India is the world’s second largest producer of carbon credits after China, as per a Verra registry analysis. Hundreds of projects have generated millions of credits that companies around the world buy to offset their emissions.
Yet beneath those impressive numbers lies a truth hardly anyone talks about: India’s carbon market has largely bypassed the people who manage one of the country’s biggest climate assets – its farmers.
Agriculture accounts for 0.2% of India’s issued credits, while renewable energy accounts for roughly 87%, a split the underlying Berkeley registry data confirms. A landscape study by the Centre for Grower-centric Eco-value Mechanisms (C-GEM) puts India’s 132 dedicated agriculture projects at just 0.40 million tonnes of CO2 issued altogether. That’s roughly equivalent to the annual emissions of 93,000 average passenger cars (in the US), despite India’s vast agricultural landscape.
The agri-food subset is even thinner. Of the 242 agri-food projects registered under Verra and Gold Standard by the end of 2024, only 21 had actually earned credits. India as a whole was about 4.1% of the global voluntary carbon market by revenue in 2023.
What’s interesting is that agriculture is the only sector in India’s voluntary market where almost every credit issued has already found a buyer. There is no shortage of demand, but it is almost impossible to let a farmer produce a carbon credit in the first place.
If agriculture can sequester carbon, reduce methane, improve soil health and generate farmer income, why should farmers not participate in carbon markets with a steady demand? Before we unpack this question, let’s start with the basics.
What is a carbon credit?
One credit stands for one tonne of CO2 or its equivalent greenhouse gas (such as methane). That tonne can come from two very different kinds of projects.
An avoidance credit rewards emissions that were prevented. The methane a rice farmer keeps out of the air by draining a flooded paddy instead of leaving it submerged. Or by changing her practice to direct sowing. (Farmers originally did use this method, before they were advised to “experts” to switch during the Green Revolution in the 1960s.)
A removal credit rewards a tonne actually pulled out of the air and stored in a tree, in soil or in biochar.
Both sell similarly, when a buyer pays for that tonne to offset the emissions they have put into the atmosphere.
The whole system was built decades ago for large industrial emitters like power plants and steel mills. It learned to measure emissions from a smokestack, but never a farmer’s small piece of land.
Six systems principles that underlie the current situation
- In India’s domestic carbon market, potential sellers (farmers, forest communities, wetland stewards) outnumber buyers.
We have roughly 146 million farm holdings, as well as innumerable forest communities and wetland stewards, who together shepherd a vast pool of land that could store or avoid carbon, thereby generating carbon credits to sell.
Buyers at home are fewer by comparison, because domestic corporate demand is still nascent; most appetite for Indian credits comes from abroad.
The reasons are clear. Gathering data from a factory is easier than from a farm. A factory has one chimney and a meter. A farm has fragmented plots, mixed crops and soil that changes across every cluster, depending on its topography.
- Large industrial emitters understand carbon markets; smallholders rarely do.
Information and communication gaps are the central obstacles for smallholders, starting from how a credit is calculated going all the way to which market channels exist. A C-GEM survey of 94 civil-society groups reports that 93% of the barriers are knowledge gaps; 84% had never joined a carbon project even though 41% had been approached by a developer.
Why? Due to the risk bearing architecture.
Here’s how carbon markets work in agricultural contexts. A project developer signs up farmers, runs the measurement and sells the credits. The farmer supplies the practice change that creates the credit. The developer captures the margin.
The farmer becomes the asset rather than the partner.
Europe’s regenerative farmers put a number on this. They modelled a 100-hectare project, and after carving out margins for ensuring permanence, running the project and the developer’s commission of around 35%, the farmer was left with roughly €20 per hectare a year – in the optimistic case.
India’s best project tells the same story.
In January 2026, Grow Indigo’s Aadi project became India’s first high integrity soil-carbon issuance under Verra’s rigorous VM0042 method, covering about 30,000 acres across Punjab and Haryana and generating more than 50,000 credits. This is the gold standard with real science and satellite-backed verification. Even here, the company estimates that the revenue from carbon credits lifts farmer income by only around 7%. The credits fetch $40 to $60 globally, with no domestic benchmark yet.
- The farmer is the “asset”, while the developer captures the profit.
Carbon can top up a farm’s income, but it cannot be the reason a farmer rebuilds her whole practice. Can the market see farmers as more than carbon-bearing assets?
- Carbon stored in soil isn’t permanent.
