An absolute necessity for survival now is a world where carbon emissions decide whether an organisation or a company is worth investing in. It’s only logical, then, that carbon offsets be treated as essential a parameter as the stock valuation of the companies. In that regard, the Kyoto Protocol of 1997 recognised carbon as a tradable good, that can be subjected to tracking and taxing, just like money. As governments around the world seek to tackle the problem of greenhouse gas emissions, one method they use is known as the ‘cap and trade’ method. It seeks to limit the amount of emissions a company can produce, for the purpose of which a key instrument which is used is called ‘carbon credit’. 

What are carbon credits?

Essentially, carbon credits represent an organisation's permitted levels of carbon emissions as set by their respective government. A single carbon credit represents the right to emit one metric ton of carbon dioxide or other greenhouse gases (GHGs) into the atmosphere. But they're more than just a regulatory mechanism – carbon credits can also be traded in the market like any other commodity. If an organisation is able to emit fewer greenhouse gases than their carbon credit limit allows, they can sell the remaining credits to other organisations for a profit. This creates a market-based solution that encourages companies to reduce their emissions while also ensuring that those who need to emit greenhouse gases can do so in a balanced way. It is a more lenient alternative compared to the "carbon tax", which imposes direct penalties on companies for their emissions through taxation.

By practising sustainable farming, a farmer can sequester about one to four metric tonnes of carbon per acre implying a direct financial benefit of up to Rs 3,120 at the current market price. Therefore, carbon credits will ensure an additional revenue stream for them, diversifying their income sources.

Why do Indian farmers need carbon credits?

Agriculture is still the primary source of livelihood for the majority of the Indian population, employing about 57.8 percent of the rural population, majority of whom are engaged in traditional farming. Traditional practices like field flooding and stubble burning, apart from resulting in inefficient output and land degradation, often cause GHG emissions that contribute to climate change. But what if these emissions could be turned into a source of income for farmers? This is where carbon credits come into play. Farmers can benefit from carbon credits by participating in carbon offset projects by adopting sustainable farming techniques.

What is sustainable farming?

Sustainable farming is an agricultural approach that aims to produce food while minimising negative impacts on the environment, promoting social responsibility, and maintaining economic viability. It involves practices such as conserving soil and water, reducing the use of chemicals, promoting biodiversity, and using renewable energy. Within it, comes the concept of precision farming which is a scientific approach to farming. It uses data analytics, satellite imagery, and sensors to tailor crop inputs such as fertiliser and water to the specific needs of each plant, resulting in higher yields, reduced waste, and better resource management. These techniques, other than reducing emissions, also help create local carbon sinks.

How can Indian farmers benefit from carbon credits?

Farmers can earn carbon credits by documenting the reduction in their GHG emissions and the amount of carbon that they preserved in their soil. Each carbon credit that they earn is about Rs 780 at the current market prices, and even as high as Rs 2000 from bigger companies when selling in huge bundles. By practising sustainable farming, a farmer can sequester about one to four metric tonnes of carbon per acre implying a direct financial benefit of up to Rs 3,120 at the current market price. Therefore, carbon credits will ensure an additional revenue stream for them, diversifying their income sources. These credits, in turn, will also benefit the buyers by providing them with opportunities to offset their carbon emissions and meet the regulatory requirements.

In addition to earning carbon credits, adopting climate-friendly farming practices can also lead to increased productivity and resilience. Conservation agriculture can lead to improved soil health, which in turn can lead to higher crop yields. Agroforestry can provide shade for crops, reducing water stress, and increasing resilience to climate change while also providing additional sources of income for farmers through the production of fruits, nuts, and timber.

However, it's worth noting that navigating the carbon credit market can be complex and requires careful consideration of project requirements, costs, and potential benefits. For smallholder farmers, it's especially important to work with experienced partners to ensure that their projects are environmentally and economically sustainable. By doing so, farmers can maximise the potential benefits of carbon credit participation while minimising potential risks. In that regard, nonprofits and farmer producer organisations should tag along with them to provide them with the necessary monetary and non-monetary support.

On Ground Training of Farmers on Carbon Credits

By 2030, the demand for carbon credits is predicted to increase by up to 15 times, and therefore to tap into the market’s potential at this early stage requires proper ground level training by experienced agri-tech firms, nonprofits, and government drives. This is a golden opportunity for India to transition into sustainable farming, and requires an all hands on deck approach. While the passing of the Energy Conservation (Amendment) Bill provides for a regulated carbon market is a step in the right direction, there is still a need for educational drives to explain the benefits and accessibility of carbon credits to the farmers, and train them to develop fins to be able to swim in this upcoming strong current called carbon markets.