1,451. That is the number of projects implemented across India to churn out the new-age essential commodity—carbon credits. Industries and businesses in the West are vying for these credits to clean up their emissions. Over the past months, Down To Earth and the Centre for Science and Environment travelled to 40 villages and towns to know how this market works and who are the people involved in the business. At all the locations, they found that communities, their land and labour, were central to the projects. But community members were almost never aware that they were working to generate carbon credits. Worse, none had the slightest idea that they had already relinquished their rights to carbon credits. The projects also raised fundamental concerns about the accounting practices of these transactions and the companies behind them
When Down To Earth and the Centre for Science and Environment (DTE-CSE) began its investigation, the team quickly learnt that there are no rules in the voluntary carbon market. Worse, there is a shroud of secrecy. There is no government database of projects that generate carbon credits. Individual companies are at liberty to make deals to get the credits issued. These companies also do not want to share much about their projects or their partners. They certainly will not reveal the price at which they have bought the credit and at which they will sell it. This suggests that the market has much to hide.
DTE-CSE was blocked in every enquiry it made. So, the first step was to deep dive into the two leading global registries—Verra and Gold Standard. The databases of these registries provide information on projects by country and the name of the project developer. The team had to locate each project on the database to find its size and location. Needless to say, the registries are designed for disaggregated information. But it helped draw up a list of projects operating and being set up across India; know who these project developers are; and where the projects are located. It also gave insight into the type of projects for which carbon credits are claimed. Roughly 90 per cent of the credits issued are for renewable energy projects across the country—from solar to wind to hydroelectric (see ‘India’s vibrant carbon market’,).
The investigation also revealed that a massive number of projects is being implemented under the household and community category, largely through the distribution of improved cookstoves and setting up of biogas plants in households. These projects reduce greenhouse gas emissions by reducing the amount of firewood or by replacing it with biogas for cooking food.
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The databases also gave information about the older companies whose energy projects have got carbon credits. Jaiprakash Hydropower Ltd (now JP Power Ventures) has got 28 million credits issued for its hydropower projects mostly in Himachal Pradesh. Adani companies have been issued 15 million carbon credits for solar projects.
The newer companies engaged with projects in categories of household and community and forestry and land-use do not match the credits generated by the large-scale energy project developers, but they make up for it in terms of number of projects. While international organisation Envirofit, which manufactures energy-efficient cookstoves, leads the list because of highest number of credits issued, Indian companies are fast catching up.
But these were just the initial clues. So DTE-CSE got in touch with the listed project developers, requesting for more information. The team also wanted to visit the project sites, particularly where local partners (non-profits or other organisations) were involved, to understand what was happening on the ground. It was met with a wall of silence.
 This article was originally published as part of Down To Earth’s special issue dated 1-15 October, 2023. Download the edition for free Also read the report Discredited: The Voluntary Carbon Market in India |
In a few cases, where the team received responses after repeated calls, emails and messages to project developers and local partners, it was asked to sign a non-disclosure agreement (NDA) before visiting the project; or was refused permission in writing. One project developer Livelihoods Funds based in France emailed, saying that DTE-CSE should not visit its project sites in Andhra Pradesh because “Most areas in Araku are cut-off now due to poor road conditions during the monsoons and insurgency is also an issue there.”
The team did not give up. From the list of 1,451 projects drawn from the two global registries, the team identified the ones in different categories that could be visited. Where the project developer had refused to share information on the location, the team did further research to identify the villages that are part of the carbon credit scheme.
DTE-CSE’s visits to the project sites have brought out the following information. Read on.
Last year, Jyoti Shital Chavan, a resident of Yarnaal village in Belagavi district, was introduced to “improved” cookstoves at a meeting hosted by Shri Kshethra Dharmasthala Rural Development Project (SKDRDP), a charitable trust that provides infrastructure and finance through micro-credit for Karnataka’s rural population. These stoves manufactured by Greenway Grameen Infra Pvt Ltd, headquartered in Mumbai, were distributed to reduce consumption of fuelwood, and thereby reduce carbon dioxide (CO2) emissions. Chavan already had an LPG (liquefied petroleum gas) connection and a traditional mud chulha before the meeting. Deepa Murghali, a village resident and representative appointed by SKDRDP, explained to Chavan that she could reduce her reliance on the more expensive LPG by switching to the improved cookstove, which was being sold at a subsidised rate of Rs 2,350 ($29). Murghali also assured Chavan that SKDRDP would provide her a loan to buy it.
“We show a video of women not weeping and looking happy,” Manoj Vinages, agriculture director, SKDRDP, told DTE-CSE at his office in Dharmasthala. He also informed that his organisation has been the facilitator of the project for the past three years and annually receives 10-20 per cent of the revenue earned through the carbon credits issued to the project. However, he was reluctant to divulge further details. DTE-CSE asked Ankit Mathur, founder of Greenway Grameen Infra Pvt Ltd, why the stoves were being sold to village residents and not given for free as the project was part of the carbon credits programme. Mathur said the company is primarily a stove designer and manufacturer and that the project proponents decide on the level of subsidies for the cookstoves based on their business models. Mathur also pointed out that his company has not yet made any revenue from the sale of carbon credits.
