These global giants are procuring carbon credits from farmers and agricultural companies in the country to compensate for their carbon emissions and achieve net-zero goals, according to company executives and farmers. When a company buys a carbon credit, it generates approval for generating a tonne of greenhouse gas.
Agricultural companies and startups in the sector such as Bayer and Grow Indigo said demand from global tech giants to obtain carbon credits from Indian farmers has surged manifold in line with India turning into a global hub for data centres and semiconductor industry, which are energy-intensive and have a very high carbon footprint requiring large amounts of water to cool down their servers.
Building materials and hardware components such as semiconductors, servers and racks used in constructing data centres also increase emissions.
“As the number of data centres in the country increases, we are getting more and more enquiries from global majors about purchasing carbon credit,” said Suhas Joshi, India Carbon Initiative lead, Bayer, which works with a network of paddy farmers.These agriculture companies invest in developing sustainable cultivation methods aimed at lessening greenhouse gas emissions such as using less water for water-guzzling crops. They also train farmers with small landholdings to adopt these methods and in negotiating with global firms in carbon trading.Such methods are approved by the United Nations Framework Convention on Climate Change (UNFCCC) and followed by several carbon trading exchanges globally.
Farmers earn between $13 to $75 per hectare, assuming each hectare generates 1 credit. The amount of credit generated is measured by the protocol set by UNFCCC. Companies such as Bayer and Grow Indigo help farmers in getting payments from MNCs in exchange for these credits.
“The price of each credit is determined by market forces,” Joshi said, adding farmers also benefit from higher yields and lesser input cost along with an additional source of income.
Basavaraja Mallapla, who owns 13.5 acres in Thavaragundi village in Karnataka’s Vijayanagar district said he has been selling carbon credits since 2022. “This has helped me supplement my income, reduce input cost and increase my yield,” Mallapla said, adding 112 other farmers in his village are also doing the same.
India’s carbon credit exports, comprising 15-20% of global supply, helped the country earn about $2 billion last year, according to industry estimates. “This figure can touch $4-7 billion in the next five years, which is equivalent to the export of basmati rice from India,” said Umang Agarwal, head, Carbon and Grow Mandi at Grow Indigo, which works with several multinational food companies and apparel makers for carbon trading to reduce emissions during cultivation of rice, wheat, maize and cotton.
Currently, most carbon trading in the country is done on a voluntary basis which does not incentivise local companies for carbon trading. However, the Indian government has announced its intent to bring about regulations by 2026.
The move will set emission targets for emitters and allow overachievers to sell their excess emission cuts while underachievers will have to purchase them to meet their goals.
One of India’s commitments during the Paris Agreement of 2016 is to reduce the emissions intensity of its GDP by 45% from 2005 levels by 2030. This led to the process of creating the Carbon Credit Trading Scheme, which was notified in June last year and is expected to come into force by 2026.
