Carbon trading in agriculture

IN NEWS:

• Recently, the Parliament passed the Energy Conservation (Amendment) Bill, which empowers the government to establish carbon markets in India and specify a carbon credit trading scheme. This Bill, though, focuses on renewable energy sources, crafts scope for agriculture and agroforestry to contribute to the net zero emission target.

CARBON TRADING:

• Carbon trading is the use of a marketplace to buy and sell credits that allow companies or other parties to emit a certain amount of carbon dioxide.
• As per United Nations standards, one tradable carbon credit equals one tonne of carbon dioxide or the equivalent amount of a different greenhouse gas reduced, sequestered, or avoided.
• The main international carbon market scheme existing today was set up under the U.N.’s 1997 Kyoto protocol on climate change.
• Under that agreement, developed countries had targets to reduce their greenhouse gas emissions, but developing countries did not. So, if a developing country reduced its emissions by building a solar panel plant or planting trees for example, they could sell a “credit” to a developed country, which could count that emission reduction in its own target.
• As per the 2022 Report of the Ecosystem Marketplace, about 500 million carbon credits, valued at USD 1.98 billion, were traded globally in the voluntary carbon market in 2021.
• However, the share of agriculture-based carbon credits was minuscule — one million carbon credits worth USD 8.7 million.

CARBON TRADING FROM AGRICULTURE: PROSPECTS

• Reduce emission:
  • Agriculture contributes approximately 22% to the total greenhouse gas emissions. However, soil is a natural carbon sink and promoting carbon sequestration through soil can help reduce the emission from agriculture.
• Increase farmers’ income:
  • The creation of a carbon market will help farming communities to sequester and sell carbon credits and earn additional income.
  • For instance, the market price of one agriculture-based carbon credit is approximately Rs. 725 in India. A farmer can generate 4 to 12 carbon credits per hectare depending on the type of farming practices adopted and thus can earn additional income of Rs. 3,000-9000 per hectare. 
• Growing demand for carbon credit:
  • The global carbon market has been expanding fast to meet the increasing urgency of attaining the net zero emission targets. To meet the growing demand, the share of agriculture in carbon trade is expected to increase.

• Improve soil health:
  • Carbon sequestration increases the soil carbon content. This will lead to higher water-holding capacity, water infiltration, nutrient availability and lesser soil surface temperature.
• Promote sustainable land agriculture:
  • Carbon offsetting efforts incentivize farmers to adopt improved land and farm management practices. This has the potential to improve soil health and restore ecological balance, and thus ensure the long-term sustainability of agriculture.
  • For instance, no-tillage, residue retention, crop rotation, integrated nutrient management, intercropping, bio-char, and agroforestry practices have 12-41 per cent higher carbon sequestration potential. 

CHALLENGES:

• Difficulty in assessment:
  • The verification and accurate accounting of additional carbon retained in the soil due to the adoption of farming practices is challenging.
• Accessibility to carbon market:
  • The regulatory framework for carbon trading in India is under-developed, making it difficult for farmers and other stakeholders to participate in carbon markets.
  • For an individual farmer, the process of selling carbon credits in the voluntary carbon market is tedious.
• Small landholdings:
  • Around 86% of agrarian landholdings in India are of size less than two hectares. So, the amount of carbon credits received may not be enough for a small farmer to adopt regenerative agriculture practices.
  • These lands differ in their cropping pattern and the adoption of carbon abatement farm practices. Hence, reaching out to such diverse number of unorganized smallholders means higher administrative and transaction costs for buyers of the carbon credits.
• Yield loss due to sequestration:
  • Adopting regenerative agriculture over conventional farming can lead to short term loss in yield. This may act as a disincentive to the large-scale adoption of carbon abatement practices.
• Lack of awareness:
  • Since carbon credit trading is in its nascent stages, there is very little awareness among farmers about this option.
  • Also, farming communities lack awareness of the environmental and economic benefits of carbon abatement practices.

WAY FORWARD:

• Farmer collectives:
  • Collectives such as FPOs and cooperatives can be used to organise farmers to adopt carbon abatement practices and sell the accrued carbon credits on their behalf.
• Improve awareness:
  • There is a need to create awareness among farming communities on the benefits of the adoption of improved agricultural practices and participation in carbon markets.
• Incentivise farmers:
  • Since the adoption of carbon sequestration practice can take time and initially lead to lower yields, it is important to handhold and support the farmers during the initial years.
• Utilise government schemes:
  • Governments at the state and central level could attempt to align existing natural farming and organic farming schemes to nudge farmers to participate in carbon credit programmes.
  • For instance, scheme guidelines could mandate the regular estimation of soil carbon levels, and the data obtained could be shared with carbon credit verifiers to facilitate measurement and verification processes.
• Develop quantification standards:
  • Evolve a transparent process of quantification and verification of additional carbon generated by different farm practices with the help of researchers, global best practices and technology.
• Incorporate technology:
  • Advancements in remote sensing data and AI have proved to be capable of predicting carbon levels through satellite data, and this could serve as one of the methods through which carbon credits are calculated.

PRACTICE QUESTION:

Q. Linking the carbon credit markets with farm fields offers multifaceted benefits for Indian agriculture. Discuss.