The project DTE-CSE visited is part of the carbon credit scheme, Dissemination of Improved Cookstoves in India by Greenway Grameen Infra Pvt Ltd, registered with Gold Standard in 2020, 2021 and 2022, under the identification number 10821. According to the project document with the registry, this project will reach 15,500 households and result in a reduction of 39,126 tonnes of CO2 or the equivalent greenhouse gas (CO2e) per annum. This would mean that each improved stove would result in a reduction of 2.5 tonnes of CO2e each year. Greenway estimates that each stove will lead to 65 per cent fuel saving (9.198 MWh per year in terms of energy savings) and 70 per cent reduction in smoke. As a result, each improved cookstove “is expected to save 3.83 tonnes of woody biomass”, says the project document. It also says Greenway would act as a coordinating managing entity for the voluntary project activity. According to the database of Gold Standard, the project has been issued 67,737 carbon credits till May 2023.
Each project is required to be “validated” by a registered third party, which in this case is 4K Earth Science Pvt Ltd based in Bengaluru. Its validation report for the project, submitted in February 2023, says “there is sufficient evidence to determine the voluntary project activities fulfilment of all stated criterion”. According to the document, the end-users (households) have consented to the transfer of rights to carbon credits. This is done at the time of installation; households are asked to sign a consent form, where carbon rights are transferred to Greenway. The Yarnaal village residents DTE-CSE met with said they remembered signing a paper but were not informed about the transfer of carbon rights.
Another cookstove project is being implemented by EKI Energy Services. Registered with Verra in 2022, the project is called Installation of High-Efficient Cookstoves by EnKing International (now renamed as EKI Energy Services). The scope of the project is across India for the distribution of 15,100 cookstoves which, as per the claims, will reduce 86,825 tonnes of CO2e annually. In this way, EKI claims that it will reduce 0.6 million tonnes of CO2e through this project in seven years. In other words, each of these super-efficient stoves will reduce 5.75 tonnes of CO2e annually (this is against the reduction of 2.5 tonnes of CO2e per year by Greenway’s stove). Verra records that this project by EKI, with identification number VCS 2473, has been issued 190,034 carbon credits for the first three years.
DTE-CSE contacted officials with EKI for further information about the project sites. EKI representative responded by saying that they have non-disclosure agreements with the investors and so they would not be able to provide field information. DTE-CSE therefore based its visit to the field on the information that its project validator TUV SUD South Asia Pvt Ltd provided in its report issued in October 2021. According to this report, “we confirm that a reasonable level of assurance has been achieved during the process”.
DTE-CSE travelled to seven of the villages listed in the report in Dhar district of Madhya Pradesh. In most villages, the cookstoves had indeed been distributed for free by a company and in some places by the local panchayat, on the basis of submission of the Aadhaar card—universal identity number issued by the Indian government. Residents told DTE-CSE that they were asked to sign on registers as receipts of the improved cookstoves. They admitted that the stoves were indeed better than the traditional mud chulha. However, they did not confirm using the improved stoves regularly.
Greenway and EKI are not the only ones in this cookstove business. Worldwide, over 1,200 cookstove projects are registered or under various stages of development with Verra and Gold Standard. Around one-fifth of these projects are in India. According to “State of Carbon Developer Ecosystem report 2023” by UK-based market research organisation Abatable, clean household device projects had a 50 per cent year on year growth—expansion of developers portfolio—in Africa and India.
In all the cases, the project developer gets carbon credits issued based on the removal of tonnes of CO2e. For instance, EKI would get 5.75 carbon credits issued per cookstove per year, while Greenway would get 2.5 carbon credits. Since each carbon credit represents the reduction or removal of 1 tonne of CO2e, these credits can be sold at an undisclosed price. But the fact is this reduction or removal of greenhouse gas emissions would depend on the usage of the stove and how carefully the project is being monitored.
The field visits showed glaring gaps in the project design and implementation. In the case of projects of Greenway and EKI, the first fundamental flaw was the baseline used to estimate the reduction of greenhouse gas. Both projects are based on the assumption that the target population is primarily dependent on non-renewable biomass, ignoring the fact that many possess LPG connections and also use it, if not regularly. They also assume that people’s behaviour will change by merely providing the improved cookstoves.
This was far from what DTE-CSE saw during its visits to as many as 13 villages across Karnataka and Madhya Pradesh. Shakarya Kalacharantimath from Bidi village in Karnataka’s Belagavi district got the improved cookstove from her daughter three years ago. She uses it only once a month and primarily relies on mud chulha and LPG cylinders. “An improved cookstove, which has one burner, is not convenient in a large family setting,” she told DTE-CSE. In the village of Phoolsagar in Madhya Pradesh’s Mandla district, Rahul Sonwani received not one but two cookstoves from different distributors. He purchased a Greenway stove for Rs 400 ($4.9) from a salesperson and received the other stove for free from the panchayat. He also possesses an LPG connection. Pointing to the Greenway cookstove, Sonwani said, “This cookstove is good for boiling water and making tea.” He has not used the other cookstove since receiving it earlier this year. Households in all other villages that DTE-CSE visited shared similar information.
Another frequent complaint was that the improved cookstove required the already over-worked women to cut the fuel wood to specifications, which they said was arduous. The improved thermal efficiency of stoves depends on the improvement in the quality of fuel supply. In fact, in a few cases, households were doing jugaad (local innovation) to speed up combustion in the stove. They simply added plastic waste into the stove, mindless of the toxicity of this emission.
