How Prepared is The Agriculture Sector in Carbon Trading? : Daily Current Affairs

Date: 30/01/2023

Relevance: GS-3: Conservation, environmental pollution and degradation, environmental impact assessment

Key Phrases: Carbon Abatement Practices and Carbon Markets, Energy Conservation (Amendment) Bill, 2022, Nationally Determined Contribution (NDCs), Net Zero Emission Target, National Carbon Market.

Why in News?

  • The Energy Conservation (Amendment) Bill, 2022 mandates the exploration and use of non-fossil fuel energy sources and the creation of a national carbon market.
  • The Bill, though, focuses on renewable energy sources, it creates wide scope for agriculture and agroforestry to contribute to the net zero emission target.

Key Highlights:

  • India updated its Nationally Determined Contribution (NDCs) to the United Nations Framework Convention on Climate Change (UNFCC) in August 2022.
  • The updated NDC includes 50 per cent cumulative electric power installed from non-fossil fuel-based energy sources and an additional carbon sink of 2.5-3 billion tonnes of CO2 equivalent through forest and tree cover by 2030.

How can Agriculture Help India in Achieving its NDC Targets:

  • Agriculture is significantly negatively impacted by climate change. Nevertheless, it also offers solutions for mitigating greenhouse gas emissions.
  • Soil, the very basis of agriculture, is a natural carbon sink as it captures carbon from the atmosphere and stores it.
  • Intensive agricultural practices remove organic carbon and other nutrients from the soil whereas improved land and farm management practices have considerable potential to sequester carbon, improve soil health and restore ecological balance, and thus ensure the long-term sustainability of agriculture. These practices include:
    • no-tillage
    • residue retention
    • crop rotation
    • integrated nutrient management
    • intercropping
    • bio-char
    • agroforestry
  • These practices have 12-41 per cent higher carbon sequestration potential.
  • Thus, agriculture is both a cause and a victim of greenhouse gas emissions. It contributes approximately 22 per cent to the total greenhouse gas emissions, leading to a rise in temperature and changes in precipitation.

Carbon Market for Monetisation of Sequestered Carbon:

  • The creation of a carbon market will help monetise the carbon sequestered in agriculture and agroforestry systems and facilitate its transaction like any other commodity.
  • It is an opportunity for farming communities to sequester and sell carbon credits in the voluntary carbon markets and earn additional income.
    • In India, the market price of one agriculture-based carbon credit is approximately ₹725. A farmer can generate 4 to 12 carbon credits per hectare depending on the type of improved farming practices adopted and thus can earn additional income of ₹3,000-9000 per hectare.

Status of agriculture-based carbon credits:

  • The global voluntary carbon market has been expanding fast due to the increasing demand for carbon credits from business organisations to meet their obligations to climate change mitigation.
    • As per the 2022 Report of the Ecosystem Marketplace, about 500 million carbon credits, valued at $1.98 billion, were traded globally in the voluntary carbon market in 2021.
  • However, the share of agriculture-based carbon credits was minuscule — one million carbon credits worth $8.7 million.
  • Given the urgency of meeting the target of net zero emission, the share of agriculture in carbon trade is expected to increase significantly. So is the price of carbon credits.
  • Expansion of the credit market is also an opportunity to invest in the development and promotion of low-cost carbon abatement technologies.

What are carbon credits/offsets?

  • Carbon credits or carbon offsets are ‘points’ issued to an entity for undertaking an activity that has the effect of either avoiding emission of carbon dioxide(CO2) into the atmosphere or absorbing some of the CO2 back from the atmosphere. One credit is given for a one-tonne reduction in CO2.

Working mechanism of Carbon Credit Market:

  • It is based on principle of selling carbon credits and gaining monetary benefits.
  • The incentives are given for avoiding or sequestering CO2 and thereby helping to limit the rise of global warming.
  • For buyer, it is the penalty paid for not being able to avoid sequestering CO2. So, buyer pays the seller for reducing CO2 in the atmosphere.
  • The sellers could be anybody who saves CO2. The buyers are typically companies, governments, municipalities or any other organisations, unable to avoid CO2 emissions.

Current status of Carbon Market:

  • Clean Development Mechanism under Kyoto Protocol is currently active, where the buyers are the companies that plan to go carbon neutral.
  • At COP26 Glasgow, all parties agreed, for a strong and deep carbon market.

Challenges Associated with carbon trading:

  • Quantification and verification:
    • The biggest challenge is the quantification and verification of the additional carbon retained in the soil due to the adoption of farming practices. Moreover, the process is costlier and time taking.
  • Fragmented and small landholdings:
    • The existing agrarian structure in Indian agriculture is dominated by small landholdings usually differing in their cropping pattern and the adoption of carbon abatement farm practices.
    • Of the total 146 million landholdings, over 86 per cent are of size less than two hectares. Thus, reaching out to such a huge number of smallholders means higher administrative and transaction costs for buyers of the carbon credits.
  • Trade off between income and carbon sequestration:
    • The trade-off between the expected additional revenue from adopting a carbon abatement practice and its impact on crop yield is another challenge.
    • A farmer will adopt a carbon abatement practice if he expects that revenue from the sale of carbon credits would compensate for the loss in crop yield, if any, due to its adoption.
    • Such a trade-off may act as a disincentive to the large-scale adoption of carbon abatement practices.
  • Lack of awareness among farming communities:
    • Farming communities lack awareness of the environmental, social, and economic benefits of carbon abatement practices and carbon markets.

Roadmap for Creating Carbon Trading Market:

  1. The first step towards creating a market for sequestered carbon is to evolve a transparent process of quantification and verification of additional carbon generated by different farm practices.
    • Artificial intelligence and remote sensing offer scope for assessing the quantum of sequestered carbon.
  2. Further, for an individual farmer, the process of selling carbon credits in the voluntary carbon market is tedious. Nonetheless, their participation in carbon trading can be facilitated by collectives such as FPOs and cooperatives that can organize farmers to adopt carbon abatement practices and sell the accrued carbon credits on their behalf.
    • A few agro-tech companies, for example, Boomitra and Nurture. farm, organize farmers through intermediaries to facilitate their participation in voluntary carbon markets.
  3. Finally, there is a need to create awareness among farming communities on the benefits of the adoption of improved agricultural practices and participation in carbon markets.

Source: Hindu BL

Mains Question:

Q. Agriculture is significantly negatively impacted by climate change. Nevertheless, it also offers solutions for mitigating greenhouse gas emissions. Examine. (150 words)