How can Indian Farmers Benefit from Carbon Markets?

Table Of Contents

• About Carbon Markets
• How Carbon Markets Benefit Indian Farmers?
• Key Reasons of Carbon Emission in Agriculture
  • Livestock Digestion
  • Chemical Fertilizers
  • Rice Cultivation
  • Poor Waste Management
  • Burning Crop Residue
• Strategies to Reduce Carbon Emissions in Agriculture
  • Agroforestry
  • Cover Crops and Companion Cropping
  • Improved Residue Management
  • Reduced Tillage 
  • Fertilizer Management 
  • Direct Seeded Rice (DSR)
• Empowering Indian Farmers Through Carbon Markets 

About Carbon Markets

Carbon markets are a trading system where carbon credits are bought and sold to balance carbon emissions and reward green habits. Carbon credits are certifications where a single credit represents removal or reduction of one metric tonne of carbon dioxide equivalent from the atmosphere.

As per the Grand Value Research, the global carbon credit market was valued USD 887 billion in 2025. Moreover, it is estimated to reach a compound annual growth rate of 25.9%, reaching USD 6,130 billion by 2033. In comparison, India’s carbon credit market was valued at USD 4,010, million in 2023. Also, it is assumed to reach USD 49,448 million by 2030 with 43.2% of compound annual growth rate.

How Carbon Markets Benefit Indian Farmers?

To participate in carbon markets, farmers must first earn carbon credits. These credits can be earned by adopting eco-friendly practices like zero tillage that reduces carbon emissions into the environment. Companies with high carbon emissions can buy these credits from farmers to meet sustainability goals. This provides farmers several benefits like:

• Revenue generated from carbon credits allows farmers to invest in quality seeds, fertilizers, and farming tools. This improves crop productivity.
• Sustainable methods like agroforestry improves soil health and water-holding capacity. It keeps the crop safe from bad weather and droughts.
• Carbon credits help farmers earn extra income. It reduces their dependency on seasonal harvests and market changes, which is great for marginal farmers.

Key Reasons of Carbon Emission in Agriculture

As per the data published by Food and Agriculture Organization, about 18% of global carbon emissions come from the agriculture sector. And majority of these emissions appear due to these five reasons:

Livestock Digestion

Emissions from the digestive processes of domestic and wild animals account for nearly 53% of total agricultural emissions, releasing carbon dioxide and methane gas into the atmosphere. This is a major source of greenhouse gases that accelerate global climate change. Adopting better feeding habits and nutritional supplements can help reduce these emissions.

Chemical Fertilizers

Using chemical fertilizers on the field causes about 21% of the total gas emission in agriculture. Additionally, overusing fertilizers damages the natural balance of soil. Using better farming techniques and lowering fertilizer usage can help lower harmful emissions. These simple changes protect the environment and improve overall crop yield.

Rice Cultivation

Paddy farming accounts for about 17% of total greenhouse gas emissions in agriculture. Flooded rice fields block oxygen from reaching the soil. This causes bacteria to produce massive amounts of methane gas. Ultimately, global rice production has a significant effect on climate change.  Methods like Direct Seeded Rice (DSR) and Alternate Wetting and Drying (AWD) can fix these issues.

Poor Waste Management

Mismanagement of manure and biomass accounts for around 6.5% of total gas emissions in the agriculture sector. This releases harmful gases like methane and nitrous oxide into the air. Proper composting and biogas recovery can help reduce these harmful emissions. It also helps turn waste into clean energy and rich fertilizers.

Burning Crop Residue

Burning crop residue in fields contributes about 2% of greenhouse gas into the environment. Additionally, it destroys good soil microbes and lowers natural land fertility. Moreover, the intense heat produced from these fires kills beneficial insects like earthworms that help plants grow well.

Strategies to Reduce Carbon Emissions in Agriculture

Below are some common practices farmers can follow to reduce carbon emissions from agricultural sector and earn carbon credits: 

Agroforestry 

Agroforestry involves growing both trees and crops in the form of a row-based cropping system. Under this system, agricultural crops are cultivated between rows of trees. As per a study conducted in Northern India, poplar-based agroforestry systems across seven districts of Punjab and Haryana stored about 9.946 million tonnes of CO₂ equivalent. Furthermore, agroforestry models involving tree species like eucalyptus and poplar can generate additional income of up to ₹25,000 per hectare per year for farmers.

Cover Crops and Companion Cropping 

Cover crops and companion cropping are natural farming methods that help improve soil health. Cover crops are planted between main harvests to protect the ground from wind and water erosion. They also trap moisture, add nutrients, and store carbon. While companion cropping involves growing different plants together, they help each other grow and naturally fight off pests.  

Improved Residue Management 

Farmers often burn leftover crop stalks after harvesting. While this is easy, it releases harmful greenhouse gases like carbon dioxide, methane, and nitrous oxide. Instead of burning, farmers can mix this leftover waste into the soil or turn it into a biochar which is a special type of charcoal used for soil. 

Reduced Tillage 

Tillage, particularly deep tillage, releases carbon into the air as carbon dioxide, which affects the climate. Traditional farming methods can disturb the soil, which leads to soil degradation, and increases carbon emissions. On the other hand, following practices like reduced-tillage, no-till farming, and conservation tillage protects the land by minimal soil disturbance, keeping the natural carbon safely locked in the ground.  

Fertilizer Management  

Excessive use of chemical fertilizers not only harms soil health but also leads to the release of greenhouse gases that affect the environment. Therefore, it is vital to reduce the use of fertilizers in agriculture. In addition to reducing fertilizer application, farmers can adopt organic farming techniques, like composting and using organic manure, to improve soil fertility without increasing carbon emissions.  

Direct Seeded Rice

 In this method, rice seeds are sown directly into the fields. This eliminates the need for nursery raising and transplanting, saving time labor, and water. Sowing can be done either manually or using seed drills. Growing 1 kg of rice generally requires 1,500 to 2,000 liters of water. Traditional rice farming in India uses 25 to 27 irrigation cycles. But DSR cuts this down to 15 to 18 irrigation cycles.

Empowering Indian Farmers Through Carbon Markets Takeaway

Carbon markets is a major opportunity for Indian farmers to enhance their income while contributing towards a sustainable agriculture. However, to participate in this market, farmers must work together with Farmer Producer Organisations (FPOs), cooperatives, or government-sponsored institutes.

To register for a carbon credit project, you must first create a detailed plan that explains how your project will reduce carbon emissions and how these reductions will be measured. It will then be reviewed by an independent third-party agency to confirm that it meets the required standards. And once the project is validated, it can be officially registered with a recognized carbon crediting programme.

Once registered, farmers can participate by adopting green farming methods like agroforestry and organic farming. Using these techniques will not only benefit the environment but will also help farmers receive fiscal benefits in the form of carbon credit.