Carbon Credits in Indian Agriculture: Pathways to Climate Finance and Cleaner Air
Agriculture in India, while foundational to the economy and livelihoods of over half the population, is paradoxically both a victim and a contributor to environmental degradation. On the one hand, Indian farmers face the brunt of erratic monsoons, depleting groundwater, and declining soil fertility driven by climate change. On the other, conventional agricultural practices—such as intensive tillage, stubble burning, and excessive use of chemical fertilizers—are significant sources of greenhouse gas (GHG) emissions.
According to data from the Ministry of Environment, Forest and Climate Change, the agricultural sector accounts for approximately 14% of India’s total GHG emissions, primarily through methane (CH₄) and nitrous oxide (N₂O). While energy, transport, and industrial emissions have been the focus of India’s mitigation strategies, agricultural emissions—especially from practices like residue burning—continue unabated, particularly in states like Punjab and Haryana.
At the same time, Indian farmers, particularly small and marginal holders, remain economically vulnerable. Input costs are rising while returns remain modest, even after the government’s efforts to support them through Minimum Support Prices (MSPs). For example, in the 2024–25 season, the MSP for paddy stood at ₹2,300 per quintal, with average per-acre income ranging from ₹46,000 to ₹57,500. After input costs are deducted, net returns are often meager.
This dual crisis—economic vulnerability of farmers and environmental harm caused by farming—creates an urgent need for innovative solutions. One such promising avenue is the integration of agriculture into the carbon credit trading ecosystem. By quantifying and monetizing practices that sequester carbon in soil or avoid emissions, Indian farmers can be both climate stewards and beneficiaries of global green finance.
In this context, carbon credits provide a triple benefit: they reward sustainable practices, reduce air pollution, and bring new revenue streams into rural economies. This paper examines the mechanisms of carbon trading in agriculture, the Indian regulatory framework, emerging players, and how this model could potentially eliminate residue burning through incentivized carbon sequestration.
Scientific Principles of Soil Carbon Sequestration
Soil carbon sequestration is the process of capturing atmospheric carbon dioxide (CO₂) and storing it in the soil in the form of organic carbon. This is primarily achieved through photosynthesis-driven plant growth, where carbon absorbed from the atmosphere is transferred into the soil via roots and decomposed organic matter. Over time, these organic inputs become part of soil organic carbon (SOC) pools, which enhance soil fertility while simultaneously mitigating climate change.
The Role of Agriculture in Carbon Flux
Agricultural soils have the potential to function as either sources or sinks of carbon, depending on the management practices employed. Conventional tillage, residue burning, and monoculture cropping systems release carbon into the atmosphere by disrupting soil structure and accelerating organic matter decomposition. Conversely, regenerative practices such as no-till farming, cover cropping, crop rotation, and biochar application slow decomposition, enhance carbon retention, and increase soil microbial biomass.
How Much Carbon Can Soils Sequester?
Studies in India’s Indo-Gangetic Plains have shown that zero-till farming can increase SOC by 0.2–0.4 tonnes per hectare per year, depending on soil type, rainfall, and cropping pattern. Translating this to carbon dioxide equivalents (using the molecular weight conversion factor of 3.67), this means that each acre can sequester 0.5–1.5 tonnes of CO₂ per year under optimized no-till and residue-retaining practices.
| Practice | Avg. CO₂ Sequestered (tonnes/acre/year) | Notes |
|---|---|---|
| Zero-tillage (no-till) | 0.5–1.0 | Reduces disturbance, retains residues |
| Cover cropping | 0.3–0.6 | Adds biomass and root matter to soil |
| Crop rotation | 0.4–0.7 | Diversifies root systems and residue quality |
| Biochar application | 1.0–1.5 (long-term stable sequestration) | Stable form of carbon with long residence time |
Verifying Sequestration: MRV Methodologies
To qualify for carbon credits, sequestration must be measurable, reportable, and verifiable (MRV). Modern MRV approaches combine field soil sampling, laboratory testing, satellite-based remote sensing, and AI-driven modeling to estimate carbon accumulation accurately. Organizations like Boomitra and Varaha in India use advanced MRV technologies to reduce transaction costs and bring smallholder farmers into the carbon market.
