India struggles to get cash to farmers producing carbon credits

• Carbon markets can help farmers adapt
• Low selling price of agri credits a problem
• Experts call for tighter regulation to protect communities

NEW DELHI - Farmer Jitendra Singh stopped flooding his rice fields in the northern Indian state of Haryana so they produce less polluting methane and he could get paid for the greenhouse gas emissions he saves, but three years on he has not received a single rupee.

Allowing companies to buy credits from projects that lock carbon away and use them to offset their emissions is seen by many environmental experts as an important way to help developing countries and custodians of the land like Singh protect the environment.

Corporations globally, from airlines and fashion houses, to technology giants, have spent billions of dollars buying carbon credits to offset their emissions.

In return, companies label products "carbon neutral" and consumers feel safe they are not deepening the climate crisis.

But while trade in credits generated from projects including renewables, forestry and agriculture reached about $2 billion in 2021, it shrank sharply to $723 million in 2023 after reports found that most of the credits issued by certification organisations were likely to be "phantom credits" that did not represent genuine carbon reductions.

That has led to organisations certifying carbon capture projects exercising greater scrutiny and has meant delays in approving them, hitting people like farmer Singh.

"It will happen when it happens," he said stoically.

Verification, middlemen hold up payments

In a vast country like India, with 60% of its land under cultivation, mostly in small farms, carbon credits could provide much-needed help to both farmers and the environment.

India generates about 20% of the world's carbon credits, said a 2023 report by the Centre for Science and Environment (CSE), a Delhi-based think-tank, and had earned more the $650 million from them.

But on top of the concerns about verifying the efficacy of carbon capture projects, the CSE said most of the money earned was eaten up by middlemen and little or nothing trickled down to people on the ground.

"The market only seems to work in the interest of the project developers and, of course, the paraphernalia of consultants and auditors," the report said.

"This also means that it is ineffective in terms of real emission reduction. The communities get virtually nothing from the proceeds, and this means that they also have no stake in the emission reduction programme," it said.

"The main question that needs attention is whether farmers are getting enough money to change their practices for adaptation or mitigation," said Trishant Dev, a carbon market expert and one of the authors of the CSE analysis.

"Currently, the compensation that farmers receive is not encouraging enough," he said.

PVS Suryakumar, ex-deputy managing director of India's premier agriculture bank NABARD, said there was "so much greed" in the voluntary carbon market with intermediaries - from project developers to contractors - rushing to enlist communities in the carbon market and make money off them.

Carbon credit certification organisations are taking more time to review their rules and standards for projects due to the concerns over the origination, credibility and efficacy of certain credits, said an executive working with an Indian carbon asset management firm who asked not to be named.

The process of enrolling farmers and selling the credits in global markets is costly and can now take up to two years, the executive said.

India moves to create its own market

Strict regulation is needed, said Suryakumar.

"In this chaotic noise around carbon markets, uniform standards and strict regulations are a must to make sure the interests of the communities are protected," he said.

The Integrity Council for the Voluntary Carbon Market (ICVCM), an independent global governance body, has sought to address integrity concerns by launching its Core Carbon Principle (CCP) standards for certifying projects.

The ICVCM said in August that around a third of existing carbon credits had failed to meet the criteria for its new standard.

Meanwhile, India has set-out to create its own registries or marketplaces to generate, verify and sell agriculture credits internally. The Indian government said last year it wanted to use its vast potential to generate a steady supply of agriculture-based credits to meet its climate goals.

Ritu Bharadwaj, principal researcher with the International Institute for Environment and Development, said the London-based think-tank was working with the Indian government and ICVCM to develop a robust framework for the Indian market.

Bharadwaj said the goal was to ensure "the monitoring, reporting and verification of carbon credits are accurate, accessible and affordable for farmers and it prioritises their rights".

Transparency in the entire process, from verification to the final credit sale, would increase market confidence and boost the money received by farmers, she said.

To do so, the Indian market is looking to use a number of methods, including crowd-sourcing monitoring, reporting and verification data directly from communities using smartphones, aggregating farmers into cooperatives to improve their bargaining power and creating a payment system to send the proceeds of sales directly to farmers.

The hope is that allowing farmers to monetise sustainable practices will help realise India's significant emissions mitigation potential.

(Reporting by Bhasker Tripathi; Editing by Jon Hemming.)