The World Bank has backed Kerala’s proposal to set up a Carbon Credit Cell under the Department of Agriculture Development and Farmers’ Welfare. The cell will function as part of the ₹2,365 crore Kerala Climate Resilient Agri-Value Chain Modernisation (KERA) Project. It aims to reward farmers for climate friendly practices and create an extra income stream through carbon trading.
What Is a Carbon Credit?
A carbon credit is a tradable certificate that represents the reduction, removal or avoidance of one tonne of carbon dioxide equivalent (tCO2e) from the atmosphere. Companies or farmers earn it by cutting emissions. Polluters buy it to offset their own emissions and meet climate targets.
The idea comes from the global effort to put a price on pollution. Greenhouse gases are gases such as carbon dioxide and methane that trap heat and warm the planet. Carbon dioxide equivalent, written as tCO2e, is a common unit that converts all such gases into the same scale as carbon dioxide. One carbon credit is equal to one tCO2e that has been kept out of the air.
A carbon offset is closely linked to this idea. It refers to the actual climate action, such as planting trees or saving methane in paddy fields, that balances out an emission made elsewhere. The credit is the certificate issued for that action. The certificate can then be bought and sold on a carbon market, which is the platform where buyers and sellers trade such certificates.
How Carbon Credits Are Generated and How They Work
Carbon credits are generated when a verified project reduces emissions compared to what would have happened without the project. The saving is measured through monitoring, reporting and verification, a system called MRV that uses field data, soil tests, gas samples and satellite images. Only after an accredited agency checks the data is the certificate issued and registered for sale.
In farming, this process is called carbon farming. It means using practices that store more carbon in soil and trees or release less methane and nitrous oxide. Examples include direct seeded rice instead of flooded transplanted rice, alternate wetting and drying in paddy, use of biochar, agroforestry with fruit or timber trees on farm bunds, and better nutrient management. Carbon sequestration is the process by which plants and soil absorb and lock carbon dioxide from the air, and these practices increase that storage.
Can Farmers Sell Carbon Credits?
Yes, farmers can sell carbon credits in India by joining a registered project that follows an approved method and gets its emission savings verified. Small farmers usually join through an aggregator, which is an organisation that groups many small farms, handles measurement and finds buyers. The income is then shared with farmers after sale costs.
Aggregation matters because most Indian farms are very small. More than 86 percent of farmers hold two hectares or less. A single small plot can generate only a small saving, often between 0.5 and 2.5 tonnes per hectare in a season. When thousands of farmers are grouped together, the total volume becomes large enough to attract buyers such as airlines, data centre operators and manufacturing firms that want to offset their emissions.
India’s Carbon Credit Trading Scheme and Carbon Market
The Carbon Credit Trading Scheme (CCTS) is India’s national framework for carbon trading. The Ministry of Power notified the scheme on 28 June 2023 under powers given by the Energy Conservation (Amendment) Act, 2022. The scheme supports India’s climate pledges under the Paris Agreement and its target of net zero emissions by 2070. Net zero means the country will balance the greenhouse gases it releases with the amount it removes.
The Bureau of Energy Efficiency (BEE) administers the scheme. BEE was established in 2002 under the Energy Conservation Act, 2001 and works under the Ministry of Power from its headquarters in New Delhi. The Grid Controller of India acts as the registry that keeps accounts of credits, while the Central Electricity Regulatory Commission (CERC) regulates trading on power exchanges. A National Steering Committee, co chaired by the Secretaries of the Ministry of Power and the Ministry of Environment, Forest and Climate Change, oversees the market.
The scheme has two parts. The compliance mechanism sets greenhouse gas intensity targets for energy heavy industries. The offset mechanism allows voluntary players, including those in agriculture, to register emission saving projects and earn Carbon Credit Certificates. Agriculture is one of the approved sectors under the offset mechanism. The Ministry of Agriculture and Farmers Welfare has also released a framework for a Voluntary Carbon Market in agriculture to help small farmers join this system with proper awareness and training.
| Feature | Compliance Mechanism | Offset Mechanism |
|---|---|---|
| Who joins | Obligated industrial entities with fixed emission intensity targets | Voluntary entities including farmers, renewable producers and others |
| How credits are earned | By beating the assigned target per unit of output | By registering a project under an approved method and proving savings |
| If target is missed | Entity must buy certificates from the market | No penalty, participation is voluntary |
| Role in Kerala context | Sets national demand for credits through industry | Provides the route for farm projects to supply credits |
The KERA Project: World Bank Backed Climate Resilient Agriculture
The Kerala Climate Resilient Agri-Value Chain Modernisation (KERA) Project is a flagship programme of the Kerala government implemented with financial and technical support from the World Bank. The World Bank is a global development lender headquartered in Washington D.C. and founded in 1944. Its Board approved $200 million for the KERA project in October 2024. With state contribution, the total outlay is around ₹2,365 crore.
The project aims to support about 400,000 farmers across Kerala’s 14 districts. It focuses on climate resilient agriculture, which means farming methods and infrastructure that can withstand floods, droughts, heat stress and erratic monsoons. Kerala needs this shift because floods, forest fires and market breaks have repeatedly hurt farm incomes. The state is also a leading exporter of spices such as cardamom, vanilla and nutmeg and accounts for about 20 percent of India’s agri food exports, so climate shocks carry a wider economic cost.
