Carbon market has once again become a global buzzword with increased focus on net zero goals by corporations, and with countries firming up their climate commitments under the Paris Agreement. It is seen as one of the most effective market-based mechanisms to price greenhouse gas (GHG) emissions and achieve climate goals. Carbon market had been operational since the launch of the Clean Development Mechanism by the United Nations in 2006, has evolved in its new version.

There are two types of carbon markets, the compliance market (emission trading resulting from legal and regulatory requirements); and the voluntary market (resulting from voluntary climate commitments by corporations). While the compliance market mainly driven by emission trading systems (ETSs) have been operational since the mid-2000s, the voluntary carbon market (VCM) has gained traction in the past few years. The VCM is led by corporations and industries in the hard-to-abate sectors which rely on carbon credits to achieve their ambitious ‘voluntary’ climate goals. This market grew by more than 60% from 2020 to reach $1 billion in November 2021 and is expected to reach at least $50 billion by 2030. One of the differentiating factors of VCM is premium pricing attributed to projects that generate co-benefits such as biodiversity conservation, gender and community economic development. Prices of carbon credits for these projects can vary widely from $5/tCO2e (e.g., agriculture, forestry etc.) to $25/tCO2e (e.g., clean cooking for low-income households) depending on the types of co-benefits (1 tCO2e is equal to 1 carbon credit).

These additional revenue streams from carbon credits have the potential to fundamentally alter the economics of key activities such as agriculture, forestry, cooking and waste management – possessing high social, economic and environmental impact potential. These activities are either capable of removing carbon from the air or avoiding emissions by adopting better practices and technologies. They play a key role in empowering local communities by:

For example, a low-income household using traditional cooking stoves can derive carbon benefits by switching to cleaner cooking solutions; and smallholder farmers can get benefit from planting trees and changing agriculture practices to reduce GHG emissions without harming productivity. The carbon credits from these activities can give almost $20 to $40 per year to a household switching to clean cooking and $7 to $20 per year per acre additional income to smallholder farmers.

Carbon markets can play a very critical role in India’s journey to achieve its net zero and decarbonization goals as well as in catalyzing certain key sectors such as transportation, agriculture, forestry, waste management etc. While India is aggressively reducing emission intensity of many sectors, it would still rely heavily on the carbon market for offsetting residual emissions to achieve net zero. This resulting carbon market is estimated to be at least worth $50 billion.This estimate only factors seven hard-to-abate sectors comprising cement, steel, aluminum, electricity utilities, aviation, automobile (passenger cars), oil and gas (refining and extraction). Additionally, India can achieve a carbon market potential of $30 to $50 billion by 2050 (at a conservative price of $15 per carbon credit) from agriculture, land restoration activities, and reducing emissions from deforestation and forest degradation (REDD+).

Rapidly growing carbon markets coupled with a dynamic international policy environment, are driving countries to develop action plans to leverage carbon markets to meet their climate commitments. India is already proactively working on shaping the domestic carbon market with the Ministry of Environment, Forest and Climate Change (MoEFCC) and Ministry of Power (MoP) developing the requisite legal, institutional and technical infrastructures.Once developed, these would be able to address aspects related to double counting, corresponding adjustments and issues of quality and integrity of carbon credits, especially in the compliance market.

While the domestic compliance carbon market is critical for India’s net zero ambitions, there is a significant opportunity to leverage the voluntary carbon market. We can be one of the major destinations for attracting global capital pools chasing voluntary carbon projects in the Global South. For this, there is a need for a more structured mechanism for private sector participation in the voluntary carbon credit projects.A proactive approach from India on developing a framework to promote public-private partnerships, and to attract private investment in carbon projects through inclusive business models can unlock significant social, economical and environmental benefits.

The world has witnessed a rapid in­cre­ase in installed solar photovoltaic (PV) capacity over the past few yea­rs. Acc­o­rding to IRENA, in 2020 alone, over 126 GW of solar PV capacity was installed glo­bally. As of now, over 713 GW of solar po­wer has been insta­lled, having multiplied ne­arly 10 times over the past 10 years. In 2011, the capacity stood at 73 GW, and has grown at an average of 70 GW per year.

