The Case for Farmer-Centric Carbon Projects in India

There is a particular irony at the heart of India's climate story that does not get discussed enough.

The country is home to over 100 million farming households, most of them smallholders cultivating fewer than two hectares of land. Many of these households have, across generations, maintained farming practices that are gentler on the soil and the atmosphere than the industrial agriculture that replaced them in large parts of the world. They have composted, rotated crops, integrated trees into farmland, and returned organic matter to the soil not because of any carbon market incentive, but because these were simply the ways their families had always worked the land.

And yet, when global climate finance began flowing in earnest, when carbon markets were created, when voluntary credit standards were established, when institutional investors began looking for ESG-compliant assets, the overwhelming majority of that capital went to large infrastructure projects, to industrial renewable energy installations, to forestry programmes managed by governments or large NGOs. It did not reach the smallholder farmer in Madurai district, or the FPO secretary managing two hundred hectares across a cluster of villages in Theni.

That is the gap this article is about. Not a gap in the desire to include farmers: there is no shortage of policy language about 'community inclusion' in carbon project documents. The gap is structural, and understanding it is the first step toward fixing it.

Why Farmers Are Systematically Excluded

Carbon markets, at their most basic, reward verified emission reductions or carbon removals. To generate a credit, you need: a defined project boundary, a credible baseline, a monitoring plan, third-party verification, and registration with a recognised standards body. Each of these steps requires technical expertise, upfront capital, and time: typically two to four years between project initiation and first credit issuance.

None of these requirements are beyond the reach of Indian farmers in principle. But in practice, the system is designed for organisations with existing technical capacity and access to working capital. An individual smallholder, or even a newly formed FPO with a handful of staff, cannot independently navigate a Verra Project Design Document, engage an accredited verification body, and cover the associated costs while also running the project on the ground.

The result is predictable: the carbon market supply chain has been captured almost entirely by developers and consultancies who sit far upstream of the farmer. They originate projects, take the technical risk, and in exchange, they retain the majority of the credit value. The farmer who plants the trees, manages the soil, and installs the cookstove receives a small incentive payment if the contract is generous, or nothing beyond a promise of future benefit.

The carbon market supply chain has been captured by developers who sit far upstream of the farmer. The farmer who plants the trees receives a small payment if the contract is generous, or nothing beyond a promise.

The FPO Model Changes This Calculus

India has, in its Farmer Producer Organisation structure, one of the most powerful aggregation vehicles for smallholder climate finance that exists anywhere in the world. FPOs are legally incorporated entities that pool the resources, land, and market access of hundreds or thousands of individual farmers. They can sign contracts, hold accounts, receive payments, and organise collective action at scale: all capabilities that are individually impossible for a smallholder farmer.

A well-structured FPO with 500 farmer members covering 800 hectares of agricultural land is not a small climate project. Depending on the methodology and land use, it could generate 3,000 to 6,000 tonnes of verified CO₂ reductions annually, a volume that is meaningful in international voluntary carbon markets and commercially viable for project development investment.

When a carbon market company partners with an FPO rather than bypassing the FPO to deal with individual farmers, several things change. The revenue capture point moves closer to the farmer. The project's social legitimacy increases, because the implementing institution is one the community already trusts and has a relationship with. Monitoring becomes more reliable, because FPO staff are on-site and known to the farmers in a way that an external developer's consultant is not.

And critically, the FPO's institutional permanence means the project's long-term viability is linked to the health of the farming community itself, which is the correct incentive structure, both ecologically and commercially.

What 'Farmer-Centric' Actually Means in Practice

The phrase 'farmer-centric' has become somewhat diluted through overuse in sustainability literature. It is worth being specific about what it means and does not mean in the context of carbon project design.

A farmer-centric project structure means, first, that the revenue sharing agreement allocates the majority of gross credit revenue to the farming community: not a token percentage, but a genuine majority. Fifty-five to seventy percent of net credit revenue to farmers and FPOs is a reasonable starting benchmark for a well-structured project.

It means, second, that the implementation model does not require farmers to bear upfront costs. The project developer absorbs the cost of PDD preparation, validation, verification, and registry fees, recovering this investment from future credit sales. Farmers are not asked to fund a process whose commercial outcomes they cannot predict.

