Carbon credits must serve communities
| Photo Credit:
Sakorn Sukkasemsakorn
A farmer’s cooperative plants native tree saplings on degraded land hoping to earn carbon credits (CCs). A company purchases those CCs to offset its emissions and proudly announces carbon neutrality. Between these, lies a labyrinth of hope, hypocrisy and opportunity.
CCs depict a story of environmental accounting, balancing growth with climate vulnerabilities. Like currencies, CCs carry hidden costs and contradictions.
There are two types of carbon markets: mandatory and voluntary. They are about $800 billion and $3 billion, respectively, and expected to reach $1.88 trillion and $24 billion by 2030. One CC represents one tonne of CO₂ equivalent reduced, avoided, or removed from the atmosphere.
The Kyoto Protocol (1997) laid the foundation for mandatory carbon markets, where companies are legally expected to limit their GHG emissions and permitted to operate under ‘cap-and-trade’ system. There is a cap on their emissions but entities can purchase CCs to negate their emissions to the set cap. Voluntary markets evolved later (2000), driven by socially conscious action.
The journey starts with a ‘Developer’ designing emission reduction projects following acceptable and specific technologies or takes existing projects under her/his wings. The project (reforestation, regenerative-agriculture, renewable-energy, methane-capture etcetera) is then registered with one of the carbon standards (Gold Standard/ VCS/Climate Action Reserve/Plan Vivo). ‘Independent third-party auditors’ assess, evaluate and monitor emission reductions. Verified emission reductions are converted into CCs. Companies/individuals buy these CCs. They are then ‘retired’ and taken off markets by ‘Registries’. The quality of CCs and integrity of the system is monitored by ‘watch-dogs’.
The weaknesses
First, CC trade is a sort of ‘Faustian bargain’, reducing Earth’s complexity to a spreadsheet. In India, forestry projects use satellite algorithms to predict deforestation rates, while agricultural initiatives extrapolate soil carbon samples, but the margin of error is vast. A Nature article (2024) exposed systemic overestimates in carbon projects.
Second, additionality in carbon markets refers to the principle, that a carbon offset project should result in emission reductions that would not have occurred without the project or the revenue from selling CC (like wind-farms generating millions of CC by displacing coal-fired electricity). But additionality is a hall of mirrors. A report (2024) on world’s largest carbon offset projects found that over 47.7 million carbon credits were problematic, meaning projects are unlikely to deliver real emission reductions, aka greenwashing.
Third, India is the second-largest supplier of carbon offset projects (afforestation, biogas plants). But benefits from these projects often don’t reach communities. A World Rural Forum (2023) study found that only 0.3 per cent of climate change funding reaches communities. A 2025 investigation by the Nature found that half of the forestry projects in India have failed/ discontinued due to lack of community rights and benefit sharing.
Fourth, ‘permanence’ is not guaranteed if/when forests get burned/removed, or farmers stop regenerative-agriculture practices. We can’t sell certainty in an uncertain world. In 2021, Cyclone Tauktae devastated forests of Gujarat, releasing centuries of stored carbon, erasing CCs sold. Registries usually withhold 20 per cent as buffer, but these safeguards crumble, in climate-amplified disasters.
Path forward
Environmentalists aver CC is a responsibility and not a commodity to be traded. An afforestation project might have restored 10,000 acres of degraded land. But down the road, a coal-power plant purchases those CC, delaying its own transition to renewables. This duality is the essence of CC. It is a tool that can heal or harm, depending on hands that wield it.
India’s voluntary carbon market is about $500 million and operates with minimal oversight, where almost 90 per cent of the value is lost/consumed in the supply chain. But opportunities exist to set fair norms. Start-ups like C-GEM are endeavouring to provide negotiating platforms to communities. Mitti Labs and Varaha use AI/ML to analyse data, exposing inflated baselines in real time.
Hopefully, the Carbon Credit Trading Scheme (2024), will show its regulatory teeth and enforce integrity.
As India prepares to embrace its net-zero targets, the question should be, what we seek from CCs, should be of transforming them from offsets to instruments of justice, serving communities and markets.
Gupta is Co-Founder C-GEM and Suryakumar is former Deputy Managing Director, NABARD. Views are person
Published on August 11, 2025