Verification is typically carried out under frameworks such as Verra’s Verified Carbon Standard (VCS) or Gold Standard, which ensure that issued credits represent real, additional, and permanent reductions or removals of greenhouse gases.
Permanence and Leakage Risks
One key scientific challenge is ensuring permanence—i.e., that the carbon stays in the soil for decades. Reversal risks (e.g., switching back to tillage or land-use change) can invalidate credits. This is why most standards require buffer pools or multi-year commitments from farmers.
Another risk is leakage, where gains in one area lead to unintended emissions elsewhere (e.g., expanding cultivation into forests). Proper policy design and aggregation models are required to manage these externalities.
Carbon Credit Valuation and Markets: India and the Globe
Carbon credits function as financial instruments representing the removal or avoidance of one tonne of carbon dioxide (CO₂) or its equivalent from the atmosphere. In agriculture, these credits are typically generated through nature-based solutions (NbS) such as soil carbon sequestration, improved land-use management, and biochar application. Once verified, these credits can be traded on carbon markets—either compliance or voluntary—providing financial returns to farmers and project developers.
Types of Carbon Markets
Carbon trading occurs in two broad categories:
| Market Type | Description | Examples |
|---|---|---|
| Compliance Markets | Mandated by law or regulation; typically for large industrial emitters. | EU Emissions Trading System, China ETS |
| Voluntary Markets | Companies/individuals voluntarily offset their emissions to meet ESG goals. | Verra, Gold Standard, Climate Action Reserve |
India’s Carbon Credit Trading Scheme (CCTS), 2023, marks the beginning of its structured carbon market, currently focused on the compliance side but with voluntary market development in parallel (due by 2025). Most agriculture-based carbon credits in India presently trade through the voluntary market via international platforms.
Valuation of Carbon Credits
The price of carbon credits varies significantly based on project type, geography, and certification body. As of 2024, voluntary carbon credit prices ranged between:
- $8 to $20 per tonne CO₂e (₹670 to ₹1,700)
In agricultural soil carbon projects, credit value may fluctuate due to:
- Permanence risk
- Verification cost
- Scale and aggregation
- Additionality (whether the project would happen without credit funding)
| Carbon Project Type | Avg. Price (USD/tonne) | Notes |
|---|---|---|
| Renewable Energy (Solar) | $1–$5 | Least valued due to limited additionality |
| Afforestation/Reforestation | $5–$15 | Moderate due to higher permanence |
| Soil Carbon (Agri) | $8–$20 | Higher due to co-benefits and complex MRV |
| Biochar | $15–$30 | Premium due to long-term carbon stability |
Estimated Farmer Earnings in India
Using Indian estimates:
- Soil carbon sequestration = 0.5–1.5 tonnes CO₂/acre/year
- Price range = ₹670–₹1,700/tonne
→ Farmer Income = ₹335 to ₹2,550 per acre annually
In practice, several variables affect the final earnings:
- Platform cut (aggregation + verification fees)
- Credit buyers (e.g., Microsoft, Google prefer long-term contracts)
- Farmer participation scale (smaller plots = higher transaction costs)
Still, in documented cases like Grow Indigo’s work in Haryana, individual farmers have reported ₹5 lakh/year income across 60 acres, validating the revenue potential when scaled efficiently.
India’s Position in Global Carbon Markets
Despite its significant potential, India currently supplies less than 5% of global voluntary carbon credits, even though it hosts a vast range of land-use and agriculture opportunities. However, India is expected to emerge as a key supplier of nature-based credits in the next decade due to:
- Over 159 million hectares of agricultural land
- Increasing climate finance interest in South Asia
- Low-cost implementation and high marginal benefits
To scale participation, aggregation, education, and regulatory clarity are critical. This leads us to the next focus area: the companies enabling access to carbon credit markets for Indian farmers.
Current Players and Market Examples – Varaha, Boomitra, Nurture.Farm
India’s carbon credit ecosystem is rapidly being shaped by a new generation of AgTech startups, climate-finance platforms, and environmental organizations that are bridging the gap between farmers and global carbon markets. These players use satellite technology, AI modeling, and blockchain-based registries to verify and monetize climate-positive farming practices. Let’s examine the leading entities in the Indian agricultural carbon credit space.
