Incentivising Agroforestry Through Carbon Revenue: Augmenting Farmers’ Income in India

Agroforestry is a dynamic and ecology based nature resource management system which diversifies and sustains production enhancing social, economic and environmental benefits at all levels (Roger Leaky, 1996). Agroforestry holds the key to sustainability and contributes to achievement of nine of the seventeen sustainable development goals (SDGs) like no poverty, zero hunger, climate action etc. set by UN, besides serving as major climate neutrality pathway. Regular research in agroforestry, upgradation in quality planting material (QPM), introduction of diversified tree species in agroforestry and policy support from government, especially the National Agroforestry Policy, 2014, has accelerated the pace of diversification of agriculture towards agroforestry.
       
During the last few decades, the “agrisilviculture system” has gained popularity with farmers owing to its higher economic returns per unit area. Plantation models (with different inter cropping patterns and spacing) and biomass productivity with Eucalyptus and Poplar based agroforestry have been evolving and improving as per changing requirements of industry and has been maximum up to 30 t ha^-1 yr^-1  (Chavan et al., 2023; Rizvi et al., 2011, 2020; Kulkarni 2005).
       
The agroforestry plantations are open to market forces and at times face crash in prices. Additional financial support in the form of carbon revenue from the sale of carbon credits generated by agroforestry plantations could serve as the biggest motivation for promotion of agroforestry (Mahendra Singh et al., 2017) and it would also serve as a buffer for farmers to safeguard them from the vagaries of market. The report of Indian Timber Supply and Demand 2010 to 2030 (Kant and Nautiyal, 2023) estimated total production of round wood in India as 47 million cum per annum of which only about 2 million cum comes from state owned forests having restricted harvesting. About 80% of the remaining requirement comes from “Trees Outside Forests” and the rest is dependent on imports. The import of wood and wood products from the year 2011 onwards has increased by more than 2.5 times reaching 457.22 billion Indian rupees in the year 2022 (statistica.com, accessed on 11-03-2024).
       
The potential available areas for expansion of agroforestry are agricultural lands and culturable wastelands suitable for agroforestry i.e. 140 MHA and 27 MHA (Directorate of Economics and Statistics, Ministry of Agriculture, Govt of India, Neelam Patel et al., GROW Niti Aayog, 2024). According to Vision 2050 report by CAFRI (2015), there is potential to expand the area under agroforestry to 53 MHA from current figure of 28.4 MHA (Arunachalam et al., 2022) by the year 2050. Enhancing agroforestry returns with additional incentive from carbon revenue can serve as a major catalyst in this direction. Table 1 gives current and projected demands for various commodities along with future projection of area under agroforestry.
 

The total estimated area under agroforestry in India is 28.4 MHA (Arunachalam et al., 2022) out of which Poplars and Eucalyptus based agroforestry systems occupy 0.27 MHA and 4.0 MHA respectively (Chavan et al., 2023) having domination in Northern India with some exceptions of Southern regions of Andhra Pradesh, Telangana and Tamil Nadu. The area under Eucalyptus and Poplar based agroforestry in Yamunanagar district has been estimated as 16,300 ha (Rizvi et al., 2020). These data have been used for estimation of carbon credits and carbon revenue.
 
Furthermore, a study was conducted in Yamunanagar district of Haryana for assessment of carbon sequestration potential of Eucalyptus and Poplars. Carbon sequestration potential of the remaining area under agroforestry i.e. 24.13 MHA of a total of 28.4 MHA was assessed using other available studies covering different parts of the country. The results of present study as well as the data available from other existing studies were used to estimate the carbon credits and approximate carbon revenue per hectare based on prevailing international prices of carbon credits.
 
For conducting the study, the villages of Yamunanagar district having more than 5000 Poplar trees (8076 ha.) and 1000 Eucalyptus trees (1578 ha.) under agroforestry plantations were selected for Sampling (Tree Census 2023, Haryana Forest Department). It was followed by identification of strata, laying preliminary sample plots to estimate standard deviation, laying permanent sample plots for data collection and finally the data analysis.
 
