India’s voluntary carbon market, long anchored in renewable energy offsets, is beginning to turn towards agriculture, prompted by a combination of weakening prices for legacy credits and rising global demand for high-integrity, nature-based solutions. The recent USD 30 million agreement by Amazon to purchase carbon credits from Indian rice farmers shows this shift, placing methane reduction in paddy cultivation at the centre of a new market experiment.
For years, renewable energy projects offered the clearest pathway for carbon credit generation, with standardised methodologies and measurable outputs. Agriculture, by contrast, remained fragmented and difficult to verify. That equation is now changing, though questions around scale, measurement, and farmer incomes persist.
From Megawatts To Mud
Poorvi Joshi Shenoy, Assistant Vice President (Carbon Business) at MMCM, situates this transition within a broader structural change. “When Amazon committed USD 30 million to purchase carbon credits from Indian rice farmers, it did not simply close a procurement deal, it cast a vote of confidence in an entirely new architecture of environmental accountability. One where value flows not from a wind turbine's nameplate capacity, but from a farmer's willingness to change how he floods his field.”
She adds that the shift is not merely about sourcing credits from a new sector, but about building the systems that make them credible. “What the Good Rice Alliance and allied intermediaries have built is not just a supply chain for credits, it is a traceability framework that makes the messy legible. Satellite imagery tracks field-level water management. IoT soil sensors log methane flux. Blockchain-anchored registries tie each credit to a named farmer, a specific plot, a verified practice change.”
This move from “megawatts to mud”, as she describes it, reflects a deeper reorientation of market logic. Renewable energy projects offered clarity and scale. Agriculture introduces fragmentation, variability and higher transaction costs. Yet, it also opens the door to a far wider base of participation, particularly among smallholder farmers.
Aggregation Drives Scale
Yashodhan Ramteke, CEO at EcoGuard Global, underlines that the promise of agriculture-based credits hinges on how these systems are designed. “Carbon credits have the potential to develop into an income stream for farmers, but this really depends on how these programs are set up. For farmers who grow rice they need to have systems in place to measure (dMRV systems) and verify the carbon credits.” He stresses the importance of aggregation. “The key to making this work is to have a large number of farmers involved and develop a structured framework of executing things, as it will be difficult for individual farmers to access carbon markets on their own. Aggregation helps reduce costs and ensure people trust the system.”
Corporate demand is playing a decisive role in shaping this emerging market. Ramteke notes that buyer preferences have shifted. “Large-scale buyers, such as Amazon are changing the carbon market. They want high-quality carbon credits from the agricultural sector. This is different from before when renewable energy credits were in demand.” He adds that the nature of transactions is also evolving. “Now buyers are willing to pay more for credits that are reliable and have additional benefits that fit with their Scope 3 goals. These buyers also want long-term agreements, which improves price visibility and bankability of projects.”
Premiums Rise, Hurdles Persist
Market data suggests that this shift is already influencing pricing dynamics. Agamoni Ghosh, Managing Editor, Carbon Pricing, APAC at S&P Global Energy, points out that renewable energy credits are losing their earlier advantage. “Traditionally, India has been the global hub of renewable energy carbon credit supply, but as the additionality of renewable energy credits from India fades and demand for the segment wanes, the market is in a pivot cycle.”
She notes that newer categories linked to agriculture are attracting higher valuations. “Some of these credits are also priced at a significant premium in the market with AWD credits valued around USD 8-USD16 as per Platts data and Biochar credits around USD 130- USD 140/mtCO2e, compared to renewable energy credits that are trading under a USD 1/mtCO2e with surplus volumes in the market.”
However, the transition is not without constraints. Ghosh highlights the structural challenges in scaling agricultural credits. “The biggest challenge in India is likely the fragmentation in landholding patterns that may deter from scaling some of these projects which require large tranches of land. Moreover, the diversity of soil types, farming practices, and land tenure arrangements in India makes it difficult to establish standardized baselines and accurately measure carbon sequestration.”
She adds that measurement remains complex and costly. “Soil sampling is also labour-intensive and costly, especially when multiple samples are needed to represent the full range of field conditions. Technologies like drone imagery and remote sensing can help, but they are not yet a complete substitute for on-the-ground data.”
Farmer Gains Still Evolving
From a policy and market standpoint, the question of farmer benefit remains central. Shailesh Tyagi, Partner, Sustainability & Climate Leader, Deloitte South Asia, cautions against overstating income gains at this stage. “Carbon credits from agriculture, particularly methane reduction in rice cultivation can supplement farmer incomes, but they are not yet a fully reliable primary revenue stream.”
He notes that current models are still evolving. “In current pilots, income from carbon credits remains incremental - often modest per acre, but becomes meaningful when combined with input cost savings, such as reduced water use, and improved yield stability.”
At the same time, corporate demand is helping shape market standards and expectations. Tyagi observes, “Global corporate buyers are playing a market-making role in India’s agricultural carbon ecosystem. Through long-term offtake agreements and commitments, they are creating demand certainty for project developers, supporting forward price signals that can help stabilise or elevate credit prices.”
Yet, scaling this market will require more than demand. It will depend on regulatory clarity, standardised methodologies and robust monitoring systems. As Tyagi puts it, “Policy and regulatory clarity will be critical, including alignment with India’s emerging domestic carbon market framework, clearly defined rules on credit ownership and benefit sharing across farmers, aggregators, and developers.”
The direction of travel is clear, even if the path remains uneven. Agriculture-based carbon credits are moving from the margins to the centre of India’s climate market. Whether they can match the scale and certainty of renewable energy offsets will depend on how effectively the country can bridge the gap between fragmented fields and formal markets. |