Varaha – Scaling Smallholder Credits with Precision
Founded in 2022, Varaha has quickly become one of India’s most prominent carbon offset companies. Specializing in soil carbon, biochar, and regenerative agriculture projects, Varaha partners with smallholder farmers to implement practices that reduce emissions and store carbon.
- Reach: 80,000+ farmers across 700,000 acres in India and neighboring countries.
- Technologies Used: Satellite remote sensing, AI models, and in-field validation.
- Credits Generated: Estimated 1.7 million tonnes of CO₂e in progress or issued.
- Key Clients: In January 2024, Google signed a major contract with Varaha to purchase carbon removal credits sourced from biochar initiatives on Indian farms.
- Farmer Incentives: Varaha offers up to ₹1,700 per acre/year depending on sequestration, verified annually, with part payments up front.
Varaha’s model is notable for using digital-only MRV (Measurement, Reporting, Verification) systems, making participation easier and cheaper for rural farmers with limited access to scientific labs or carbon auditors.
Boomitra – Satellite-Driven Soil Carbon Monetization
Backed by global investors including Y Combinator and Microsoft’s Climate Innovation Fund, Boomitra operates a carbon platform that aggregates, verifies, and sells soil carbon credits by working with local implementation partners such as NGOs and Farmer Producer Organizations (FPOs).
- Project Example: URVARA Project – active across Rajasthan, MP, Maharashtra, and Karnataka.
- Farmers Onboarded: 6,000+ across six states.
- First Credit Issuance: 47,311 credits already issued under the Verra Verified Carbon Standard.
- Projected Total: 315,735 credits over 20 years.
- Revenue Model: Farmers receive a share of credit sale proceeds after accounting for aggregation, verification, and registry fees.
Boomitra’s unique value proposition lies in machine-learning models that use historical satellite data to estimate soil carbon changes at scale without requiring physical sampling for every parcel.
Nurture.Farm – Integrating Sustainability into Agribusiness
A subsidiary of UPL Ltd, Nurture.Farm leverages its agrochemical and seed distribution network to promote climate-resilient practices, especially in Punjab and Haryana. Its flagship program in 2021-22 replaced stubble burning with a biodecomposer application, reducing methane emissions while improving soil carbon.
- Focus Areas: Direct Seeding of Rice (DSR), residue decomposition, zero tillage.
- Regions Covered: Punjab, Haryana, Andhra Pradesh.
- Carbon Credits: Generates voluntary carbon offsets sold via international markets.
- Farmer Incentives: Direct payment support, technology access, and carbon revenue sharing.
- Recognition: Supported by the World Bank’s carbon finance facility and UNDP’s SDG partnerships.
Nurture.Farm’s holistic approach—linking sustainable farming with agronomic services and carbon monetization—has proven critical in reducing crop residue burning, a major contributor to winter air pollution in North India.
Other Notable Platforms
- Grow Indigo: Joint venture between Indigo Ag and Mahyco; active in Bihar and Haryana; promotes no-till and microbial soil treatments.
- Farmers for Forests: NGO focusing on tribal farming and agroforestry-based credit generation.
- Agricert / CarbonCheck: Indian firms providing third-party MRV and validation services.
These market actors provide the operational infrastructure required for small and marginal farmers to access the climate finance ecosystem. Their success, however, is heavily dependent on regulatory clarity and policy support, which will be the focus of the next section.
Farmer Income Models – Region-wise Analysis with Earnings Per Acre
The financial viability of carbon credit trading for farmers depends on three primary factors: (1) the amount of carbon sequestered per acre, (2) the prevailing market price per credit, and (3) the efficiency of the aggregation and verification system. In India, despite fragmented landholdings and varied agro-climatic zones, credible data from pilot projects and startups now offer a clearer picture of the income potential per acre from carbon trading, particularly when combined with no-till and regenerative farming practices.
