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Unlocking Carbon Value for ⁠Indian Agri-Food Businesses

The agricultural sector forms the backbone of India’s food processing industry. India, being the one of the largest producers of fruits, vegetables, millets, tea, and food grains globally, has a flourishing agri-food business. However, rising temperatures, erratic rainfall, floods, and prolonged droughts are negatively impacting the agricultural sector, and threatening rural livelihoods. Furthermore, the agriculture sector contributes over 13.72% to India’s total greenhouse gas (GHG) emissions. 

Amid the dual pressure of rising risks from climate change and increasing climate responsibility, the agri- food business sector in India presents a unique opportunity. By introducing processes and interventions that reduce emissions and create opportunities for carbon credit generation, Indian agriculture can lead the transition towards sustainable, low-carbon food systems. 

The Sustainability Journey

A typical agricultural supply chain involves various actors, where emissions can be classified according to the step in the supply chain where they occur. These are known as Scope 1, 2, and 3 emissions. While Scope 1 are direct emissions from a company’s own sources, Scope 2 are indirect emissions from the energy a company buys and Scope 3 includes all other indirect emissions that are linked to the company’s operations. These can occur before (upstream) or after (downstream) the company’s direct activities. 

The sustainability journey for any company begins only after they have a clear understanding of both the sources of emissions and the emission categories they fall under. Reducing greenhouse gas emissions in agribusiness requires a comprehensive approach across Scope 1, 2, and 3 emissions. 

For example, for companies producing cereals and pulses, Scope 1 interventions may include fuel switching and optimizing diesel use. Scope 2 strategies focus on transitioning to renewable energy and improving energy efficiency through solar installations and energy audits. Scope 3 emissions, however, are more significant and complex. This will involve managing upstream activities and downstream logistics. 

Leveraging Carbon Markets 

Along with mitigating emissions within the value chain, agribusinesses can further strengthen the climate strategy by leveraging carbon markets. As highlighted in the playbook published by Confederation on Indian Industries (CII), Unlocking Carbon Value for Indian Agri-Food Businesses, these markets are a pivotal mechanism to incentivize sustainable practices. 

India’s voluntary carbon market (VCM) is evolving rapidly with initiatives focused on enhancing integrity and aligning with global climate goals. Agriculture is a fast-growing and promising sector within VCM because of its dual capacity to act both as a source and a sink of GHG emissions. Through participation in VCMs, companies can support farmers in adopting carbon-smart practices, generate high-quality carbon credits, and unlock co-benefits such as improved soil health, biodiversity, and farmer incomes.

Challenges and Adaptive Measures 

Maturing and scaling the VCM ecosystem requires addressing a range of complex challenges. These include navigating evolving global standards and regulatory frameworks, financial uncertainties, and barriers to adoption of new practices and participation in carbon traded markets.

The playbook suggests measures to deal with these challenges, namely:

  • Using digital MRV (measurement, reporting, verification) techniques such as remote sensing and GIS to eliminate double counting, ensure transparency and integrity. 
  • Using diversified buffer reserves and project level insurance. 
  • Providing forward purchase agreements with predefined minimum prices to combat the challenge of high upfront costs. 
  • Building realistic timelines with buffers and securing bridge financing or advanced payments to combat uncertainty in delivery of carbon credits. 
  • Creating awareness and providing training to educate farmers on the current agricultural method and how they can transition to sustainable practices. 
  • Use of community-based data verification and mobile enrolment drives, along with leveraging initiatives like Agri Stack to build a nationwide database of farmers.
  • Agri-investors can play a catalytic role by promoting sustainable farming practices, such as alternate wetting and drying in rice, reducing synthetic fertilizers, and engaging in supply of emission-linked sourcing. These help in 

Furthermore, blended finance models, results-based payment structures, carbon revenue recycling, and benefit-sharing mechanism can help the Indian agribusiness reduce the overall footprint and generate carbon credit that aligns with evolving buyer and regulatory expectations. With policy support, long-term design and farmer trust, agri-food companies are well positioned to embark on or accelerate their sustainability journey. 

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