Small-scale farmers who implement low-carbon and deforestation-free practices are well-positioned to benefit from carbon markets. Carbon markets provide an important tool to compensate or incentivize farmers who provide critical ecosystem services, such as sequestering greenhouse gases or using sustainable farming practices. Beyond carbon sequestration, agroforestry under carbon finance projects increases soil fertility, improves water retention, and reduces erosion, thereby boosting agricultural productivity. In addition, it promotes environmental sustainability by restoring degraded land and providing a buffer against climate-related risks.
For small-scale farmers, carbon markets provide an opportunity to improve farming practices, adapt to climate change, and contribute to global climate solutions. Many carbon projects aim to protect and restore forests, wetlands, and other ecosystems. These ecosystems are important sources of biodiversity and can provide livelihood opportunities for small farmers and rural communities. Intensive farming practices have been adopted in Indian agriculture for the last six decades to ensure food security in the country.
This has resulted in a significant reduction in soil organic carbon, a decline in soil fertility, and chemical pollution in major cultivated lands across the country. In addition, intensive farming with single-crop cultivation of major cereals has led to a loss of biodiversity and depletion of groundwater resources. These farming practices have also increased greenhouse gas (GHG) emissions that contribute to global warming and climate change. India’s agroforestry sector presents a significant opportunity to integrate with carbon finance projects, particularly through afforestation, reforestation, and restoration initiatives.
Carbon Sequestration through Carbon Finance Projects Agroforestry’s ability to sequester carbon makes it a central component of carbon finance initiatives. Carbon finance projects involve planting trees or increasing tree cover in agricultural landscapes, allowing farmers to earn carbon credits through carbon sequestration activities.
Expanding the agroforestry sector to 53 million hectares by 2050 presents an opportunity for large-scale carbon sequestration and participation in global carbon markets. Carbon finance project initiatives also offer the potential for income diversification, particularly for small and marginal farmers. However, small farmers have still not benefited extensively from carbon markets – primarily due to the low prices offered and the high cost of generating tradable, unique, and verifiable carbon credits.
In addition, participating in carbon markets can require a significant investment of time and resources. Although carbon markets can provide financial benefits for carbon sequestration, financial incentives may be insufficient to cover the costs borne by farmers. Still, the market is changing rapidly, and new technologies are expanding the range of what is possible.
Beyond carbon sequestration, agroforestry under carbon finance projects enhances soil fertility, improves water retention, and reduces erosion, thereby boosting agricultural productivity. In addition, it promotes environmental sustainability by restoring degraded lands and providing a buffer against climate risks. Government policies supporting agroforestry, such as the National Agroforestry Policy, 2014, provide a framework for expanding agroforestry in India.
For further integration with carbon finance, this policy should be revised to explicitly support carbon finance project initiatives and facilitate access to carbon markets. Subsidies and financial support for carbon sequestration Financial incentives, such as subsidies for planting trees or maintaining forest cover, can encourage small farmers to systematically adopt agroforestry.
Capacity building and awareness campaigns Training programs are necessary to educate farmers about the benefits of agroforestry and carbon finance. Extension services and NGOs can play an important role in disseminating information and providing technical support to enable small and marginal farmers to participate in carbon finance initiatives.
Encouraging private sector participation through private and international collaborations such as public-private partnerships (PPPs) and engaging with international carbon finance platforms will be critical to scaling up agroforestry-based carbon finance projects. Global platforms such as Verra and Gold Standard need to recognize the need for India-centric standards that take into account the unique challenges of smallholder agriculture. Agroforestry in India has immense potential to contribute to carbon sequestration, environmental sustainability, and rural economic development. A framework has been developed to promote Voluntary Carbon Markets (VCM) for the agriculture sector in India, to encourage small and marginal farmers to avail carbon credit benefits. Introducing farmers to the carbon market can accelerate the acceptance of eco-friendly agricultural practices along with increasing their incomes. Farmers can adopt sustainable agricultural practices and gain additional income from carbon credits, as well as other agro-ecological benefits in terms of improved natural capital such as soil, water, biodiversity, etc.
The carbon credit market in agriculture is in its infancy and requires strict monitoring and regulatory systems. There are concerns that asymmetric information, lack of transparency, and inadequate regulation may lead to unfair pricing practices for carbon credits, resulting in lower incomes for farmers. Additionally, lack of knowledge and awareness among farmers and rural communities may lead to their exploitation. There is an urgent need for policy measures to ensure transparency, regulation, and widespread awareness about this in the country.
These systems are essential for efficient and transparent functioning in the country to ensure that the intended benefits reach the farmers. The framework for voluntary carbon markets in agriculture sector will help promote carbon market among the agricultural community, encourage and finance sustainable agricultural practices. The main objective of the VCM framework is to create awareness and build capacity of stakeholders, motivate farmers to adopt sustainable agricultural practices. It will further contribute to Sustainable Development Goals, support rural livelihoods and enhance resilience in agriculture.