Switching to improved cookstoves is important as it not only improves the health of women and children in the households but also reduces greenhouse gas emissions. But the question is if this estimated reduction actually happens. In 2016, the Indian government launched its social welfare scheme Pradhan Mantri Ujjwala Yojana which provided 50 million concessional LPG connections to women of below the poverty line households. Almost all households DTE-CSE visited had LPG connections, though it was apparent that LPG was being used sparingly because of the cost of refilling. Therefore, the actual emission reductions would depend on the usage of the cookstove and not on the mere distribution of it.
Gold Standard and Verra provide methodologies—a standard set of parameters, criteria and operations—that help project developers calculate emission reductions or removals. The Greenway project uses a Clean Development Mechanism (CDM) methodology, called AMS-II. G, Version 12, and EKI use the Verra VMR0006, and estimates its emission reductions by calculating the amount of wood saved, the emission factor based on displaced fossil fuels and the fraction of non-renewable biomass but they miss out accounting for the usage of the appliance. Greenway estimates that its project would reduce the use of 3.83 tonnes of woody biomass per stove per year because of increased thermal efficiency. EKI in its emission reduction calculation document says that each stove would reduce the use of woody biomass by 3.7 tonnes per year.
This estimate, even if the thermal efficiency is taken at face value, would depend on the complete shift to the improved biomass stoves by households for each meal each day in a year.
Second, there is the tricky question of ownership of carbon credits. Project design documents available with Gold Standard and Verra suggest that customers have transferred their carbon credits to Greenway and EKI, respectively. These rights allow the companies to sell the carbon credits in the voluntary carbon market. EKI’s project design document states that “The end users are informed in advance that the use of ICS [improved cookstoves] generates carbon finance which in turn is used to cover the price of ICS and for recovering project implementation costs.” However, none of the village residents that DTE-CSE spoke with knew anything about carbon credits or remember signing any document regarding the transfer of carbon rights to Greenway or EKI. It is important to note that in Greenway’s Karnataka project, the intermediary SKDRDP suggested that it was receiving a share of the carbon revenue but there is no detail of this arrangement.
The third problem is that there is no evidence of robust monitoring. Atharva Mahesh Bidikar, the field officer of Greenway, told DTE-CSE that he conducts surveys once every year to monitor the use of cookstoves and to know about the problems people face. Savitri Ramesh Malleshi from Bidi village in Belagavi district, however, informed that Bidikar visited her only once six months ago when she got her damaged three-year-old cookstove replaced. None of the village residents that DTE-CSE spoke with recall interacting with Greenway or SKDRDP employees about the stove. “The service is bad. No one has come to ask us if we are facing any problems with the cookstove,” Shatragun Divate, community leader of Yarnaal village in Belagavi, stressed.
This is also true for cookstoves distributed by EKI in Madhya Pradesh. Om Prakash Kamdar, a hardware store owner in Bagdi village of Dhar district, has given the EKI cookstove he received to his daughter. No one has visited him to check if the stove is with him and if it is being used. It is clear that there is much missing in this tricky accounting of carbon reduction, which is based on the continuous usage of the appliance.
The validation and verification bodies, which are third-party entities, receive money from project developers to audit the claims. EKI project was validated and verified by TUV SUD South Asia Pvt Ltd and was monitored from 2019 to 2021. According to the validator’s report, on-site inspections were not conducted for the project, citing lockdown restrictions during the novel coronavirus (COVID-19) pandemic. Fourteen Greenway projects in Karnataka were verified and validated by 4K Earth Science Pvt Ltd, which conducted on-site visits during July 20-22 in 2022. 4K Earth Science says it determined the baseline by randomly asking users a few questions such as the fuel used previously, whether they still depend on fuel wood and if they experienced any health issues. They also interviewed Greenway and SKDRDP employees. Both the validation and verification bodies gave Greenway and EKI a clean chit, citing that there is no additionality issues (meaning, the project would not have existed without revenue from carbon credits) and recommending the projects for registration under Gold Standard and Verra. DTE-CSE reached out to the validation and verification bodies, requesting information on their monitoring methodology and to understand why their reports contradict the team’s field reports. 4K Earth Science responded: “On the outset, we are [a] third-party certifying agency and are bound by confidentiality law. We regret we would not be of much help to you. You can contact the client for information.”
This is the fourth issue. Typically, a “clean cookstove” costs anywhere between Rs 160 and Rs 8,000 ($2-$97). EKI cookstove costs between Rs 1,500 and Rs 3,000 ($18-$36) and the Greenway model is sold at Rs 3,490 ($42). Each cookstove is reported to offset 2-4 tonnes of CO2e per year (in the case of EKI, it is some 5.75 tonnes of CO2e) based on its thermal efficiency and the amount of woody biomass it reduces or replaces. Carbon credits are given typically for five to seven years, considering the cookstove’s lifespan. In its five-year lifespan, a cookstove would generate 10-28 carbon credits (in the case of EKI, it would be 40).
