India bets on carbon credits to Green agriculture, but questions remain on fair returns

Agricultural carbon credits are increasingly being promoted as a climate solution that can turn farmers into providers of environmental services while offering them a new source of income. By adopting practices such as reduced tillage, cover cropping, agroforestry, improved water management and enhanced soil carbon sequestration, farms can store more carbon in soil and biomass, which is then converted into tradable carbon credits purchased by companies to offset their emissions.

However, experts caution that while the concept appears to be a win-win in theory, its implementation in much of the Global South remains complex and uneven. In countries such as India, Kenya, Indonesia and Brazil, carbon markets have often been shaped by information gaps, weak safeguards and unequal bargaining power , resulting in modest or uncertain benefits for farmers while intermediaries and corporate buyers capture a large share of the value.

India’s agriculture sector contributes around 13–14 percent of national greenhouse gas emissions , estimated at 550–750 million tonnes of CO₂ equivalent annually , largely from livestock methane, rice cultivation and fertiliser use. Livestock alone accounts for more than half of agricultural emissions. At the same time, the sector holds significant mitigation potential of nearly 85.5 million tonnes of CO₂ equivalent per year by 2030 through climate-smart practices such as improved soil carbon sequestration, better nitrogen management, livestock feed optimisation and water-efficient rice systems.

With nearly 170 million hectares of agricultural land , India is seen as well positioned to scale nature-based mitigation approaches. The country’s carbon market is projected to grow from about USD 4.17 billion in 2025 to USD 48.24 billion by 2032 . Although agriculture currently accounts for only 0.2–1.5 percent of issued carbon credits , it is among the fastest-growing segments, driven by regenerative agriculture, agroforestry and soil organic carbon enhancement projects.

Policy momentum has accelerated since 2022, beginning with Gujarat’s carbon trading initiative and followed by amendments to the Energy Conservation Act, 2001. The Union Ministry of Agriculture has issued guidelines to facilitate farmer participation, and the launch of the Indian Carbon Market (ICM) in 2025 is expected to integrate agriculture more firmly into climate finance mechanisms.

Fiscal pressures have also influenced the shift. Rising fertiliser subsidy costs, particularly after global price shocks triggered by the Ukraine war in FY2022, have pushed policymakers to explore alternatives that reduce chemical input dependence. Carbon farming is now being framed as a dual benefit lowering government subsidy burdens while providing farmers with an additional income stream .

Studies indicate that farmland can sequester between 0.8 and 10 tonnes of CO₂ per hectare annually , depending on practices and local conditions. Implementation costs range from USD 16 to 90 per hectare per year , while potential returns from carbon credits and co-benefits range from USD 22 to 258 per hectare annually . Experts note that profitability depends on transparent measurement systems, fair revenue-sharing models and strong policy support .

More than 10 major companies are currently active in India’s agricultural carbon credit market, collectively targeting emission reductions of over 12 million tonnes of CO₂ equivalent per year across about 4 million hectares . Firms such as Varaha, Grow Indigo and Bhoomitra have rapidly expanded farmer enrolment and project aggregation.

However, concerns have emerged over market concentration and governance. Several dominant players have roots in agrochemicals, fertilisers and genetically modified seeds industries historically associated with soil degradation and increased chemical dependence. Critics warn that unless transparency and independent verification are ensured, carbon markets could become another profit layer for legacy polluters rather than a tool for genuine agricultural transformation.

Meanwhile, questions of accountability in public institutions continue to draw attention. In a separate development, the Enforcement Directorate (ED) has filed a chargesheet in the financial irregularities case linked to R G Kar Medical College and Hospital , alleging misuse of funds and procedural violations. The move underscores growing scrutiny over financial governance at a time when large climate and carbon-related financial flows are entering India’s agricultural sector.

Analysts argue that for carbon farming to deliver real climate and livelihood benefits, safeguards must be put in place to ensure that farmers receive a meaningful share of revenues and that projects lead to measurable improvements in soil health and productivity. Without such measures, carbon credits risk becoming a new financial commodity that repackages past agricultural externalities without addressing their root causes.

Part two of the analysis will examine potential risks such as yield impacts, uncertainties around biochar use, and the untapped potential of reducing methane emissions from dairy farming, while outlining a framework that prioritises farmers’ interests in India’s evolving carbon economy.