Crafting a Carbon Market from India’s Grassroots
Cross-Posted from Worldwatch Institute, Eye on Earth, www.worldwatch.org
In India, the carbon market is starting to take root. The country is now home to a large share of carbon-offset projects, many of which are certified under the Clean Development Mechanism (CDM) of the Kyoto Protocol. Yet forests remain poorly represented in these efforts.
This may not be the case for long, however, if one of India’s climate-focused entrepreneurs has his way. M. Satyanarayanan is hoping to utilize a new and innovative business model to create a veritable forest of wealth.
Dr. Satya, as his friends call him, is the founder and Honorary Advisor of Veda Climate Change Solutions Limited (VCCSL), a company that is developing a network of tree planting operations to promote livelihood creation across six rural districts. These are areas with largely tribal populations, low literacy, minimal employment opportunities, and few natural resources.
“The majority of CDM projects that have been approved so far [in India] are in sectors such as biomass-based cogeneration, energy efficiency, industrial processes, fuel switching, renewable energy, and a few in the field of municipal solid waste,” said Dr. Satya. “The number of projects in sectors relating to rural people, including farmers, is negligible, though they are the most vulnerable to climate change.”
Working in the states of Orissa and Andhra Pradesh, VCCSL has teamed up with Rayagada-based manufacturer JK Paper Mills on an innovative pilot project. The mill provides farmers with saplings at a subsidized rate and trains them to grow and maintain the trees, helping to regenerate the local landscape. Meanwhile, the trees capture carbon dioxide from the atmosphere, mitigating climate change while generating a new income stream for residents.
Once a project template is in place and the method for certifying “carbon credits” is validated, Dr. Satya hopes to replicate the model at a larger scale. He envisions implementing similar projects across India, East Asia, Africa, and South America, as well as diversifying the range of industries that the company works with.
“This model could include not only paper mills, but also construction, furniture, and biofuels, as well as the creation of ‘green’ fuel for other local economic activities,” said Dr. Satya, who also serves as Resident Commissioner for the State of Orissa and has worked for many years with the Indian Ministry of Environment and Forests.
It was his experience working with high-level climate policymaking that inspired Dr. Satya to found VCCSL in 2003. His goal was “to take climate solutions from theory to practice.”
The tree saplings, which include eucalyptus and Casuarina, are carefully bred and selected for their suitability to local conditions, providing benefits such as drought resistance and protection against high winds. The farmers then sell the mature timber to JK Paper Mills, generating a new income stream that previously did not exist. At the same time, VCCSL assesses the wood for both voluntary and certified carbon credits that can be sold on the global carbon market, generating a second income stream for the farmers.
VCCSL acts as the intellectual support partner for the venture, working with carefully identified local industries and communities to ensure that the value created at the base of the supply chain extends fully into the global market in an effective and sustainable way.
“We need to get into the ‘business of development,’ as it can no longer be ‘business as usual’ but ‘business unusual,’ in which stakeholders would become shareholders,” Dr. Satya said.
The project works across 3,500 hectares of land and involves nearly 2,000 farmers, each of whom will earn an additional 10-20 percent on their earnings from the paper mill from the sale of carbon credits, VCCSL estimates. As the cost of carbon in the market rises, so too will the benefits gained by these rural farmers and their families.
“The venture epitomizes the way that progressive business models are moving today,” said Tina Goyal, an associate with Endeavor, a New York-based non-profit that assists entrepreneurs in eight developing-country markets.
By developing public-private partnerships that address economic, environmental, and social concerns – the “triple bottom line” – VCCSL plans to support the creation of a complete value chain in India, from the country’s arid plains to the air-conditioned innards of metropolitan investment banks.
“It is a self-sustaining, scalable model that in time will benefit not only the local farmers and industries, but also VCCSL itself through the company’s cut of carbon sales,” Goyal said. So far, however, VCCSL has chosen to apportion an unusually high share of revenue from carbon credits – as much as 80 percent-to the farmers.
By 2030, India is projected to account for some 5 percent of global carbon dioxide emissions, generating an estimated 1.4 metric tons per person, according to the International Energy Agency. The Energy and Resources Institute (TERI), a Delhi-based non-governmental organization, estimates that emissions will grow at nearly double the IEA’s projected rate and reach 5 tons per person by 2032 if they continue at their current pace.
The Indian government has identified eight national “missions” to limit greenhouse gas emissions, with an emphasis on solar energy, energy efficiency, water conservation, and sustainable agriculture.
July 10th, 2009 at 8:58 am
This has got to be the worst long term idea I have heard in a while. Getting carbon credits may be ok, but is growing invasive species like casuarina and Eucalyptus a good idea at all? Paper mills love eucalyptus (it grows fast, and is easily converted to paper) but slowly you’ll find that the groundwater has totally disappeared and nothing will grow in the shade of these trees.
Read more:
http://en.wikipedia.org/wiki/Eucalyptus#Cultivation.2C_uses.2C_and_environmental_effects
http://en.wikipedia.org/wiki/Casuarina
August 5th, 2009 at 10:59 pm
Dear Lerene,
Thank you for raising this important point. I’m sorry not to have addressed it in the article.
The use of Eucalyptus in forestry schemes has indeed had some mixed press in the past, but Dr. Satya, who has worked in Indian forestry for a long time, finds the studies of its impacts to be inconclusive and to be dependent on a number of factors, including the plantation management and locality.
The genus, which has been in India since 1790 and of which 170 different species are now present in India (and over 700 exist in total) was chosen in consultation with the farmers for specific use on these projects in an area where there is very little choice in terms of the crops that will grow and produce value; and following an Environmental Impact Assessment.
More broadly, it has already been planted by the government across more than 1,000,000 ha in India to regenerate degraded areas of land and relieve the pressure on natural forests for pulpwood.
The way in which it is planted and managed is highly relevant to the kind of ecological impacts it may have. In the case of VCCSL’s projects, it constitutes a third of the total project area, the rest of which is planted with Casuarina. The Casuarina was chosen for this coastal area as the plantations act like shelterbelts against coastal erosion and winds, as well as fixing nitrogen in depleted soils.
VCCSL is also encouraging farmers to plant other native species along the borders and together with JK Paper Limited organise training programmes for the farmers to teach them best management practices. More broadly VCCSL say they are dedicated to using native species wherever possible on their projects, but that this is not always possible to find alternatives that are economically viable.
It is important to avoid the indiscriminate planting of any species, especially non-natives, and it is also important thing is to have intelligent and evolving management of projects that can adapt to the needs of the population and the environment as the projects grow.
To this end, these projects are pilots, so before they role out further, they will be looking at how the local area is responding, including impacts on groundwater and local biodiversity.
One of the issues of prime importance that I hoped to highlight with this article is the overarching model that VCCSL is using, namely helping local communities to become an integral part of the solution to both rural poverty and global climate change, to become a part of the solution and at the same time to become stakeholders in that solution. An approach that is gaining strength in India now.
You are right that connecting this overarching approach with a careful scale up that ensures that one problem is not created through solving the first rightly deserves attention.