There is no organised marketplace to monitor the price of carbon credit for improved cookstoves, or for that matter any other type of project. A review done by market researcher Abatable in its paper, “Not all cookstoves are the same”, published in March 2023 shows that the current price ranges from $7 to $10 ( Rs 577-825) per carbon credit in cookstove projects. Now, taking the offset average as 3 tonnes of CO2e per year and the price average as $8.5 ( Rs 701) per credit, each cookstove would fetch $25.5 ( Rs 2,102) per year, and over its seven-year lifespan would earn the developer $178.5 or Rs 14,687 on a conservative basis. This more than covers the capital cost of the cookstove, even assuming that the village residents are given this for free. This scam is not cooked up, but real. In its project document, Greenway argues that carbon credits are essential to finance the project as the sales revenue, which is used to subsidise the cookstoves given to low-income households, helps the company recover only a small sum of the total investment. But Greenway has sold its cookstove in Karnataka for Rs 2,350 ($29). “People in my house are annoyed that I paid so much for the stove. It is a waste of money. We barely use it five to six times in a year. Also, we do not have enough fuel wood. The little fuel wood we buy is used in our cement chulha to boil water for bathing,” Shilpa from Dhangalli village in Mysuru district told DTE-CSE. She bought the cookstove a year ago.
In his reply to DTE-CSE, Ankit Mathur, co-founder, Greenway, distances himself from carbon markets. “These carbon projects are run and operated by the likes of EKI, MEC, C Quest Capital and others. In Karnataka, the majority of Greenway stoves have been distributed (with/without SKDRDP) under the programme operated by Seattle based MicroEnergy Credits (MEC).” EKI has responded with deafening silence. Finally, after repeated messages, DTE-CSE received the following cryptic email on August 31, 2023 from a senior EKI representative, which read: “At this point of time the company is in a silent period and we will not be able to respond.”
In 2010, some 6,000 hectares (ha) of plantation spread over 333 villages across the Araku Valley in the Eastern Ghats of Andhra Pradesh began earning carbon credits. The tribal communities took up plantation on their private land, but the carbon credits are owned by the developer of the project, Livelihoods Funds, a Paris-based entity. On its website, Livelihoods Funds says that it is an impact investment fund with initial investment from the food multinational, Danone.
Called Araku Valley Livelihood Project, it officially started in 2014. As per the project design document, its implementer is the well-known and respected social funding organisation Naandi Foundation, based in Hyderabad. The project will continue till 2030. But the document says that its longevity will actually be more as the project design does not include harvesting or thinning of the planted trees. As trees get planted, the project will progressively increase its emission reductions—from 2,415 tonnes of CO2e in 2011 to 145,134 tonnes of CO2e in 2030. In its 20 years, the project document claims that it would reduce 1.6 million tonnes of CO2e—with an average of 80,660 tonnes of CO2e each year. The project has been registered with Verra and has received 96,386 carbon credits till May 2023.
In this project, a variety of tree species would be planted over 6,000 ha, of which 60 per cent is classified as barren and the rest shrubby and grassland, according to the document. These trees would also provide shade to the coffee plantations, which are spread over 3,000 ha. The document says that this land is owned by 9,700 farmers—all smallholder tribals.
According to the project document, these communities have “agreed” that they will have the right to the fruits and other produce of the horticulture trees, but not to the carbon credits generated by the project. The document says, “farmers and the communities have agreed that the property rights on the carbon credits generated by this restoration are exclusively allocated to the developer of the Project.” Furthermore, “under this agreement, the beneficiary community is committed not to assert any property rights over the carbon credits generated and/or to be generated by the Project.” This agreement is a legally binding commitment to manage and protect the credited carbon stocks over the length of the crediting period of 20 years.
SCS Global Services, a verification agency based in the US, says in its 2014 validation report that although “the ownership is with the farmers, each farmer has signed an agreement with Naandi Foundation, acting on behalf of Danone, whereby they transferred the right of use on the carbon credits generated by the project.” Furthermore, “although the agreements were made in the name of Danone, the audit team confirmed that Danone transferred any right on the project to Livelihoods Fund, a fund participated by Danone”. It confirms that “Naandi Foundation does not have any right of use, since it is planting and implementing, it may claim rights linked to its role as a project implementer.”
Interestingly, in 2022, a popular Danone brand, luxury water Evian, was hit by a lawsuit on its carbon neutrality claim. The company responded saying “We partner with the Livelihoods Fund, which has planted 130 million trees so far, sequestering carbon emissions from the atmosphere” and so we are carbon neutral.
DTE-CSE travelled to Araku Valley in August 2023 despite Livelihoods Funds declining its request for field visits citing difficulties in accessing the villages because of insurgency and inclement weather. Naandi Foundation also did not provide field information, but it did respond to queries after the visit. There are two major questions about this project: one, whether communities are benefitting from carbon credits and whether the emission reduction by the project is “additional” and would not have occurred without revenue from carbon credits.
It was clear from the visit that the real benefit to the communities comes from coffee plantations. In villages like Doravalasa, Thotavalasa, Kondavalsa and Garudaguda, tribal families had shifted from millets to coffee—trees were planted to shade the plantations. Naandi Foundation provides training on organic coffee plantations and the tribals DTE-CSE spoke with acknowledged that this shift had improved their lives. But they knew nothing of carbon credits. G Apaliamma of Doravalasa has set up a coffee plantation on her 0.8 ha farmland. She sells part of her harvest through Naandi and the rest through middlemen. She told DTE-CSE that her husband had signed a document but they do not know what it said. Thamala Vimala, another resident of Doravalasa who owns 4.8 ha and grows coffee, also narrates a similar story.
On being questioned about the revenue-sharing model, Rohini Mukherjee, head of global partnerships and strategy at the Naandi Foundation, replied “that tribals have become “lakhpatis” (millionaires), thanks to the Livelihoods project”. However, DTE-CSE found no evidence to back that claim. The tribal farmers had certainly benefitted from growing and selling coffee. Quality of the coffee has also improved and the brand Araku is now well known. But they have not benefitted from the carbon credits.
