Carbon Credit in Indian Agriculture: For Sustainability and Empowerment of Marginal Farmers
India’s agriculture sector employs millions and supports 60% of the population, but it faces challenges from climate change, low productivity, and reliance on monsoons. Small and marginal farmers, who make up 86.1% of the farming population, can benefit from the growing carbon-credit market by adopting sustainable practices like agroforestry and efficient irrigation. This allows them to generate carbon credits for sale, helping to reduce greenhouse gas emissions and increase their income.
Despite being a top producer of various crops, Indian agriculture must improve productivity amid a growing population and climate issues. Plans are in place to boost farmers’ income, reduce resource use, and rehabilitate land by 2030. Agriculture emits about 14% of India’s greenhouse gases but can also act as a carbon sink through sustainable practices. Private companies and international agreements, like the Paris Agreement, support funding for emission reduction projects in developing countries. These initiatives provide financial rewards to farmers adopting eco-friendly methods, which could enhance soil health and rural development.
Global Scenario:
Carbon trading in agriculture occurs in countries like the USA, Australia, New Zealand, and Canada through voluntary markets. The Chicago Climate Exchange was an important scheme that embraced practices such as no-till farming. There is a global effort to improve soil management for carbon initiatives, which aids climate change mitigation and rewards farmers for good practices. The carbon trading market is growing, especially in Europe and California, with China’s cap-and-trade program also expanding it. Demand for carbon credits is expected to increase, offering farmers income, but it is crucial that carbon prices are higher than implementation costs to keep them participating.
Initiatives from India:
India is seeing growth in carbon trading through global programs that help sell carbon credits, possibly generating $480 billion by 2070. These initiatives could particularly help agriculture, where soil health is important. India wants to store 2.5 to 3 billion tonnes of CO2 by increasing forests, supported by programs encouraging sustainable farming.
Agriculture, especially from livestock and rice farming, releases greenhouse gases. Better farming methods and waste management can lower emissions and earn carbon credits. Voluntary markets let companies and people offset emissions, improving rural life. The Energy Conservation Bill hints at a carbon market in agriculture.
The government introduced a Carbon Credit Trading Scheme (CCTS) to create a carbon credit market, overseen by the Indian Carbon Market Governing Board. Accredited agencies verify carbon credits. The Green Credit Program (GCP) also started, supporting environmental actions like tree planting, managed by the Indian Council of Forestry Research and Education. A framework launched in January 2024 promotes sustainable farming practices, enabling farmers to earn from carbon credits.
The Union Budget 2026-27 has introduced a Rs 20,000 crore Carbon Capture, Utilization, and Storage (CCUS) support programme, which is a significant step towards India’s climate goals. This initiative aims to formalize India’s carbon market, allowing both industries and farmers to participate in carbon trading. The programme integrates farmers into India’s carbon market through a structured, step-by-step process, where farmers join projects run by farmer-producer organizations (FPOs), cooperatives, or aggregators. The initiative is expected to help farmers earn beyond their crops by adopting sustainable practices, contributing to a cleaner environment.
Carbon Farming Projects:
In India, various private initiatives in carbon farming aim to reduce emissions through agriculture land management projects. Over 140 such projects are registered with Verra, potentially reducing over 27 million tons of CO2 annually, which equals removing 6 million gasoline cars from the road. This creates about 27 million carbon credits, valued at around INR 2200 crores, with an estimated INR 1300 crores reaching farmers.
Farmers may earn carbon credits for sustainable practices, which industries like aviation and mining can buy to offset their emissions. While the carbon credits system offers promise, agriculture represented only 1% of global credits in 2021. Accelerating carbon farming could benefit India and globally, helping to reshape its economy. The carbon market in India could be worth at least $50 billion, with significant potential from agriculture, land restoration, and reducing emissions from deforestation by 2050.
Methodologies to Track, Report and Verification:
A carbon market methodology provides the guidelines for measuring carbon emissions reductions or removals from various projects. Important terms include baseline emissions, additionality of reductions, and leakage from project activities. Standardized methodologies are vital for accurately measuring greenhouse gas benefits and creating Verified Carbon Units (VCUs). Organizations like Verra, Plan Vivo, and Gold Standard have established rules for voluntary carbon programs, with countries like the USA and Australia also developing standards for agricultural emissions verification.
The Agricultural Land Management (ALM) Methodology (Verra VM0042) evaluates greenhouse gas reductions via improved practices, centering on soil organic carbon (SOC) storage. It establishes baseline conditions and assesses additionality through barrier analysis, offering several methods for quantifying reductions. Estimating emissions in India is complicated by diverse rice farming methods.
