and Madhya Pradesh, revealing significant socio-economic exclusions:

• Women represented only 4% of participants.
• Carbon farmers cultivated more land than non-carbon farmers (51% more in Haryana and 32% more in Madhya Pradesh).
• Land ownership among non-carbon farmers was skewed towards non-marginalized castes (46% owned by general castes vs. 17% by SC/ST).

Issues with Implementation

• Communication Gaps: 45% of farmers reported no communication regarding project details.
• Lack of Training: Over 60% lacked training in new sustainable techniques.
• Financial Incentives: 28% stopped sustainable practices by the second year due to insufficient financial incentives.
• Carbon Credit Payments: Alarmingly, 99% had not received payments for carbon credits.
• Project Management: “Carbon Core” Projects (managed by startups solely focused on carbon credits) performed better than projects run by larger corporations.
  • However, they were less inclusive of smallholders and marginalized groups.

Recommendations for Addressing Challenges

• Incentivize Inclusivity: Offer higher prices for carbon credits that include smallholders and marginalized communities.
• Improve Communication and Training: Ensure regular communication and training for farmers.
• Timely Payments: Guarantee timely payment for carbon credits to maintain trust and participation.
• Collaboration for Effective Implementation: Partner with national and international research institutions to:
  • Identify suitable regions.
  • Avoid yield penalties.
  • Protect food security.

Conclusion

Building a thriving agricultural carbon market in India requires:

• Policymakers, researchers, and private entities working together.
• Ensuring inclusivity, transparency, and timely rewards for farmers.

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