
There is a major disconnect between the promises of carbon markets and the practical realities. A study found that over 99 per cent farmers participating in emissions reduction projects under voluntary carbon market (VCM) received no monetary benefits despite adopting sustainable farming practices aimed at reducing greenhouse gas (GHG) emissions.
The study, published in the journal Climate Policy, surveyed 850 farmers in Haryana and Madhya Pradesh. The findings of the paper are consistent with a Down To Earth-Centre for Science and Environment analysis on India’s VCM.
These emission-reduction initiatives are registered with VCM, a decentralised platform where private entities trade carbon credits. A single carbon credit represents the reduction or removal of one tonne of carbon dioxide (CO₂) equivalent through activities that cut or capture GHG emissions. Once generated, these credits are sold to companies seeking to offset their emissions.
VCM has grown in popularity, with an increasing number of carbon credit registries (which issue and manage carbon credit information), projects, developers (who create GHG reduction initiatives), and related services such as insurance and ratings. The market grew from $520 million in 2020 to $2 billion in transactions by 2021, according to Ecosystem Marketplace, an initiative of the non-profit Forest Trends.
The projects involve farmers adopting practices like direct-seeded rice, an environmentally friendly method of growing rice directly from seeds sown in the ground; alternate wetting and drying, a technique that reduces water usage by 30 per cent and lowers methane emissions; zero-till farming that minimises soil disturbance and helps retain carbon in the soil; and crop residue management in which stems, leaves, chaff, and husks left in the fields are managed after harvesting.
Other practices included reducing chemical fertiliser use, applying organic fertilisers, and using biochar, a nutrient-rich material derived from biomass that enhances soil fertility and crop productivity.
There was a 283 per cent increase in transaction volumes for carbon credits from agricultural projects between 2021 and 2022, the paper noted. These credits command some of the highest prices in the VCM, driven by the demand for sustainable land management practices that deliver robust co-benefits.
“Although the existing literature explores the potential of carbon credits to facilitate the transition toward sustainable practices, and in reducing on-farm GHG emissions in a changing climate, farmers’ perspectives offer crucial insights into these initiatives’ practical challenges and successes,” the researchers write in their paper.
Several barriers may hinder farmers' participation, including inadequate information, complex project requirements, long-term commitments, and uncertain financial returns. Researchers from the International Maize and Wheat Improvement Center, a Hyderabad-based non-profit, explored these challenges in greater detail.
The study assessed whether such projects are socio-economically inclusive, particularly for marginalised communities and smallholder farmers, and investigated the obstacles and facilitators influencing farmers’ decisions to adopt or discontinue carbon farming practices.
The team analysed seven projects based in Haryana and Madhya Pradesh, which were at various stages of development covering 28 villages. Overall, the study included 841 farmers, half of whom were not participants in the carbon projects.
Findings revealed that these projects performed poorly in terms of inclusivity. Approximately 83 per cent and 69 per cent of farmers involved with “carbon core” companies (focused exclusively on carbon credits) and “carbon branch” companies (subsidiaries of larger corporations) were from non-marginalised communities.
“This dominance of the non-marginalised communities and the under-representation of marginalised castes and women raise concerns about the role of carbon markets in achieving inclusive developmental goals,” read the paper.
Projects led by “carbon blend” companies (which engage in other agricultural activities, such as organic farming or exports, alongside carbon credit projects) performed relatively better in inclusivity.
Gender equality was another area of concern, with women accounting for only 4 per cent of participants.
The study also evaluated the additionality of these projects — the extent to which GHG reductions stemmed from activities that would not have occurred without revenue from carbon credits.
Practices that passed the additionality test included alternate wetting and drying, direct-seeded rice, zero tillage, intercropping, and reduced chemical fertiliser use in Haryana, as well as tree planting, micro-irrigation, and reduced pesticide and fertiliser use in Madhya Pradesh.
However, 28 per cent of participating farmers discontinued these practices by the second year, raising questions about the permanence of emissions reductions. The primary reason cited by over half of these farmers was the lack of monetary benefits.
Despite undertaking labour-intensive efforts to reduce emissions, 99 per cent of farmers reported receiving no financial rewards.
Additionally, 27 per cent of farmers experienced a decline in yields, and 16 per cent cited inadequate information as reasons for abandoning the projects.
“If projects are not registered and farmers do not receive revenue from carbon credits, they face a double blow of yield loss and lost carbon credit revenue. This situation poses a significant threat to the adoption of carbon farming practices. Therefore, addressing these issues is crucial to avoid adverse impacts on the Indian VCM,” the researchers explained.