The Biochar Utilization Methodology (Verra VM0044) assesses carbon dioxide removals from waste biomass converted into biochar in new facilities. It covers various applications and focuses on monitoring GHG impacts, including permanence and decay rates, with potential for improving soil health in India through crop residue use.
The Small-Holder Agriculture Mitigation Benefits Assessment (SHAMBA) tool assists smallholder farmers in sub-Saharan Africa to earn carbon credits from their agricultural practices and is user-friendly.
The SOC Activity Module explains methods for measuring SOC changes from soil management using biostimulants and discusses soil types and analytical methods in India, highlighting advanced techniques for SOC measurement.
Water and Erosion Assessment Methodologies analyze the effects of sustainable agricultural practices on soil and water via soil erosion rates, stressing the need for accurate data.
Methane Emission Reduction Methodologies explore water management changes in rice cultivation to reduce emissions, while another methodology focuses on reducing enteric methane from ruminants. Each methodology emphasizes the need for precise measurement in India’s diverse agricultural context.
The Food Loss and Waste Reduction Methodology centers on keeping food in the human food chain, while the afforestation/reforestation methodology focuses on tree planting for CO2 credits, requiring specific conditions for eligibility.
How Does it Empower Marginal Farmers?
Carbon finance provides small-scale farmers with a distinctive chance to broaden their income streams while encouraging sustainable practices. By implementing agricultural techniques that qualify for carbon credits, they can earn supplementary income through these credits. This additional revenue assists them –
Invest in Superior Agricultural Inputs: Revenue generated from carbon initiatives enables farmers to allocate funds towards high-quality seeds, soil enhancements, and equipment that boost crop yield.
Enhancing Climate Resilience: Implementing sustainable practices like agroforestry and conservation tillage contributes to better soil health and increased water retention, thereby safeguarding farms against unpredictable weather conditions and droughts.
Establish Economic Stability: Carbon credits offer an extra source of income, lessening reliance on seasonal crops and market volatility, which is especially crucial for marginal farmers.
With the backing of institutions, availability of technology, and a well-structured marketing strategy, carbon credits have the potential to revolutionize Indian agriculture. By consolidating small farmers into Farmer Producer Organizations (FPOs) and establishing a strong institutional framework, the agricultural sector in India can make a substantial contribution to climate objectives while improving the livelihoods of rural communities.
Challenges:
Voluntary carbon markets (VCMs) in Indian agriculture face several challenges that need to be addressed. One major issue is the credibility of agricultural carbon credits, which affects farmers’ payments. Past experiences, like the closure of the Chicago Climate Exchange, highlight the need for sustainable trading models. Upfront costs for soil sampling and project registration, along with the potential for reduced yields, can deter farmers. Accurate carbon measurement is difficult and costly, with current methods like soil sampling being time-consuming. While satellite technology could lower costs, it lacks precision in certain areas.
Fragmented land holdings make it hard to implement large-scale carbon farming projects, as the average size of operational holdings has declined significantly. Risks related to non-additionality and permanence of carbon credits also challenge the effectiveness and quality of conservation programs. Finally, a lack of clarity in payment structures and high project costs hinder farmer participation. The ICAR and the National Agricultural Research and Education System can play a crucial role in supporting VCM implementation by developing methodologies and providing training for farmers.
Summary:
India has one of the world’s largest agricultural sectors, which is highly affected by climate change due to its reliance on agriculture for a large population. The sector can both emit and capture carbon, making it important for carbon trading. Opportunities for carbon credits in agriculture are significant, and improving the carbon economy involves reducing greenhouse gas emissions and increasing carbon sinks. Technological options exist for emission reduction, and carbon offset projects can encourage sustainable practices while conserving resources. The Framework for the VCM in agriculture aims to create a market-based mechanism for funding sustainable methods. Challenges exist in VCM implementation, and the ICAR and NARES can assist by enhancing research, developing measurement methodologies, and building capacity among farmers to expand carbon project participation.
Sources –
Gopinath, K.A., Singh, V.K. and Prabhakar, M. 2025. Voluntary Carbon Market in Indian Agriculture: Status, Challenges and Way Forward. Policy Paper No. 01/2025. ICAR-Central Research Institute for Dryland Agriculture, Hyderabad, Telangana, India, 45p.
https://www.teriin.org/sites/default/files/2024-10/Carbon%20Credit_Agriculture.pdf
https://ijcrt.org/papers/IJCRT2401692.pdf