Estimated Carbon Sequestration by Crop and Practice
| Crop | Avg. CO₂ Sequestered (tonnes/acre/year) | Primary Practice Used |
|---|---|---|
| Paddy | 0.8–1.5 | No-till, stubble retention |
| Wheat | 0.6–1.2 | Direct seeding, cover cropping |
| Maize | 0.5–1.0 | Conservation tillage |
| Soybean | 0.4–0.9 | Biochar, crop rotation |
| Cotton | 0.6–1.1 | Reduced tillage + composting |
| Pulses | 0.3–0.6 | Rotational cover cropping |
| Groundnut | 0.5–1.0 | Soil amendments, residue retention |
Carbon Credit Income Estimations
Based on a carbon credit value of ₹670–₹1,700 per tonne CO₂ in the voluntary market:
| Crop | Estimated Carbon Credit Income (₹/acre/year) |
|---|---|
| Paddy | ₹680–₹2,550 |
| Wheat | ₹500–₹2,040 |
| Maize | ₹425–₹1,700 |
| Soybean | ₹335–₹1,530 |
| Cotton | ₹500–₹1,870 |
| Pulses | ₹255–₹1,020 |
| Groundnut | ₹425–₹1,700 |
Source: Statscope India Research estimates compiled from Varaha, Boomitra, and Grow Indigo project data.
Additive Income from No-Till Subsidies and Cost Savings
Apart from carbon credit earnings, farmers who adopt no-till or zero-tillage practices benefit from reduced input costs and targeted government subsidies. Here’s the estimated per-acre economic benefit from no-till practices:
| Crop | Fuel & Labor Savings (₹/acre) | Machinery Subsidy Benefit (Amortized) | Total Savings/Subsidy Income (₹/acre/year) |
|---|---|---|---|
| Paddy | ₹1,200–₹1,500 | ₹800–₹1,000 | ₹2,000–₹2,500 |
| Wheat | ₹1,000–₹1,400 | ₹600–₹800 | ₹1,600–₹2,200 |
| Maize | ₹800–₹1,200 | ₹600–₹800 | ₹1,400–₹2,000 |
| Soybean | ₹800–₹1,100 | ₹500–₹700 | ₹1,300–₹1,800 |
| Cotton | ₹1,000–₹1,300 | ₹600–₹800 | ₹1,600–₹2,100 |
Total Additional Revenue Per Acre (Carbon + No-Till Combined)
| Crop | Total Estimated Add-On Income (₹/acre/year) |
|---|---|
| Paddy | ₹3,480–₹5,950 |
| Wheat | ₹2,700–₹5,040 |
| Maize | ₹2,425–₹4,700 |
| Soybean | ₹2,335–₹4,330 |
| Cotton | ₹2,900–₹5,070 |
These returns are over and above the existing income farmers generate from MSPs or market sales. For instance, in Haryana, farmers who adopted Direct Seeding of Rice (DSR) combined with no-till practices received up to ₹4,000 per acre from government incentives and an additional ₹1,000–₹1,800 per acre from pilot carbon projects.
Regional Highlights
- Punjab and Haryana: Highest potential due to stubble management impact and widespread wheat-paddy rotation.
- Bihar and Madhya Pradesh: Early adoption by Grow Indigo and Boomitra shows promising returns on marginal lands.
- Maharashtra and Karnataka: FPO-based models aggregating tribal and smallholder farms with biochar programs.
The Regulatory Framework – CCTS and Its 2023 Rollout
India’s entry into the global carbon trading ecosystem was formalized with the notification of the Carbon Credit Trading Scheme (CCTS), 2023, under the Energy Conservation Act (Amendment), 2022. This landmark policy framework lays the foundation for a structured domestic carbon market, with clearly defined compliance and voluntary mechanisms. Its rollout is being seen as a pivotal move to align India’s economic activities, especially agriculture, with its net zero target by 2070.
Legal Foundation and Notification
- Legislation: Energy Conservation (Amendment) Act, 2022
- Notification Date: 28 June 2023
- Nodal Ministry: Ministry of Power
- Administrating Body: Bureau of Energy Efficiency (BEE)
- Trading Oversight: Central Electricity Regulatory Commission (CERC)
- Registry Management: Grid Controller of India Ltd (Grid-India)
The CCTS provides legal status to Carbon Credit Certificates (CCCs), allows for trading on registered power exchanges, and introduces market oversight mechanisms. Though initial focus is on energy-intensive industries, the voluntary arm is poised to include agriculture, forestry, and land-use (AFOLU) sectors.
