Post the Paris Agreement, companies are increasingly pledging to help stop climate change by reducing their greenhouse-gas emissions as much as they can. Yet many businesses find they cannot fully eliminate their emissions, or even lessen them as quickly as they might like. For the companies committing to achieve carbon neutrality, use of carbon credits will be very important to offset emissions they can’t get rid of by other means.

The market for carbon credits could be worth upward of $50 billion in 2030. Indian smallholder agriculture can generate a large number of carbon credits and supply to the global markets; however, this would require significant upfront investments and focused efforts on the ground. Private investment flows in carbon credit generation projects in Indian agriculture can not only help the country improve the local environment, but also put substantial money in the hands of Indian farmers, supporting the Prime Minister’s promise of enhancing farmers’ income.

To attract private investment and efforts, it would be important to have a well-defined and conducive policy framework that would assure: * Safety of capital and investee’s legal ownership rights over the carbon assets generated through such projects. That would mean assurance of keeping such carbon assets out of the scope of the Nationally Determined Contributions (NDCs) or authorizing Corresponding Adjustments in case of cross border transactions. * Open access to international voluntary carbon markets for the carbon credits generated through such private projects in order to help monetize efforts, ensure optimal price discovery and liquidity, and consequently the ability to pass on more benefits to the farmers.

India grows paddy on around 44 million hectares with transplanting being the predominant cultivation practice. Methane emissions from rice paddies, where the land remains in foothigh standing water throughout the season, are the highest from cropland and the second highest source in agriculture, surpassed only by emissions from enteric fermentation in livestock. The amount of methane emitted from rice paddies are strongly linked to the practices (flooding and fertilizing) applied by the rice farmers.

Encouraging paddy farmers to adopt more water efficient practices such as Direct Seeded Rice (DSR) and Alternate Wetting & Drying (AWD) reduces methane emissions, water usage, and improves soil health. It reduces the cost of cultivation and improves farmer profitability. This also creates an additional source of income for the farmers by way of compensation for the carbon credits generated through the switch in the cultivation practice and is line with GOI’s enhancing farmer’s mission.

The paddy stubble burning issue in Haryana and Punjab can also be alleviated by way of incentivizing farmers through carbon credits to stop following the highly polluting practice. Sugarcane farmers can also benefit by switching to water-saving and environment friendly techniques. Boosting private investment in such projects can help the country resolve multiple problems like excess water use, electricity use, worsening soil quality along with reduction in GHG emissions and better income/ profitability for the farmers.

The Paris Agreement requires all ratifying Parties to communicate an NDC (Nationally Determined Contribution). NDCs are documents capturing the pledges made by each country, outlining their mitigation and adaptation goals, under the agreement. They include targets, measures and policies and are the basis for national climate action plans. NDCs will be updated every five years to close the gap with the Paris temperature goals. India is a fast-growing economy.

It is also the world’s third-largest energy consumer and greenhouse gas (GHG) emitter, although its per capita emissions and historical emissions are low. India submitted its intended nationally determined contribution (INDC), now NDC, after signing the Paris Agreement, to the UNFCCC in October 2015.

The first India NDC for the period 2021 to 2030 focuses on three priority areas: * To reduce the emissions intensity of its GDP by 33-35 per cent by 2030 from the 2005 level. * To achieve about 40 per cent cumulative electric power installed capacity from non-fossil fuelbased energy resources by 2030 with the help of transfer of technology and low-cost international finance including from the Green Climate Fund (GCF). * To create an additional carbon sink of 2.5 to 3 billion tons of CO2 equivalent through additional forest and tree cover by 2030. Specific sector targets besides energy and forestry are not specified in the India NDC.

However, various sectors are mentioned in the NDCs for mitigation and adaptation strategies such as energy, industry, transportation, agriculture, forestry, waste, etc. Promoting Climate Mitigation activities in Indian agriculture is a very tedious effort that involves identifying and enrolling smallholder farmers in large numbers, training them, handholding them on climate smart agricultural practices, managing the MRV (Monitoring, Review & Verification mechanism) on each small farm, generate carbon credits and timely incentivization of each participating farmer.

Such tedious and resourceintensive activity should be ideally left to the private sector as the Government machinery may not be able to focus on such micro level-farming units and meticulously follow all the necessary processes. Double claiming occurs when two different parties claim the same emission eduction/ removal/ mitigation outcome. In the context of the Paris Agreement, this can occur when a project’s host government claims the outcome towards its NDC and at the same time, another country (for their own NDC) or an entity for a specific carbon reduction project claims it. This effectively means that an emission reduction/ removal is occurring once but being claimed twice.

The main safeguard established under the Paris Agreement to prevent double claiming is the ‘corresponding adjustment’, under which a country transferring a mitigation outcome must adjust its emissions balance to reflect the transfer and, in cases where the user of the outcome is another country, they must make a corresponding adjustment to their emissions balance to reflect the use. If the Government of a country from its national inventory does not exclude the benefits created by a specific carbon sequestration project, this represents a double claiming situation.

Some carbon standards such as Gold Standard require a statement/clarification from the government proving such an adjustment. Due to environmental integrity, the host country can forgo a claim to the emission reduction/removal outcome from a voluntary market project by applying a corresponding adjustment to the reporting of its progress towards achievement of its NDC, such that the level of effort required to meet its targets remains unaffected.

In the absence of a clear policy on the carbon accounting, especially on double claiming, the private and international investment in carbon capture projects may slow down. It is proposed that the government authorises the projects in agriculture, involving private investments, for use by any international mitigation purpose, with the Corresponding Adjustment. It will help in realizing the best possible price for such generated carbon credits making the projects viable and benefiting the farmers. Indian farmers can strongly benefit from the growing demand of the voluntary carbon credits.

India has 44 million hectares of the area under rice cultivation. Transplanted paddy rice is one of the major sources of methane, accounting for around 8-10 per cent of global anthropogenic methane emissions. Transplanted paddy rice is also highly water intensive. It takes around 3,000 to 4,000 liters of water to produce one kg of rice. This also means significant amount of electricity consumption for water pumping. Converting transplanted paddy rice to Direct Seeded Rice (DSR) or Alternate Wetting & Drying (AWD) techniques can result in the reduction of around 2 tCO2e / hectare / season, reduce water consumption by 30-40 per cent and improve farmer profitability by around Rs 8000 to 10,000 per hectare per season.

Government can save on electricity and water subsidies with farmers shifting to DSR & AWD. The funds to train the farmers in DSR and AWD techniques + additional cash incentives can be generated from International Voluntary Carbon Markets. This, however, involves significant upfront investment and efforts on the ground.

The private sector can play an enabling role: * If the government creates a conducive policy framework for private investments in carbon credit generation from smallholder agricultural projects. * Assures investors that the carbon credits generated from smallholder agriculture projects will not be nationalized or included in the NDC * Removes policy impediments, if any, from international transactions of the voluntary carbon credits generated from smallholder agriculture * Develops a process for registering agricultural carbon credit generation projects and authorizing / licensing them with necessary documentary approvals to trade in International markets. Enable necessary corresponding adjustments in the NDC.

(The writer is Chief, Environment Committee, PHD Chambers of Commerce and Industry, New Delhi and can be reached at jpglobalconsultinggroup@gmail.com)