It leaves one wondering whether benefit sharing in carbon credits can only be claimed by providing free saplings and training, given that farmers contribute the land and labour towards growing and maintaining the plantations that sequester carbon. It is also the land of the tribals, where the “ownership” of the trees has been transferred to a private entity.
In Naandi Foundation’s model, farmers pay an annual membership fee of Rs 100 ($1.2) to the cooperative it has set up, the Small and Marginal Tribal Farmers Mutually Aided Cooperative Society (MACS). “By becoming a member [of MACS], farmers start receiving support with saplings, training, organic bio-inputs, farm gate collection of harvested cherries and buy back at prices higher than any other buyers’ offer,” Mukherjee says. But DTE-CSE during its field visit has found that some farmers were not aware that a membership fee was being charged. Khroaa Ruthama, a tribal from Thotavalasa village, said that she had never heard about a subscription fee. Kilo Buddu from Garudaguda village knew that money was being charged but did not know the exact amount. This is because MACS deducts the membership fee every year while buying the produce.
Then, there is the additionality issue, which suggests that the project would not have existed without revenue from carbon credits. Several residents of Doravalasa and other villages informed DTE-CSE that several other private agencies also provide them saplings of coffee and other trees for free. The Integrated Tribal Development Agency (ITDA), a government agency, has been providing free saplings and training to the tribal farmers since 1985.
The region has seen some deforestation in the past due to podu (shifting cultivation), where forest patches are cleared for agriculture by burning. Bauxite mining, banned only in 2019, had also added to land degradation. In the 1990s, ITDA, through the state government of Andhra Pradesh, launched a massive plantation drive in Araku Valley. “Tens of thousands of silver oak saplings were distributed, making the mountains green in the 1990s. The plants also provided shade for coffee saplings. In this way, deforested areas were converted into coffee plantations,” V Abhishek, project officer of ITDA, told DTE-CSE. Naandi Foundation entered the region only in the 2000s.
Mukherjee does not agree that the project violates additionality. “Naandi’s livelihoods-supported carbon sequestration programme began in 2010 and includes strictly only those fruit and forest trees that were planted at the start of this programme, and grown and nurtured by farmers from that time,” she says.
The project calculates its annual emission reductions by following a CDM methodology “ARACM0003: Afforestation and reforestation of lands except wetlands (Version 2.0)”. The 2014 validation report by SCS Global Services shows that the shrub cover prior to the project was non-woody weed with scarce biomass. It has been calculated that the annual emission reduction from the project is 38,551 tonnes of CO2e after considering the project’s risk rating, which was found to be 10 per cent due to hazards like fire and cyclones. In October 2014, a strong tropical cyclone Hudhud caused extensive damage to the planted trees. Naandi Foundation clarified that a replantation activity was undertaken in 2015. The validation document points out that no study was done to assess and quantify the damage.
The revenue model of the project is not obvious. Livelihoods Funds finances Naandi Foundation to provide technical support and saplings to farmers. The financial details on its website shows that Naandi Foundation has received Rs 21.5 crore between 2016 and 2022 from Livelihoods Funds. The real money would be in the sale of the carbon credits, which are owned by Livelihoods Funds. As per the project document, Livelihoods Funds expects to get 1.6 million carbon credits. According to Abatable, forestry projects earn between $8 and $30 (Rs 660-2,474) per credit, with the average being $14 (Rs 1,154). At the conservative rate of $8, the value of held credits would amount to $12.8 million (Rs 106 crore), which as explained above is not being distributed among the growers of trees.
This project, however, is not selling credits in the open market. As per information gathered by DTE-CSE from various sources, the carbon credits are issued to private companies, which have invested in the fund.
These investor companies, whose names are listed on the website of Livelihoods Funds, include Danone, Schneider Electric, Crédit Agricole SA, Michelin, Hermès, SAP, Groupe Caisse des Dépôts, La Poste, Firmenich, Voyageurs du Monde. DTE-CSE found on the Verra registry that in 2019 and 2020, Michelin Group retired credits from this project to offset the emissions from travel of its employees. The public data on retirement is sketchy. Livelihoods Funds also does not have information on how much credits it has issued to its investors. The carbon credits game, once again, is about non-transparency and all in the name of climate action and poor people.
Venkat Reddy, a farmer from Nemmany village in Telangana’s Nalgonda district expects to receive Rs 6,400 ($78) annually for changing the way he cultivates rice. A year and a half ago, Core CarbonX Solutions Pvt Ltd, a Hyderabad-based carbon trading, environmental consulting and sustainability advisory firm, had introduced him to a new technique called alternate wetting and drying, in which paddy fields are alternately flooded and dried. In fact, many other farmers in Telangana also expect to be rewarded from next year for collaborating with the company, which has applied for registration with Verra—identification number (ID) VCS 3238—and hopes to enter voluntary carbon market in 2024.
The conventional method of paddy cultivation accounts for roughly 2 per cent of the global greenhouse gas emissions from anthropogenic sources. Typically, paddy is continuously flooded during cultivation to check weed growth. This practice, however, leads to proliferation of bacteria that generate methane, a powerful greenhouse gas. According to a review paper by the International Rice Research Institute, the Philippines, experiments in South Asia have shown that alternate wetting and drying method helps reduce methane emissions by an average of 43 per cent and water use by 30 per cent. Using the 2006 guidelines of the Intergovernmental Panel on Climate Change (IPCC), it is estimated that if continuously flooded rice fields were drained at least once during the growing season, global methane emissions would reduce by 4.1 million tonnes per year, which is 2.5 per cent of the global methane emissions from agriculture in 2021.