Selection of strata, sampling plan and data collection
 
Based on the data of Tree Census, 2023, available records and field visits, the population in the study area was divided into three homogeneous strata based on prevalent girth classes i.e. 30-59 cm and 60-89 cm for Poplar and 30-59 cm for Eucalyptus. This categorization was made based on presence of majority of plantations within these specific girth classes in the field (source, field visits).
       
The prevalence of Poplar and Eucalyptus within different administrative units of Forest Department i.e. Forest Ranges, was taken into consideration for the purpose of sampling. Jagadhari Forest Range having 45% of total Poplar trees and Sadhaura range having 60% of total Eucalyptus trees were selected as study areas for Poplar and Eucalyptus respectively (Tree Census, 2023). To estimate the standard deviation within each stratum, five sample plots each having a size of 0.1 ha (31.62 m x 31.62 m) were laid randomly in each stratum (Carbon Stock in India’s Forests, FSI, 2011). Using Pearson’s (Pearson et al., 2007) formula, statistically significant sample size for Poplar 30-59 cm, Poplar 60-89 cm and Eucalyptus 30-59 cm strata was calculated as 16, 8 and 9 sample plots respectively.
       
Stratified Random Sampling strategy using the rice grain method was used to identify the location of sample plots within each stratum separately. Nested Square sample plots with a dimension of 0.1 ha (31.62 m x 31.62 m), were laid for undertaking fieldwork. Measurement of the Girth at breast height (GBH) at 1.37m of individual trees having girths greater than or equal to 30 cm was done using linear tape. All measurements taken in field were recorded in standard proformas. Calculation of biomass and carbon stocks was done using standard tools given in Table 2.
 

It was observed during field visits that agrisilvicultural system dominated by Eucalyptus and Poplars is producing straight timber under compact planting models meeting with requirements of plywood industry.
       
The Carbon sequestration rate for different strata i.e. Poplar 30-59 cm, Poplar 60-89 cm and Eucalyptus 30-59 cm was assessed as 7.29, 8.49 and 13.05 tha^-1 yr^-1 respectively, given in Table-III. These figures were used to calculate carbon credits and carbon Revenue for Yamunanagar district using current international price of carbon credits (@ $ 6 per carbon credit, ecosystemmarketplace.com). These calculations suggest that Eucalyptus and Poplar under suitable agroforestry models can generate carbon revenue (additional earning for the farmer) worth up to Rs 25000/ha/year. Using standard carbon fraction and multiplication factor for calculating carbon and carbon dioxide equivalents (Table 2), the carbon credits for current area under agroforestry in Yamunanagar district i.e. 16,300 ha (Rizvi et al., 2020), @ average carbon sequestration potential of 10 t/ha/yr come at 0.6 million tCO₂eq ha^-1yr^-1 having a valuation of Rs. 290 million annually (@ $ 6 per credit), given in Table 3.
 

       
The carbon sequestration rate of agroforestry plantations from the present study done in Yamunangar district and data from other existing studies covering different parts of the country have been tabulated in Table 4.
 

       
Assessment of annual valuation of carbon credits was made using current area under agroforestry in India and carbon sequestration rates given in Table 4. Carbon sequestration rates for area under Eucalyptus and Poplar (4 MHA 0.27 MHA, Chavan et al., 2023) and for rest of India (24.13 MHA) were taken as 12 tha^-1 yr^-1, 7 tha^-1 yr^-1 and 3.9 tha^-1 yr^-1. These figures were further used to assess the total carbon revenue from agroforestry taking international price of carbon credits as $ 6 per credit and were then converted to rupees (source http://www.ecosystemmarketplace.com, accessed on 10-3-2024). The annual valuation of carbon credits was estimated at Rs 250 billion per year, having annual potential of GHG emission reduction of 0.5 Gt ha^-1 yr^-1 (half Giga tonnes) given in Table 5.
 