India is moving from an informal voluntary market to a regulated one under the Carbon Credit Trading Scheme. Nine energy-intensive industrial sectors now face binding compliance targets, with more to follow.
Agriculture sits in a voluntary offset track with government-defined rules but no mandatory requirement. The resultant soft demand keeps the price low. A low price gives the farmer no reason to change.
But there is a deeper problem that is often not spoken about. A CO2 certificate promises permanence and soil carbon cannot deliver it.
Healthy soil is alive and microbes constantly build and break down organic matter. Any carbon you add to the soil will, in time, be eaten by those microbes and released again as CO2 or methane.
The carbon does not stay put. Nature loves to recycle carbon. The systems we have built around soil carbon treat soil carbon as a stock, a quantity locked in a vault, when in nature it behaves as a flow, a river moving through the ground.
- Carbon certificates are not the right instrument for agriculture.
A certificate that pays for permanence is the wrong tool for farming. The few who understand this are walking away.
Climate Farmers built Europe’s first internationally approved soil-carbon methodology and then stepped back from the market, judging that integrity had become too costly to deliver.
- A sophisticated, data-heavy financial instrument is ill-suited to an illiquid asset class (soil and trees).
Regeneration touches soil biology, water, biodiversity and farmer livelihoods all at once. A single CO2 score captures none of that. You cannot read a soil’s health from one figure any more than you can read a person’s health from their weight.
And there is the additionality clause. A project earns credits only for going beyond business as usual – by showing that the carbon avoidance or storage would not have happened without the project generating the credits. The farmer who switched to zero tillage last year qualifies. The farmer whose family has farmed regeneratively for three generations does not, because for her it is already the baseline.
How do we address these challenges?
Europe’s regenerative farmers’ position paper on soil carbon markets sets out five redesigns: replace the single CO2 score with outcome indicators for soil, water and biodiversity; build tiered measurement, so the paperwork burden scales with the size of the farm; reform additionality to reward continuous improvement, not just new conversions; separate regenerative livestock from industrial livestock in the accounting; restructure the finance to pay farmers earlier and share the transition risk.
Creating a system that works for India
India now has an opportunity to rethink this architecture as it develops its Carbon Credit Trading Scheme.
Rather than asking farmers to fit industrial systems, policymakers should build systems that recognise agricultural realities. That begins with shared digital Monitoring, Reporting and Verification (MRV) infrastructure that lowers verification costs instead of requiring every project to build its own data stack.
India also needs standards designed for its own farming systems, particularly regenerative agriculture. Today’s credible MRV frameworks rely largely on international methodologies such as ISO 14064-2 and Verra’s VM0042. They verify carbon outcomes, but not whether a farmer is genuinely practising natural or regenerative agriculture. Those are not the same thing. India needs an integrated verification framework that combines:
- practice verification (whether a farmer is actually chemical-free and following the Natural Farming methods package)
- climate outcomes (the amount of carbon sequestered, emissions avoided or captured)
- market verification (the product is residue-free, traceable to a plot).
The financial architecture must evolve too. Farmers cannot be expected to shoulder years of transition risk while waiting for carbon revenues to materialise. They should be paid earlier and receive a fairer share of the value they create.
Ultimately, the success of agricultural carbon markets cannot be measured only in tonnes of carbon. It should be measured in healthier soils, resilient livelihoods, restored ecosystems and thriving rural communities. Carbon markets should not simply extract climate value from agricultural landscapes. They should invest in the people who sustain them.
If India succeeds in redesigning carbon markets around farmers rather than projects, it will do more than strengthen climate action. It could build one of the world’s most inclusive models of agricultural climate finance, and offer a blueprint for other countries where millions of smallholders stand at the frontlines of both food security and climate change.
That is an opportunity worth seizing.
Venky Ramachandran is agritech analyst, consultant and researcher. He runs a popular Substack, Krishi.System and agri-preneurs’ network. This is an abridged and edited version of a story published on Krishi.System.
Tl;dr: A summary for the busy, the curious, and the done-for-today
Carbon markets were designed for factories, not farms that are way more complex.
Agriculture accounts for just 0.2% of India's issued carbon credits, despite the sector's enormous potential to store carbon and cut emissions.
Farmers bear the risks of changing their practices while developers capture much of the value, making carbon credits an unreliable source of income.
Carbon markets struggle to value living soils because they reward permanent carbon storage, while soil carbon naturally cycles through ecosystems.
India has a chance to redesign carbon markets around farmers – with better standards, shared digital infrastructure and fairer financial incentives.
