Executive Summary

The agricultural sector is a central pillar of the Indian economy, employing 60 percent of the nation’s workforce and contributing to about 17 percent of its GDP. But for the millions of smallholder farmers across the country, a changing climate is making that reality increasingly precarious with rising temperatures, extreme weather events and water stress.

The Gates Foundation has been working in India since 2003 to support these communities. Its rural development efforts range from advancing inclusive agricultural transformation in partnership with central and state governments – particularly in Bihar, Uttar Pradesh and Odisha – to testing innovative technologies and approaches that can improve lives and livelihoods.

One of its key workstreams seeks to understand how carbon finance can be structured to create meaningful and lasting benefits for smallholder farmers. Agricultural carbon credits from India (agri-carbon credits) are showing significant potential as a source of supply for international compliance markets, and these local communities sit at the heart of that opportunity.

This report does not examine farmer outcomes directly. Rather, it focuses on voluntary and compliance demand channels through which that potential could be realised, with particular emphasis on Singapore’s compliance carbon market and the growing Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), outlining the policy decisions and commercial levers that would help shape the viability of these pathways.

Context & rationale

Practices such as alternate wetting and drying (AWD) – a water management technique that reduces methane emissions from flooded rice paddies – and improved nutrient management offer meaningful emissions reduction potential, but are not yet adopted at scale in India. Carbon markets, which allow companies to buy and sell verified carbon credits to meet compliance obligations or voluntarily offset their emissions, can make such practices economically attractive and commercially viable for farmers. If structured well, they not only deliver climate benefits, but directly improve lives and livelihoods.

Singapore has emerged as one of the most operationally advanced compliance markets under Article 6.2 of the Paris Agreement, the international framework that governs government-to-government carbon trading. Its carbon tax, set to rise to S$50-80/tCO2e by 2030, acts as an effective price ceiling for the compliance market. Tax-liable entities may use eligible international carbon credits, known as Singapore International Carbon Credits (SG ICCs) to offset up to 5% of their taxable emissions, provided Singapore has signed a bilateral Implementation Agreement (IA) with the credit’s country of origin. With 11 IAs currently in place and an active government-led procurement programme, Singapore provides a structured, price-supported demand channel. An India-Singapore IA would be required to enable Indian agri- carbon credits to be sold into this market.

A second compliance market channel is emerging through CORSIA, the UN’s global scheme requiring airlines to offset growth in their carbon emissions above 2019 levels. India is not participating in CORSIA Phase 1 (2024-2026), but is expected to become a mandatory participant in CORSIA Phase 2 from 2027 onwards. With a projected supply deficit of over 200 million tonnes of eligible credits through 2035, CORSIA presents a timely opportunity for new supply. For India, enabling a domestic supply of CORSIA-eligible agri- carbon credits would serve a dual purpose: supporting Indian airlines in meeting their compliance obligations and contributing to India’s broader development objectives.

Against this backdrop, the following key findings and recommendations distil the report’s core conclusions. The findings reflect the evidence and dynamics shaping the market opportunity, while the recommendations set out the actions most likely to advance it. Together, they provide a starting point for strategic decisions on enabling Indian agri- carbon credits to access these demand channels.

Key Findings

1. Policy authorisation is the primary driver of market access and value

The exclusion of agriculture from India’s list of Article 6.2-eligible activities is the single most limiting factor identified in this report. Without Letters of Authorisation (LoAs), Indian agri-carbon credits cannot access the Singapore compliance market or CORSIA, irrespective of project quality or readiness. Scenario modelling shows that access to these compliance markets alone could increase cumulative addressable market value from around $60 million to $546 million over 2026-2030, compared to a VCM- only addressable value of $7 million to $14 million over the same timeframe. This suggests that the VCM serves as a floor for value, rather than a scalable pathway on its own. On the Singapore side, the SG ICC allowance rate is the most significant policy lever influencing addressable market value.