Structure of India’s Carbon Market
| Segment | Details |
|---|---|
| Compliance Mechanism | Mandatory targets for high-emission sectors (cement, steel, aluminum). |
| Voluntary Mechanism | Open to agriculture, MSMEs, institutions; rules under development. |
| Trading Platform | Power exchanges regulated by CERC. |
| National Carbon Registry | Manages issuance, transfer, and retirement of carbon credits. |
While the compliance market is expected to become fully operational by 2026, the voluntary market for agriculture is being prepared for phased entry beginning in 2025.
Government Integration with Agricultural Policy
Although agriculture is not yet part of the compliance mechanism, various schemes and subsidies have been indirectly supporting the generation of voluntary carbon credits:
- Sub-Mission on Agricultural Mechanization (SMAM): Offers up to 50–80% subsidy on zero-till, seeder, and residue management equipment.
- National Mission on Sustainable Agriculture (NMSA): Promotes climate-resilient agriculture, including soil carbon restoration.
- Crop Residue Management Program: Specific to Punjab, Haryana, UP, and Delhi—offers ₹800–₹1,000 crore annually for machinery and training.
These schemes, when linked with carbon credit protocols, can transition into pre-financing mechanisms for generating verified offsets.
Inter-ministerial Coordination
India’s carbon trading ecosystem involves a coordinated approach:
| Agency/Body | Role |
|---|---|
| Ministry of Power | Policy direction and final approval of the CCTS |
| Bureau of Energy Efficiency (BEE) | Trajectory setting, accreditation of MRV protocols |
| Central Electricity Regulatory Commission (CERC) | Ensures fair, transparent trading of CCCs |
| Ministry of Agriculture | Supports integration through sustainable farming programs |
| Grid Controller of India | Operates the national carbon registry system |
What’s Still Missing?
Despite this progress, several gaps exist in relation to agricultural carbon trading:
- No official protocol for soil carbon measurement yet recognized under Indian rules.
- Absence of a National Carbon Credit Aggregator for smallholder projects.
- Limited farmer representation in policy consultations.
- Lack of tax clarity on carbon credit income for individual farmers.
Until the voluntary agriculture mechanism is formalized under the CCTS, farmers remain dependent on foreign carbon registries (Verra, Gold Standard) and private platforms for credit validation and trade.
India’s regulatory direction is clear: it intends to transition from fragmented voluntary initiatives to a unified national carbon market, with agriculture playing a future-critical role. In the next section, we explore how this model can tackle one of India’s most acute environmental issues—stubble burning and winter pollution in North India.
Curbing Pollution in Punjab-Haryana Belt – Incentivizing Alternatives to Stubble Burning
The annual spectacle of toxic smog blanketing North India—particularly the National Capital Region (NCR)—is directly linked to the post-harvest burning of paddy stubble in Punjab and Haryana. This environmental crisis, responsible for severe health impacts, political friction, and judicial interventions, stems from agronomic and economic constraints that compel farmers to burn leftover crop residues instead of managing them sustainably.
Despite years of subsidies, fines, and awareness campaigns, the problem persists. A market-driven solution—carbon credit trading for soil carbon sequestration—offers a compelling alternative that not only reduces emissions but pays farmers to stop polluting.
Scale of the Problem
- Over 5.7 million hectares of land is under paddy cultivation in Punjab and Haryana combined.
- Around 20 million tonnes of paddy straw are produced annually.
- Of this, 70–80% is typically burnt, releasing vast amounts of particulate matter and GHGs.
- According to SAFAR (System of Air Quality and Weather Forecasting and Research), stubble burning contributed up to 40% of PM2.5 concentrations in Delhi during peak months.