It means, third, that the project activities are ones the farming community actually wants, not activities imposed from outside to maximise credit generation at the expense of agricultural productivity. A cookstove project that saves farmer households money on fuel costs while generating carbon credits is a genuinely farmer-centric intervention. An agroforestry project that plants trees on farmland without consulting the farmer about which species to plant, where to plant them, and how they affect the existing crop system is not.

And it means, fourth, that contracts are written in language farmers can understand, translated into the local language, explained by an NGO or community partner the farmer trusts, and not signed under time pressure or informational asymmetry.

The India-Specific Opportunity

India's climate profile makes the case for farmer-centric carbon projects particularly compelling from a purely commercial standpoint, quite apart from the justice argument.

Agriculture contributes approximately 14–18% of India's total greenhouse gas emissions, with significant sources including methane from rice paddies, nitrous oxide from fertiliser use, and the open burning of agricultural residue. Each of these emission sources can be addressed through farm-level practices that simultaneously improve soil health, reduce input costs, and generate verified carbon credits.

India also has, in the Indian Carbon Market launched under the Energy Conservation (Amendment) Act 2022, a domestic compliance framework that creates institutional demand for carbon credits from non-obligated entities including agricultural project developers. This domestic demand pathway is important because it creates a price floor and a transparent, regulated market for Indian-origin credits, reducing the dependence on international voluntary markets that has historically disadvantaged Indian project developers.

The scale of the opportunity is not modest.

Conservative estimates suggest that Indian agriculture could contribute 50–100 million tonnes of verified emission reductions annually if farm-level practices were systematically supported, measured, and credited. At even a modest carbon price of USD 5 per tonne, that represents USD 250–500 million of potential annual income flowing into Indian farming communities, income that does not require a single additional input from the government beyond a supportive regulatory framework.

The Honest Challenges

None of this is straightforward, and writing honestly about the opportunity requires acknowledging the difficulties.

Monitoring, reporting, and verification (MRV) at the smallholder level remains genuinely difficult. The cost of verifying carbon reductions across hundreds of small, fragmented landholdings is high relative to the credit value generated, which is why aggregation through FPOs is not just preferable but practically necessary. Even with aggregation, MRV costs can consume a significant portion of gross project revenue, particularly in the early years before methodologies are refined for the Indian smallholder context.

The risk of permanence is real in agricultural carbon projects. A drought that kills newly planted agroforestry trees, or a change in land use driven by economic pressure, can reverse the sequestered carbon, creating a liability for the project developer and damaging the credit buyer's confidence. Good project design addresses permanence risk through buffer pools and conservative credit issuance, but it cannot eliminate it.

And the 18-to-24-month timeline from project initiation to first credit issuance means that any model built on carbon revenue alone will face a significant working capital challenge. The first-year costs of project development, PDD writing, validation, community engagement, baseline studies, must be financed before a single credit is sold.

These are not reasons to abandon the model. They are reasons to design it with honesty about the timeline, the costs, and the risks, so that farmers, FPO partners, and corporate buyers all understand what they are participating in.

What Needs to Change

The shift toward genuinely farmer-centric carbon markets in India requires movement on several fronts simultaneously.

Project developers and carbon companies need to invert their revenue-sharing instincts. The farmer's share cannot be what is left over after all other costs are covered. It needs to be the number that is set first, with everything else structured around it.

The Indian Carbon Market framework needs to ensure that agricultural non-obligated entities are supported, not just technically eligible for participation. This means clear guidance on agricultural methodologies, streamlined ACVA processes for smallholder projects, and potentially a dedicated agricultural window with reduced registration costs.

And NGOs and community organisations need to be recognised, structurally and financially, as essential project infrastructure, not optional add-ons. The monitoring, training, and community liaison work that makes an agricultural carbon project function is not free, and it is not secondary.

The commercial case for farmer-centric carbon projects in India is strong. The justice case is stronger. The question is not whether this model should exist. It is why it does not yet exist at the scale it should.

That is the problem Karimam Global Ventures was founded to address.