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Leveraging carbon finance projects for a livelihood fillip

Carbon finance projects hold immense potential for driving sustainable development and poverty alleviation.

Leveraging carbon finance projects for a livelihood fillip

*Non-Timber Forest Products

Jitendra Vir Sharma

IN India, where agriculture and forestry are integral to the livelihoods of millions, the intersection of environmental conservation and economic empowerment holds immense promise. Carbon finance projects, particularly those focusing on ARR (Afforestation, Reforestation and Revegetation) and REDD+ (Reducing Emissions from Deforestation and Forest Degradation), are emerging as powerful tools for not only mitigating climate change but also uplifting the socio-economic conditions of farmers and forest-dependent communities, while simultaneously achieving Sustainable Development Goals. These projects help in either absorbing greenhouse gases (GHG) from the atmosphere or preventing their subsequent release into the atmosphere. The amount of CO2 sequestered or the GHG emissions avoided are generated in the form of carbon credits, which can be traded in the international market via voluntary carbon platforms. Carbon financing is a result-oriented mechanism that allows companies wishing to offset their GHG emissions to buy carbon credits generated from such projects. It can serve as a key mitigation measure to combat adverse impacts of climate change.

The ARR way

The agricultural sector is a crucial component of the economy, employing a significant portion of the workforce and contributing a substantial share to the country's GDP (around 15-20 per cent). However, it faces several challenges, such as low productivity, dependence on monsoons, fragmented landholdings, post-harvest losses and environmental degradation. Introducing carbon finance projects as an alternative livelihood through ARR initiatives can potentially address some of these challenges while providing additional income for farmers and communities.

Recent research indicates that the ARR sector can contribute more than 2 billion tonnes of CO2 equivalent (CO2eq) by 2030 if policies, finances and support are provided. In India, around 86 per cent of the farmers are small and marginal — they have landholdings smaller than 2 hectares. They can benefit from ARR-based projects. By incentivising the planting of trees and restoration of degraded forests, these projects offer tangible benefits to local communities. ARR-based carbon finance projects can supplement farmers’ income by selling carbon credits in the carbon markets, enabling risk reduction and contributing towards climate resilience. These projects are designed to include activities like tree plantations of timber and horticulture species, harvesting of timber species and regular replanting of trees that are harvested. Farmers practising agroforestry and tree planting or interested in adopting agroforestry on their private farmlands and even the large community fallow lands can also be considered for these projects. The projects can also help states move forward towards carbon neutrality.

For farmers grappling with unpredictable weather patterns and fluctuating crop yields, participating in ARR projects presents a pathway to income diversification. By integrating trees into their agricultural landscapes or restoring degraded forest areas on their land, farmers can tap into additional revenue streams through carbon sequestration.

REDD+ projects

The forestry sector plays a pivotal role in achieving India’s Nationally Determined Contribution (NDC) of creating an additional carbon sink of 2.5 to 3 billion tonnes of CO2eq. Presently, India’s total forest and tree cover is 80.9 million hectares, which is 24.62 per cent of the geographical area. Protected Areas (PAs) cover about 5 per cent of the total geographical area. Around 50 million people, staying in proximity of the PAs, depend on forest resources for their livelihood. This dependence is in the form of collection of a variety of non-timber forest products, fuelwood and fodder for subsistence and livelihood purposes. The PAs in India have been identified to have the potential for generating around 10,000,000 carbon credits, which can be traded in the carbon market. Thus REDD+ initiatives go a step further by addressing the root causes of deforestation and forest degradation while empowering forest-dependent communities.

At the heart of REDD+ projects lie community engagement and empowerment. By recognising the rights and traditional knowledge of local communities, these initiatives ensure that forest management decisions are made in consultation with those who depend on forests for their livelihoods. Participation in REDD+ opens doors to international carbon markets, where verified emission reductions or carbon credits can be traded. The revenue generated from carbon sales can then be reinvested in community development initiatives as well as to further enhance livelihood opportunities of local communities.

Various platforms facilitate the registration and implementation of these projects, offering stakeholders opportunities to engage in meaningful climate action. Some key registration platforms for ARR and REDD+ projects are Gold Standard, Verra, Plan Vivo, Global Carbon Council, Social Carbon, Puro Earth and American Carbon Registry.

Leveraging carbon finance projects hold immense potential for driving sustainable development and poverty alleviation. By harnessing the power of environmental conservation to create economic opportunities, these initiatives not only mitigate climate change but also improve the lives of farmers and forest-dependent communities. As India continues its journey towards a greener and more inclusive future, investing in carbon finance projects becomes not just a choice but a necessity for building resilience and prosperity at the grassroots level.

The author is Senior Director, The Energy and Resources Institute

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