Economic Logic Behind Burning
| Factor | Detail |
|---|---|
| Tight harvest-to-sowing window | Just 15–20 days between paddy harvest and wheat sowing |
| High cost of residue management | ₹2,500–₹3,000 per acre for machinery/fuel |
| Lack of labor availability | Mechanized burning is cheaper and quicker |
| Policy gap | Subsidies target machinery, not outcomes |
Burning is thus not an agrarian ritual—it is an economic default.
Carbon Credits as a Behavior Modifier
Soil carbon-based credits encourage in-situ incorporation of residues through no-till and microbial decomposition. This results in:
- Increased organic matter in the soil
- Suppressed weed growth, improving wheat yields
- GHG mitigation, eligible for monetization via verified carbon credits
By implementing residue management practices linked to carbon revenue, farmers get paid for NOT burning, aligning financial incentives with environmental stewardship.
| Practice | CO₂ Avoided or Sequestered | Credit Income Potential |
|---|---|---|
| Residue incorporation (no-burn) | ~1.0–1.5 tonnes/acre/year | ₹850–₹2,550/acre/year |
| Use of decomposers + DSR | 0.8–1.2 tonnes/acre/year | ₹680–₹2,040/acre/year |
Case Study: Nurture.Farm’s Decomposer Program
In 2021–22, Nurture.Farm deployed bio-decomposer solutions over 420,000 acres in Punjab and Haryana:
- Resulted in 90% stubble decomposition within 25 days
- Avoided significant methane and CO₂ emissions
- Generated credits now being aggregated and monetized under international standards
- Farmers received input kits + guaranteed carbon-linked revenue sharing
Transition Potential
If even 50% of Punjab and Haryana’s paddy area (approx. 2.85 million hectares) adopted no-burn practices through carbon-financed incentives:
- Total CO₂ avoided/sequestered = 28.5–42.75 million tonnes/year
- At ₹1,000/tonne (conservative market rate), this equals ₹2,850–₹4,275 crore in potential revenue
- Equivalent to or greater than current machinery subsidies (~₹1,000 crore/year)
This makes the case for shifting from supply-side subsidies to performance-based carbon payments.
Policy Integration
To fully leverage this potential, the government must:
- Create protocols under CCTS for no-burn, soil-carbon projects
- Offer carbon-linked incentives, replacing fragmented machinery subsidies
- Integrate MSP bonuses with verified eco-friendly practices
- Empower FPOs and panchayats to act as credit aggregators
Carbon credits offer a pathway to break the burn-and-sow cycle without coercion. They align ecology and economy in a way few policies have succeeded in doing. In the next section, we will explore the technical and socio-economic challenges that must be overcome to scale this solution nationwide.
Technical and Social Challenges – MRV, Adoption, Trust
While the promise of carbon credit trading in Indian agriculture is significant, realizing its full potential hinges on addressing a set of technical, institutional, and behavioral challenges. From accurately measuring carbon in soil to winning farmer trust in an unfamiliar financial mechanism, multiple barriers exist that must be systematically tackled to ensure equitable and scalable participation.
Measurement, Reporting, and Verification (MRV)
MRV is the backbone of any carbon credit system. It ensures that each tonne of CO₂ credited corresponds to a real, additional, measurable, and permanent reduction or removal of greenhouse gases.
Key Challenges:
| Challenge | Explanation |
|---|---|
| Soil heterogeneity | Carbon sequestration varies by micro-climate, soil type, and crop cycle |
| High verification cost | Lab testing and sampling are expensive and impractical for small plots |
| Lack of standardized tools | India currently lacks a government-approved MRV protocol for agriculture |
| Temporal variability | Carbon gains may reverse if farming practices change later (e.g., tilling) |
New technologies like satellite-based sensing (Boomitra) and AI-driven predictive modeling (Varaha) are attempting to solve these issues, but government recognition of digital MRV systems is still pending under the Carbon Credit Trading Scheme (CCTS).
Farmer Awareness and Adoption
Despite economic benefits, adoption of no-till and climate-smart practices remains regionally limited. For instance:
- In Punjab, only 45% of wheat-growing villages had adopted zero tillage by 2017–18.
- In Bihar, zero tillage in wheat rose from 33% to 42% between 2012 and 2016.
- Even in these areas, adoption is higher among large landowners, while marginal farmers remain underrepresented.