 
Discussion on policy initiatives promoting carbon financing
 
India became the first nation to adopt the National Agroforestry Policy in 2014 which yielded many positive outcomes. More than 20 states issued notifications relaxing felling and transit regulations for agroforestry produce. From a minimum of 6 species in Tripura to a maximum of 86 species in Gujarat have been brought under transit free regime. Major features of the National Agroforestry Policy, 2014 include creation of an institutional setup for agroforestry under Ministry of Agriculture, simplification of felling and transit regulations, developing Market Information System (MIS) for agroforestry, certification of nurseries and seeds, research and development for supply of Quality planting material (QPM), institutional budgetary provisions and insurance of agroforestry produce, involvement of industry for extension and supply of QPM etc.
       
Government of India aims to achieve net-zero carbon emissions by the year 2070. At COP-21, Prime Minister of India declared our Nationally Determined Contributions (NDCs) creating an additional carbon sink of 2.5 to 3 billion tonnes of CO₂eq through additional forest and tree cover by the year 2030. Top of Form Agroforestry based carbon finance projects have potential as well as opportunity to holistically address the issue of augmenting agroforestry based industrialization across India. The carbon finance provided for agroforestry plantations will not only generate the carbon revenue from the sale of the carbon credits but it will boost the furniture, paper and pulp and timber based industry due to assured supply of raw material resulting into enhanced income of farmers, augmenting livelihood opportunities across sectors and hence substantially contributing to Sustainable Development Goals.
 
Options for carbon financing
 
Agriculture, forestry and other land use (AFOLU) sector carbon markets have evolved over past two decades. Due to expiry of Kyoto Protocol in the year 2020, Compliance Markets executed through UNFCCC are non-operational for the time being. Currently, Voluntary Carbon Markets (VCMs) are operational world over including India. But due to lack of awareness amongst stakeholders and policy makers, the response to VCM is still very limited. VERRA and Gold Standards are some of the important VCM standards which are operational in India and are having over 68 projects (data from websites of VERRA and Gold Standard). These projects are covering estimated area of 1.5 MHA (10% of total area under agroforestry) across India likely generating 17 million carbon credits which are at various stages of development. If these credits get issued then it would generate an amount of over Rs 8000 crores with interval of every five years. This revenue from the sale of carbon credits will represent an additional incentive made available to farmers. India has an area of 28.4 MHA under agroforestry and there is a potential of adding another 29 MHA to this pool (Vision 2050, CAFRI, 2015). It means, there is an enormous potential left untapped for VCM to generate additional incentive for farmers across India since approximately only 1.5 MHA are under VCM as of now.
       
Similarly, the companies committed to carbon neutrality can engage directly with farmers to support carbon credits through intermediary organizations capable of developing carbon finance projects. The corporates will compensate farmers through their CSR funds for generating the carbon credits by paying the market price as an incentive to farmers and in return achieve net neutrality by neutralizing carbon emissions due to business/industrial activities. States like Haryana can take the initiative in this regard and develop a platform to create a pool of agroforestry plantations and associated credits and trade with the domestic industry to garner support for farmers as an incentive.

The Eucalyptus and Poplar plantations in Yamunanagar district of Haryana have potential to effect GHG emission reductions of 0.6 mtCO₂eq per year valued at Rs. 290 million. Under compact planting models these plantations have potential to generate additional carbon revenue of Rs 25,000/ha/year to farmers. This additional incentive can serve as chief motivation for promotion and extension of agroforestry in India, particularly in the state of Haryana. The current area under agroforestry in India has annual GHG emission reduction potential of 0.5 G t per year. If the area under agroforestry is increased to 50 MHA over the next two decades, even with the current productivity rates agroforestry can generate carbon credits of more than 1.0 Gt annually worth Rs. 500 billion. This entire stock of carbon credits is unused and requires immediate policy intervention through a carbon registry in India. The carbon registry at national and state levels can aim at efficient issuance of carbon credits through government-approved validation and verification systems. Opportunities to finance agroforestry through CSR for carbon projects can play a big role in achieving carbon neutrality in India. This strategy can help India achieve domestic carbon neutrality and meet international climate commitments, while also significantly increasing farmers’ income.

All authors declare that they have no conflict of interest.