KERA works through three main components. The first strengthens production by promoting zone specific practices, digital extension services and low carbon rice through alternate wetting and drying in Palakkad and Thrissur. The second links small farmers to business through up to 150 productive alliances between farmer groups and agribusinesses, along with agri parks, replanting of climate tolerant coffee, cardamom and rubber, and a partial credit guarantee to improve access to finance. The third supports agri food small enterprises and startups, including support for high growth food firms and incubation for 150 agri tech startups through the Kerala Startup Mission. The project is anchored in the Department of Agriculture Development and Farmers’ Welfare and works with the Kerala Agricultural University, established in 1971 and headquartered in Thrissur, and other state agencies.
Kerala’s Carbon Credit Cell: What It Will Do for Farmers
The proposed Carbon Credit Cell will sit inside the Department of Agriculture and act as the nodal unit for farm carbon credits in Kerala. The World Bank team visiting Kerala in early October 2026 backed the proposal during a review of KERA implementation with Agriculture Minister T. Siddique (as of October 2026). The minister said the framework must give farmers supplementary income and push climate friendly cultivation at the same time.
The cell is expected to identify which practices qualify, set measurement methods and create a clear path from field to payment. This includes baseline studies of greenhouse gas emissions, registration of farmers and farmer producer companies, coordination with accredited verification agencies, and linkage to trading platforms. Without such a single window, small farmers often fail to benefit because rules are unclear and verification costs are high.
The move is important for Kerala’s farm structure. Most growers are small or marginal holders with thin margins. They face high input costs, labour shortage, fragmented plots and weather risks. A well designed cell could help them earn from better soil health, lower methane and higher tree cover in addition to crop sales. Field level checks will shape the design. The World Bank delegation continued site visits until 13 October 2026, covering mango cultivation in Muthalamada, high tech vegetable farming in Elavanchery and avocado cultivation in Wayanad. These visits test how different crop systems can fit into one state framework.
Carbon Credit Price and How Green Credit Is Different
The carbon credit price in India varies with quality, standard and buyer. On the global voluntary market, prices often range from $2 to $50 per credit depending on the project type. Removal credits that lock carbon in trees or soil usually earn more, around $19 per credit, while avoidance credits average near $8. Farm credits sold directly to companies in India have been reported between $12 and $40, while exchange traded lots can be much lower at $1 to $6. Methane savings from rice projects are now trading near $15 to $25 per tonne, which can mean about ₹1,363 per acre for a single paddy season at a saving of 2.5 tonnes per hectare.
Price discovery, which means finding the fair price through bids on an exchange or direct deals, is still developing in India. Trading of compliance certificates takes place through power exchanges under CERC rules, with floor and forbearance bands to control extreme swings. For farmers, the final earning depends on project costs, the share passed on by the aggregator and the prevailing rate on the day of sale.
Carbon credit is often confused with green credit, but the two are separate. The Green Credit Programme was notified through the Green Credit Rules, 2023 on 12 October 2023 under the Environment (Protection) Act, 1986. It rewards a wider set of green actions such as tree planting, water conservation and sustainable farming. The Indian Council of Forestry Research and Education (ICFRE), headquartered in Dehradun and established in 1986, administers the programme. Green credits are earned after at least five years of work with a minimum canopy density of 40 percent on degraded forest land. An activity can earn both a green credit and a carbon credit if it meets both sets of rules.
| Basis | Carbon Credit | Green Credit |
|---|---|---|
| Law | Energy Conservation Act and CCTS, 2023 | Environment (Protection) Act and Green Credit Rules, 2023 |
| Unit | One tonne of carbon dioxide equivalent saved | One unit of green action such as tree growth on degraded land |
| Administrator | Bureau of Energy Efficiency | Indian Council of Forestry Research and Education |
| Focus | Greenhouse gas reduction and trading | Wider goals including green cover, water and soil health |
Kerala’s Carbon Neutral Farming Background and the Way Forward
Kerala already has a strong base for this work. Meenangadi Gram Panchayat in Wayanad started a carbon neutral panchayat mission in 2016 with technical support from the environmental organisation Thanal. The panchayat planted about 400,000 trees, introduced a tree banking scheme that pays farmers ₹50 per tree per year for protection, and promoted bamboo, biogas and carbon neutral farming. The model later fed into the state’s wider Carbon Neutral Kerala 2050 vision, which aims to balance emissions and removals well ahead of India’s national 2070 goal.
The Carbon Credit Cell can build on this experience if it solves three practical issues. First, measurement must be simple and credible so that small plots can join without heavy cost. Second, payments must reach farmers directly and on time, with clear sharing rules between aggregators and growers. Third, climate practices must also raise yields and market access through stronger coconut cultivation, farmer organisations and supply chains for high value crops such as mango and avocado. If these links hold, Kerala can turn climate action from a cost borne by farmers into an income source that also protects soil, water and rural jobs.
Key Takeaways
- Kerala will set up a Carbon Credit Cell under the Department of Agriculture as part of the ₹2,365 crore KERA Project with World Bank backing.
- The KERA Project stands for Kerala Climate Resilient Agri-Value Chain Modernisation and targets about 400,000 farmers with $200 million World Bank assistance approved in October 2024.
- One carbon credit is equal to one tonne of carbon dioxide equivalent (tCO2e) reduced, removed or avoided.
- India’s Carbon Credit Trading Scheme was notified on 28 June 2023 and is administered by the Bureau of Energy Efficiency, established in 2002.
- India’s Green Credit Rules were notified on 12 October 2023 and are administered by ICFRE, Dehradun, separate from carbon credits under CCTS.
- Meenangadi in Wayanad launched India’s pioneering carbon neutral panchayat effort in 2016 with a tree banking incentive of ₹50 per tree per year.