Reasons for Low Adoption:
- Lack of knowledge about carbon markets and verification process
- Suspicion of intermediaries and aggregators
- Delayed payments from carbon credits (1–2 years typical for first cycle)
- Resistance to change from traditional farming techniques
- Limited availability of custom hiring centers (CHCs) and eco-machinery
Institutional Bottlenecks
- Fragmented landholdings: With average land size in India at 1.08 hectares, aggregating plots for project eligibility is difficult.
- Absence of farmer collectives: In many regions, Farmer Producer Organizations (FPOs) lack scale or legal strength to negotiate on behalf of farmers.
- Registry access barriers: Most Indian farmers cannot directly access Verra or Gold Standard without going through third-party developers.
- Lack of integration: There is no single-window system to link MSP benefits, MRV data, subsidy access, and carbon market entry.
Trust and Transparency
Carbon markets are still seen as opaque and elite-driven, especially in rural India. Issues of concern include:
- Unclear profit-sharing mechanisms from credit sales
- Over-promising by some aggregators or startups
- Poor dispute redressal in case of performance penalties or reversal risks
- Language and literacy barriers in contract comprehension
Building trust will require transparent, farmer-facing dashboards, multilingual contracts, third-party grievance redressal, and robust payment timelines.
Financial Flow and Delays
Unlike crop sales (which provide instant revenue), carbon credits are issued annually or biennially, often with partial upfront payments. This cash flow lag can disincentivize small farmers unless:
- Bundled with early-stage micro-incentives
- Combined with MSP bonuses or input support subsidies
- Integrated into crop insurance or Kisan Credit Card (KCC) schemes
Addressing these multifaceted barriers will be essential if carbon finance is to become not just a niche incentive, but a mainstream component of Indian agriculture. With policy support, technology scaling, and institutional reforms, these hurdles can be converted into stepping stones.
Policy Recommendations and Conclusion
The integration of carbon credit trading into Indian agriculture offers a transformative opportunity—financially, environmentally, and socially. For a sector that contributes significantly to the nation’s greenhouse gas emissions and yet suffers from economic fragility, the monetization of sustainable practices through carbon credits could create a self-reinforcing cycle of soil regeneration, emission reduction, and rural prosperity.
Policy Recommendations
To scale this model effectively and equitably, the following policy interventions are essential:
- Finalize MRV Protocols for Soil Carbon
The government must officially recognize and standardize Measurement, Reporting, and Verification (MRV) systems that use remote sensing and digital tools suited to Indian conditions. - Integrate Carbon Credits with MSP Incentives
Farmers adopting zero-burn, no-till, or regenerative practices should receive carbon-linked bonus payments directly via MSP procurement or through DBT (Direct Benefit Transfer). - Build a National Carbon Aggregator Network
FPOs, cooperatives, and Panchayati Raj Institutions should be empowered and funded to act as verified aggregators, ensuring scale and fair participation. - Ensure Regulatory Oversight of Private Platforms
Introduce a licensing or registration mechanism under CCTS to ensure that companies issuing or aggregating credits do not exploit illiterate or smallholder farmers. - Tax Exemption for Farmer Carbon Income
Given the environmental service nature of carbon farming, the income earned from it should be tax-exempt for small and marginal farmers. - Create Farmer-Facing Digital Dashboards
Transparency portals in local languages showing acreage enrolled, carbon credits generated, income received, and payments due will help build trust.
Conclusion
Carbon credit trading in Indian agriculture is more than a climate mitigation strategy; it is a rural financial innovation that can simultaneously address pollution, soil degradation, and income instability. The groundwork has been laid by private players and early government policy, but a truly inclusive and impactful system will only emerge when carbon finance is as accessible and trusted as MSP or crop insurance.
This article was developed in partnership with Statscope Research India.
“Carbon Credits Trading can hit two birds in one stone for India—it combats climate change and boosts farmer income. That’s why it’s vital the government ensures every farmer knows about these incentives. Equally important is safeguarding against corporate manipulation—companies must not fool our illiterate farmers and must compensate them fairly for the value they create,”
— Darshan Walawalkar, Partner, Statscope Research India
