India’s farming and carbon credit market

Meet the farmer with whom India’s farming enters carbon credit market (Livemint) profiles a farmer from Punjab with 65 acres of landholding. He grows rice using the direct-seeded rice (DSR) method. The method reduces labour cost because transplanting of saplings as well as puddling is not involved in DSR method. He is saving on irrigation water volume because flooding of the field is not required. He saves about INR 5000 per acre on labour costs, as the article reports.

In the next cropping cycle, he sows wheat by using a ‘Happy Seeder’ machine which sows wheat on the previous rice crop’s residue, without tilling the land. This zero-till further reduces the cost.All of these practices have also led to reduced carbon emissions. He could get carbon credits issued for these practices. The article reports,

The credits, generated by practices Cheema has adopted, will be put up for sale in the global voluntary carbon market (VCM). These credits can be purchased by corporations to offset their own carbon emissions.

For instance, the climate-friendly practices adopted by Cheema is likely to generate at least one credit per acre of land every year – equivalent to removing one tonne of carbon dioxide from the environment. The credits could be sold for a price, say $15 a piece, in the global market. For instance, if Cheema could generate a credit for each acre every year, he could receive a payment close to $4000 for four years (on 65 acres of land).

Livemint

This story is over-hyped. Farmers like Chemma are exceptions as far as Indian landholding is concerned. Besides, there are a couple of flaws in this approach to develop a market for carbon credits from farming.

In some advanced economies, there are incentives awarded for reduction in each input item – for using less water, less chemical fertilizer etc. So, practically it could be the case that for a farmer a yield of 170 bushels/ hectare is more viable than 200 bushels/hectare because the moment he tries to up his yield he will need to increase the quantity of inputs like fertilizer. If he does that he exceeds the limits on the emission and water use. Above the threshold there are no incentives to be had. These incentives are monetary and paid per hectare. So, in effect 170 bushels/hectare is the ‘economically viable yield’ for the crop. It doesn’t matter whether the potential yield of the crop that could be had is 200 bushes/acre.

Economic incentives in this case may not work in the interest of food security and maximum possible yields that must be had for a growing population and shrinking farm acreage.

Right now, the money to be made from carbon credit market is not significant even for a farmer with a large landholding (by Indian standards) such as Cheema. Besides, the carbon credits (or quantity of reduction achieved) and their expected selling price are entirely based on loosely identified ‘farming practices’.

Practices as zero-till wheat and using a super-seeder must be spoken of with yield numbers alongside. Punjab itself, on a state-level, hasn’t seen consistent yield from zero-till methods. The article reports of Cheema realizing a 5-7% increase in yield. This as well as the potential gain from selling carbon credits are insignificant for farmers to adopt given that the downsides (of pest infestation, low yield for a couple of cropping cycles) are far more clear, certain and can lead to significant losses.

This is energy and effort directed in wrong direction in the current situation of poor yields, low affordability and high costs of experimentation that Indian farming finds itself grappling with.

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