The idea is to allow the soil to dry out until fissures appear before re-flooding it. This creates alternate wet and dry cycles for the rice plants. “We keep the fields fully flooded only seven days before and after flowering,” says Niruj Mohanty, managing director and chief executive officer of Core CarbonX, who accompanied DTE-CSE to meet the farmers of Nalgonda.
Core CarbonX has partnered with Swamy Vivekananda Rural Development Society (SVNRDS), a local non-profit that provides educational, social development and humanitarian services to the rural population, to recruit farmers in the district. Core CarbonX also provides training to farmers and supplies field water tubes to them. Measuring 30 cm in length and 15 cm in diameter, the field water tube is essentially a plastic pipe with drilled holes, which is sunk into the rice field so that 10 cm of it protrudes above the soil. When the water level drops to about 15 cm below the surface of the soil, farmers can re-flood the field to a depth of about 5 cm. As of August 11, 2023, when DTE-CSE visited Nalgonda, Core CarbonX claimed that 150,000 ha in Telangana had been brought under this new method of cultivation, and that farmers in at least 17 districts, where rice is grown in both rabi and kharif, were adopting the technique. Core CarbonX has appointed supervisors in each village to conducted surveys and monitor the project.
A similar project is also been readied for roll out in Madhya Pradesh. Called Sustainable Rice Cultivation for Marginal Farmers in Madhya Pradesh, the project is listed with Verra (IDVCS3156) and hopes to get registered soon. Its project proponent Value Network Ventures Advisory Services (VNV) is based out of Bengaluru and the project is being implemented by Shriram Education and Welfare Society (SEWS) based in Seoni, Madhya Pradesh. Rameshwar Pardhi, who runs SEWS, told DTE-CSE that under this project they would form groups of farmers who would collectively own 60-70 ha. The farmers would be trained to conduct the practices, monitor water levels, record observations in monitoring diaries, and ensure adherence to the overall practice. They would be supervised by appointed individuals responsible for overseeing operations.
Alternate wetting and drying method is relatively new in the Indian voluntary carbon market. In India, 13 companies have already applied for registration for such projects with Gold Standard and Verra. They are located in three states: Telangana, Madhya Pradesh and Maharashtra.
Projects to reduce methane emissions from paddy fields currently use a CDM methodology called AMS-III-AU-Methane emission reduction by adjusted water management practices in rice cultivation, to estimate emission reduction. The methodology focuses on reducing anaerobic decomposition of organic matter in rice cropping. Baseline emissions of methane gas are measured in reference fields using “closed chamber method”. This results in a emission factor that is measured in kilogram methane per hectare per season. To demonstrate a decrease in emissions, project practices are carried out in reference fields and similar measurements are performed.
According to Mohanty of Core CarbonX, measuring methane from the field is tedious and expensive. Instead, he uses a formula present in Verra’s methodology that allows him to calculate emission reductions by multiplying the adjusted daily emission factor (coefficient that describes the rate at which a given activity releases greenhouse gases into the atmosphere) with the area of project fields in a year, the cultivation period of rice in a year and global warming potential of methane. The formula suggests that alternate wetting and drying method could result in 52,920 tonnes of CO2e reduction per year. The project is expected to be active for seven years, resulting in emission reductions of 370,440 tonnes of CO2e. Prithvi Ram from Dr Reddy’s Foundation, sister organisation of Hyderabad-based pharmaceutical company Dr Reddy’s Laboratories, also plans to claim carbon credits for alternate wetting and drying projects in Telangana in the future. He says that measuring methane emissions can help check whether theoretical estimates match ground measurements. “It is expensive but doable. The implementation might not be the same everywhere. When you scale up or extrapolate the data, the measurements may look different. So it is important to validate them,” Ram says.
The methodology also says that the shift in practice should not lead to decreased yields. Dhasharata Reddy, a farmer from Urumadla village in Chityala mandal of Nalgonda, told DTE-CSE that he benefitted from the alternate wetting and drying method. “Last rabi, my yield was 2.9-3 tonnes per acre (roughly 1.2 tonnes per ha). This is an increase of 0.4-0.5 tonnes,” he said. Muthian Shetty from Wattimarthy village in Chityala mandal, who has been following the technique for over a year now, however, informed no changes in the yield. DTE-CSE was not able to ascertain if the farmers’ expenditure had increased in terms of labour and farm inputs because of the shift in method.
Both Core CarbonX and VNV have signed agreements with the farmers stating that the latter has agreed to transfer the rights to carbon credits to the companies. These agreements outline the farmers’ relinquishment of their carbon rights, their commitment to adhering to specified methods and their willingness to seek advice for sustainable farming practices.