2. CORSIA presents a distinct, time-sensitive opportunity alongside Singapore’s compliance market

CORSIA provides an additional demand channel1 to Singapore’s compliance market, with its own commercial and policy dynamics. India’s mandatory participation in CORSIA from 2027, combined with the projected global supply deficit, creates a near-term opportunity for new, eligible credit supply. The potential for Indian airlines to source domestic CORSIA- eligible agri-carbon credits also provides an additional policy rationale for India to authorise agri-carbon credits under Article 6.2. Scenario modelling reflects how these compliance channels interact. In the Bear (conservative) scenario, SG ICC leads on the strength of its price-supported structure. In the Base (moderate) scenario, the two demand channels converge, with CORSIA at $72 million against SG ICC at $94 million. In the Bull (optimistic) scenario, CORSIA becomes the more dominant opportunity at $358 million, as scale effects of mandatory Phase 2 participation take effect.

3. Agri-carbon commands a price premium, but Indian projects have historically traded at a discount

Agri-carbon credits typically price at $20-24/t, representing a premium relative to the broader nature-based solutions segment, with higher-integrity projects commanding further upside. Indian projects have historically traded at a discount to global peers, approximately $6/t below the global average and $8/t below comparable projects in other low- and middle- income countries. Pricing across this segment is driven primarily by project type and methodology, and the market remains highly varied – with prices shaped more by project- specific narratives than by standardised benchmarks. Even after adjusting for differences in methodology, a residual India-specific discount has been observed in historical data, reflecting broader concerns around credibility and market confidence. This gap is expected to narrow as Indian projects mature and establish a track record of performance and integrity.

4. Methodology selection is the primary commercial lever available today

Credits approved under the Core Carbon Principles (CCP) of the Integrity Council for the Voluntary Carbon Market (ICVCM) command price premiums and are increasingly becoming a minimum requirement among quality-conscious buyers. Among the reviewed methodologies most relevant to Indian agri-carbon, Verra’s VM0042 is currently the only one to have obtained CCP approval, while Verra’s VM0051 and Gold Standard’s AWD methodologies are under active assessment. Several agri-carbon methodologies, such as VM0042 and Gold Standard’s AWD are also included in multiple Singapore IA eligibility lists, reinforcing their relevance to future compliance access. While the methodology choice alone is unlikely to address the India-specific pricing discount, it remains developers’ most immediate lever for strengthening market positioning.

Key Recommendations

1. Support the inclusion of agriculture within India’s Article 6.2 framework

Adding agricultural activities within India’s list of Article 6.2 eligible activities is the single most important step to enabling access to compliance markets globally, including Singapore and CORSIA. India’s upcoming participation in CORSIA Phase 2 from 2027, combined with the projected CORSIA-eligible credit supply deficit, provide an additional policy rationale for authorising agri-carbon credits under Article 6.2, enabling their use for CORSIA compliance and allowing Indian aviation demand to support national development outcomes.

2. Advance the India-Singapore Implementation Agreement

An India-Singapore IA is a prerequisite for access to Singapore’s compliance market. Ensuring agri-carbon
methodologies are considered from the outset and included as eligible methodologies will be vital to enable participation once the IA is established.

3. Monitor and engage on the trajectory of the SG ICC allowance rate

The SG ICC allowance rate is a key policy lever shaping demand. Sensitivity analysis in this report shows that an increase in Base scenario SG ICC allowance rate from 5% to 10%, while holding Indian agri-carbon’s market share constant at 5%, raises cumulative SG ICC value from $53 million to $72 million. As high-integrity, Article 6.2 authorised supply scales, the evolution of the allowance rate will have meaningful implications for market size and accessibility.

4. Prioritise high-integrity methodologies in project development

Developers should prioritise CCP-approved methodologies, particularly those with CCP approval or under active CCP assessment, recognising their importance in strengthening market positioning within the VCM and enabling access to compliance markets.

5. Assess emerging demand pathways in the voluntary market

While the VCM alone is unlikely to drive demand at the scale of compliance markets, it continues to play an important role. Project developers and commercial stakeholders should actively assess emerging voluntary demand pathways, including supply chain insetting and alternative buyer use cases, which may provide additional routes to market as compliance pathways develop.

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