Monday, Aug 08, 2022

Soil Carbon Incentives Through Carbon Credit Monetization – A Nudge For Soil Health Revival?

As soil carbon levels drop, the ability of soil to absorb and retain water reduces. Above a threshold of carbon levels, it acts as a sponge to absorb water. This leads to limited effect of rainfall on the soil, and makes the topsoil prone to runoff and erosion, further leading to cycles of floods and droughts.

Representational Image
Representational Image Pixabay

Soil Health Challenges 

Since the green revolution, with intensive application of fertilizers and pesticides, along with intense irrigation practices and erosion, the soils across our country, have undergone severe degradation and loss of fertility.  As per 2019-20 Soil Health Survey by Govt of India, showed, 55 percent of the country’s soil is deficient in nitrogen, 42 percent in phosphorus and 44 percent in organic carbon. This deficit leads to overuse of fertilizers to maintain the yield, which in turn results in further loss of fertility. 

What does soil management entail? 

Soil organic matter content in soil is an indicator of soil health. It should be between 2.5%+ range by weight in top 20 cm.  Soil organic matter consists of elements like carbon, nitrogen and phosphorus, with carbon being more than 50%.  Thus, soil carbon measurement provides a good indication of overall soil health. Soil organic matter starts from plants and animals that are further transformed during the decomposition process by microorganisms.

As soil carbon levels drop, the ability of soil to absorb and retain water reduces. Above a threshold of carbon levels, it acts as a sponge to absorb water. This leads to limited effect of rainfall on the soil, and makes the topsoil prone to runoff and erosion, further leading to cycles of floods and droughts.

What Practices must Farmers follow to restore soil health?

Practices to increase biomass and practices that reduce the loss of carbon from soil, are both needed to increase the soil health

These techniques include - 
1.    Cover cropping to keep the land covered at all times. 
2.    Residue mulching & recycle bio-waste in soil. No burning of residues.
3.    No-till farming and other conservation tillage
4.    Manure, Compost and Bio-fertilizer usage 
5.    Better crop rotations & intercropping
6.    Reduced flood irrigation, and excessive use of chemicals.
When farmers follow these practices for a few seasons, the carbon content of soil improves. Which in turn helps in increased yield as well as the possibility of one extra crop if soil carbon goes up significantly. 

These farming practices are also for regenerative agriculture, as these work on reversing climate change by rebuilding soil organic matter and biodiversity.

The farmers may likely need an incentive during this period to adopt these practices. We would like to share an available emerging option which does not burden the government. This is through voluntary carbon markets, where carbon credits are traded. 

Through a process of carbon sequestration, the CO2 in the air is reduced and also stored in soil as increased carbon.

How does Carbon Sequestration work to remove CO2 in air, and increase soil carbon?

Carbon Sequestration
Carbon Sequestration

Image Source: Calrecycle (Carbon Sequestration - CalRecycle Home Page )

During photosynthesis, plants break down CO2 and water from atmosphere in presence of sunlight into oxygen, sugar and carbon rich compounds. These reach the roots and the soil underneath, which feeds the organisms below the soil. With decreased biomass below the soil, increased erosion of soil, and higher tilling, a higher percentage of CO2 is released back to the air, causing lower carbon content in soil.

To reverse these changes, the techniques described in last section, namely – cover cropping, increasing biomass below soil with residue mulching, no-till farming, etc. should be practiced 

What are Voluntary Carbon Markets & Carbon Credits?

Carbon Credits are certificates representing quantities of greenhouse gases that have been kept out of the air or removed from it. 1 Carbon Credit certifies that 1 Metric Tonne of Carbon Dioxide has been removed from the atmosphere. A farmer who sequesters 1 Carbon Credit can earn close to ₹780 (US$10), at current market prices.

Advancements in remote sensing data and Artificial Intelligence (AI) have enabled estimation of soil Carbon levels using satellite data, which has eased the process of measurement & trading of these. 
Voluntary carbon markets trade these Carbon credits where companies wanting to achieve their climate goals complement their internal emissions with purchase of carbon offsets.  These markets have seen huge growth in recent years. 

The steps and process in trading Carbon Credits & getting payments for farmers
1. Follow regenerative agriculture practices as a group - The first step is to have an NGO, or FPO organization which is encouraging and practicing the regenerative agriculture practices, focussed on increase soil organic matter and soil carbon.  Showing this additionality – i.e. this was done in addition to regular practices, is key step in the process.
2. Identify a Agri-tech partner & partner for your project - Secondly there are agri-tech companies which trade in voluntary carbon markets, and having a tie-up with such companies would allow for the farmer project being listed & traded.  Some of the companies include – Boomitra, CarbonX, Carbon Count, etc.
3. Onboarding & third party Verification of carbon credits - Once the projects are identified and listed, third party agencies like Verra verify these projects.  Once verified and approved through rigorous processes, these credits are then sold in credit markets and the incentives distributed to the FPO as well as farmers.  Usually this takes between 8 to 12 months after listing the project.

While each farming group’s practice may differ and the amount of carbon sequestration may vary. As a reference, in one of the projects which was verified by third party, each acre of land generating between Rs 750 to 1200 per year in carbon credits.

Current Challenges & Way Forward

Like any new emerging area, this has its share of challenges 
1. Verification of Carbon captured in the soil is a one such challenge due to the requirement of proving additionality; the company facilitating the sale of Carbon Credits must be able to prove that the farmer engaged in new practices over-and-above the routine package of practices to increase the soil carbon level. 
2. It still takes 8 to 12 months for the cash incentives to arrive to farmers & FPOs/NGOs. Any innovations to reduce this time cycle would greatly help.
3. The average landholding size of an Indian farmer is just over 1 Hectare. The amount of carbon credit received may not be enough for a small farmer to adopting regenerative agriculture practices, especially in the short term. 

Having said that, the demand for Carbon Credits is expected to go up by approximately 15 times by 2030, as per McKinsey report .  This could be a net positive as pricing could see an upside in this market, thus making these more valuable. 

India is already exporting several of these carbon credits – making it viable to pursue carbon credit monetization, which is helping us meet our climate goals. China launched its own Carbon Trading Market last year. A similar market in India, could also act as a catalyst for achieving climate goals as well as promoting regenerative agriculture through Carbon led incentives

Author's profile

Ravi Trivedi, Agriculture, Indian Administrative Fellowship, & Gokul Deep Girish, Analyst /The Nudge Foundation

Disclaimer – The opinion shared in the article represent personal views of the author, and they don’t represent the view of the organizations they work with.