The farmers DTE-CSE spoke with were unaware of carbon credits but said that they have been assured of incentives for following the alternate wetting and drying method. Mohanty told DTE-CSE that his company would give the farmers Rs 800 per acre ( Rs 1,920 or $23 per ha) per annum. “Almost 25 per cent of revenue from the sale of carbon credits would be used by the company and their partner non-profits. Farmers would get 35-45 per cent share and 30 per cent would go to their investors, Carbon Streaming and Vida [Canada-based companies that invests in carbon credit projects],” he explained. The company expects the value of one carbon credit to be $8 (Rs 660). Each hectare where paddy is grown using alternate wetting and drying generates 5-8 carbon credits or 6.5 credits per ha on average. At this rate, the company would fetch a carbon revenue of Rs 4,313 ($52), of which it plans to share Rs 1,920 per ha or roughly 45 per cent with the farmers. However, some farmers said that the incentive may not be sufficient. “Because of alternate wetting and drying method, we now use more herbicides to control weeds and our input costs go up,” said A Ram Reddy from Nemmany village.
As for the Madhya Pradesh project, Pardhi shared that participating group (each group is expected to have 60-65 farmers) would receive a financial support of Rs 50,000 ($606) annually—roughly Rs 800 ($9.7) per farmer per year—to cover operational expenses. He estimates that the project cost per group will be roughly Rs 1 lakh ($1,213) per annum, which includes the cost of registering the project and annual monitoring. This will be secured through the sale of carbon credits.
The questions that remain in this important mitigation effort are if the incentives that will flow to the farmer are sufficient to drive the change and if the methodology for estimating emission reduction is robust. The fact is this change in cultivation system of a subsistence crop will need to be carefully managed so that it benefits both the farmer and the planet.
Unkalal Ji Patidar has a 4 cubic metre biogas plant in his backyard in the Alniya village of Ratlam district in Madhya Pradesh. Biogas plant, also known as biogas digester, is a system that converts organic waste into methane and organic fertiliser through anaerobic digestion. Unkalal Ji’s house has had the plant for about 30 years, but the technology kept changing. Previously, it was a simple brick structure with lesser capacity. Now the one built with the help of New Life Centre, a Ratlam-based non-profit, is an RCC (reinforced cement concrete) digester. His family has used LPG in the past, but stopped using it because of high refill costs. The construction of the RCC biogas plant cost him Rs 35,000-40,000 ($424-485), which was initially borne by the household. But New Life Centre helped him avail a 40 per cent subsidy on the expenditure under the state government’s Biogas Vikas Yojana, which is being implemented by the Madhya Pradesh State Agro Industries Corporation Ltd (MP Agro). DTE-CSE verified this claim by checking the list of beneficiaries on the MP Agro website.
Unkalal Ji’s neighbour Lalchand Ji Patidar also got a biogas plant built in 2020. It cost him around Rs 29,000 ($352) and New Life Centre helped him obtain a subsidy of Rs 14,000 ($170) from MP Agro. Lalchand Ji was satisfied with the plant, which he said has never caused any problems and is the only source of cooking fuel in his house.
DTE-CSE visited these biogas plants in Alniya village because they are part of the project of INSEDA Engineers and Consultants Pvt Ltd, Delhi-based non-profit, which has been issued carbon credit under Verra. The project, called “Household biogas Carbon Offset Project for Clean, Convenient and Efficient Cooking” (identification number VCS 2754), has been issued 35,820 credits till date for installation of 8,519 biogas plants across Madhya Pradesh. It has a seven-year crediting period till 2027.
The project seems to run well on the ground with biogas plants actually being used, yet concerns abound. First, the biogas plants have been set up using the Madhya Pradesh government’s subsidy scheme. The households DTE-CSE visited have all received the subsidy and paid the balance money. This raises questions about the additionality of the project, as the role of carbon credit in running the project cannot be substantiated. Second, while the ownership of carbon credits has been claimed by INSEDA, possibly through an agreement between the company and the implementing agency New Life Centre, and the member organisation has an agreement with the beneficiaries, the latter were not aware of carbon credits, nor did they recall signing any document relinquishing their carbon credit rights. Third, if the project is receiving carbon credits, it remains unclear how the resulting revenue is being utilised.
Another concern around the project is monitoring. Biogas systems need to be fed with a large amount of biomass daily and often need maintenance to keep them running. If such plants are being counted for emission reductions, their usage needs to be monitored.
Globally, over 200 household biogas projects are registered with Verra and Gold Standard, mostly from India and China. Of these, more than 50 projects are from India, which have collectively generated over 4 million carbon credits. One such biogas project registered with Gold Standard is “Household Biogas Plants Installed in Rural Areas of Madhya Pradesh” (ID: GS7510). It has been developed by a Bengaluru-based company VNV Advisory, which is working along with Seoni-based non-profit SEWS (Shriram Education and Welfare Society) for implementation of the project. In 2018, as many as 14,301 biogas plants were commissioned in Mandla, Seoni, Balaghat and Chhindwara districts under the project, which claims over 51,235 tonnes of emission reduction per year. Till date, the project has been issued 143,966 credits.
Rameshwar Pardhi, who runs SEWS, maintains biogas service centres in Seoni and Balaghat. He claimed to have been building biogas plants in the region for almost three decades now. He mentioned that the government’s subsidy system is functionally weak with inordinate delays, so his project does not rely on subsidies. Instead, the funding comes from carbon credits. On the question of monitoring, Pardhi claimed that they have affiliated biogas service centres in all the towns around which the project is clustered. He showed a servicing card which mentions free biogas repair services, saying that they keep track of biogas plants that they install through their teams.
Even with that setup, maintaining over 14,000 biogas plants is challenging. In a small village called Bhawal, 70 km from Jabalpur, Naresh Malgam got a biogas plant built for free in his backyard in 2018. He used it initially, but the system was no longer in use. The family has an LPG connection received under the Pradhan Mantri Ujjwala Yojana but uses the mud chulha, which he said is more affordable. Another resident in his village Brijesh Yadav had a similar story to narrate. “About 40 kg of cow dung is required to feed a digester per day. There is no way a household can get that much cow dung each day,” said Suvedas Bairagi, another resident of the village. Elsewhere, such as in Seoni, people were found to be using biogas as the sole source of cooking fuel. Thus, even if biogas plants are funded through carbon credits, questions arise regarding subsidy implications and manual project monitoring. This, in turn, raises questions about the projects’ additionality and the actual emission reduction benefits they provide.
Carbon credit-based project developers install biogas plants in households that traditionally use wood or other forms of non-renewable biomass. As a renewable biomass, cow dung is anaerobically digested to produce biogas that is utilised in cooking. According to INSEDA’s estimates, a 4 cubic metre biogas plant reduces greenhouse gas emissions by 8 tonnes per year. This is because when households move to biogas they switch from using wood based fuels or even fossil fuel like LPG. INSEDA’s project uses a CDM methodology, AMS-IE--Switch from non-renewable biomass for thermal applications by the user, to estimate this emission reduction. Project developers DTE-CSE spoke with estimate that the price is $2-7 (Rs 155-577) per credit. In other words, a 4 cubic metre plant would earn $16-56 per year (Rs 1,319-4,617).
This is clearly a pittance, as compared to the capital cost of building the plant (Rs 30,000 or $364) and then its management and maintenance. In this way, the buyer of the carbon credit is short-changing the farmers of the developing world. This can be called a fundamental flaw in the “market” as it underestimates the real cost of reducing emissions.
The biggest chunk of carbon credits are awarded for renewable energy projects, which include wind, solar, biomass and hydropower projects. Good, you would say, as India has plans to greatly augment its clean energy portfolio and in this way, offsets can be used to make the transition. Sadly, this does not add up.
About 675 projects are registered under Verra and Gold Standard for 268 million carbon credits, of which 148 million have been retired (or claimed against offsets)—this is over 90 per cent of the carbon credits issued. There are no new projects in this sector, as since 2020, both Verra and Gold Standard have stopped accepting new grid-connected renewable energy projects, except from the least developed countries. The reason cited is that “these projects are now cost-competitive with fossil-fired power generation facilities and have become common practice”.
Till then, the concept behind awarding carbon credits to renewable energy projects was straightforward: these projects generate energy without emitting greenhouse gases that would have been released had fossil fuels been used for electricity generation. The difference in emissions between the project’s actual performance and a hypothetical scenario where fossil fuels were used was calculated, and based on that carbon credits were issued. Renewable energy projects include, wind, solar, biomass and hydropower projects.
Additionality is not an issue but price isIt is widely accepted that renewable projects would not pass the test of additionality—the reason is that government and private entrepreneurs would invest in these projects regardless of the carbon credit received.
In a 2021 paper by the Centre for Climate Change Economics and Policy and the Grantham Research Institute on Climate Change and the Environment, both in the UK, the authors estimated that of the 472 wind farm projects in India registered under CDM, 52 per cent of the “approved offsets” were allocated to projects that would very likely have been built anyway. Selling these non-additional offsets to emitters has allowed them to increase carbon emissions without any real benefit in terms of emission reductions in the real world.
However, this may not be the real test of the renewable energy’s viability in the carbon credit market. The fact is that the world needs to augment clean energy and needs finance to be able to do this. In countries of the South, the high cost of finance restricts the investment in grid-based renewable energy projects, which would help countries make the transition to clean fuel. Therefore, it would help if the carbon credit scheme pays for the cost of the project.
Renewable energy carbon projects represent some of the cheapest carbon credits available in the market. For instance, the average price of India-based wind energy carbon credits is approximately $1.20 (Rs 99) per credit, a price that has significantly decreased over the past decade.
Carbon credits must be based on the cost of the project and not on the whims of the non-existent market. We have analysed the proportion of the carbon credit in the cost of the key registered renewable energy projects. It is clear that the voluntary carbon market only takes care of a fraction of the costs of these projects—between 3 and 4 per cent in the 10-year crediting period.
This is based on the current price of credits for renewable projects at $1.5 (Rs 124) and the emission reduction potential as cited in the project document. Even assuming the highest cost of carbon credit, it would still be less than 10 per cent. The only outlier is the 300 MW hydroelectric project by Jaiprakash Hydro in Himachal Pradesh.
In this case, the credits per megawatt as estimated by the project developer is much higher than what the solar and wind projects usually command; the project period for which Jaiprakash Hydro would secure credits is also longer at 20 years.
With this and a higher carbon credit price of $3.5 (Rs 289), it adds up to roughly 38 per cent of the capital cost (see ‘Cost undermined’,).
Renewable energy carbon credit projects reveal the big issue that needs to be addressed in carbon credits market. In whose account book should the emission reduction from these projects be kept? Should India count renewable capacity addition and emission reduction towards its own Nationally Determined Contribution (NDC) targets under the Paris Agreement?
All countries, including India, have taken on targets for reduction of emissions under the Agreement. As per its NDC, India has announced that non-fossil fuel would constitute 50 per cent of the total installed power capacity by 2030. India would count all projects that are non-fossil fuel, including hydroelectricity, wind and solar. This either poses a risk of double counting or short-changes the government’s clean energy efforts by attributing carbon rights to foreign entities.
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