Solar modules have a life of around 25 years, at the end of which they become un­­profitable. Thus, it is expected that star­ting in 2026, around 70 GW of solar ca­pacity will have to be retired every year. This translates into about 4 million panels per GW or 280 million panels decom­m­issi­oned per ye­ar. Most of these panels will find their way to landfills where they will do more harm than the good done over their lifetime. Moreover, as the dema­nd for solar pa­nels increases with time, raw materials will become increasingly scarce. It is, the­re­fore, an opportune time to understand and establish a circular ec­o­nomy for solar en­ergy to enable an eco­system that en­co­urages repair, reuse and recycling of solar PV materials.

Intellecap attempts to explore the various aspects of the solar circular economy to en­hance the sustainability quotient of solar energy and create an ecosystem to tackle this massive issue that can potentially overwhelm the global solar PV industry.

Defining the ecosystem

By definition, a circular economy is aimed at minimising waste by segregating materials and components derived at the end of a product’s life and reusing them in the manufacturing process of new products, to keep the raw materials circling within the ec­onomy to the maximum extent possible. Extending this definition to the solar industry, a circular solar economy is essentially a process of extracting reusable valuable components and elements from retired so­lar panels and using them to develop new so­lar cells and panels. Productive re­use generates further value out of the product and prevents essential ingredients from ro­tting in the landfills for aeons to come. It also prevents toxic elements used in products from contaminating the environment by making their disposal sustainable.

Driving a circular solar economy

Solar panels use many elements that are precious and finite in nature including silicon, indium, silver, tellurium and copper. These are rare earth elements that are mined and refined to be used in solar panels. Developing countries have large reser­ves of these raw materials. According to the Center for Strategic and International Stu­dies, China produces nearly 90 per cent of the world’s rare earth metals, a large part of which is also used in making solar cells. Neither the mining nor the refining process is sustainable and leads to gross wastage of resources. Therefore, at the end of a so­lar panel’s life, discarding the panels al­to­gether will not only lead to wastage of precious metals and associated was­tage of resources, but also cause environmental poisoning. Developing a circular economy will create a process to feed the recovered material back into the system to avoid wastage at multiple levels.

As the demand for solar energy increases, the need for these elements will become greater. However, there are not enough reserves of precious metals for the entire fossil fuel-based generation to be replaced by renewable energy, including solar. Re­using elements could be one of the primary solutions for the production of solar en­ergy to match the anticipated global demand in the future.

Increased profits, enhanced job prospects and cost savings are the key consequen­ces of developing a circular solar economy. The manufacturers may be able to re­duce production costs by reusing preci­ous elements recovered from retired panels. Given the magnitude of solar waste expec­ted to be generated, third-party recycling could become an independent segment of the solar industry and provide sustainable livelihood opportunities, especially in deve­loping countries.

Building a circular solar ecosystem

A circular solar ecosystem has three foundational factors that need to be developed – technological expertise, economic maturity, and regulatory support. At present, a circular solar economy is largely a theoretical concept with little on-ground progress. Only a handful of companies are engaging in buybacks or refurbishment of solar panels after the end-of-life is ac­hieved. The market is also at a nascent sta­ge at present since the number of retir­ed solar panels is very low. However, this may soon change.

In 2019, the world generated 720 TWh of solar power, accounting for 3 per cent of the total power generation, using 46 million metric tonnes (mmt) of solar panels. It is expected that by 2026, around 70 GW of solar power capacity will be ready for decommissioning every year. As per estimates, around 8 mmt of decommissioned solar panels could be accumulated by 2030. Technological expertise that can re­furbish solar panels at scale will be re­quir­ed to tackle such massive quantities of so­lar waste. While other components su­ch as aluminium frames, glass, ethylvi­ny­la­cetate and backsheets are also used, the rare earth metals used in manufacturing the ce­lls and other metals such as copper can justify the refurbishing costs. In some cas­es, general e-waste recycling processes are being employed for solar waste management but there is a strong need for research and development in this area. Veolia, a French waste management company, has developed a recycling line specific to solar panels. ROSI Solar, an­other French enterprise, has created a process to extract precious metals from used panels.

Standards and regulations will be re­quired to sustainably extract the reusable materials from solar panels. Moreover, the un-recyclable materials will also have to be sustainably discarded so as to prevent waste. Initially, manufacturers and waste managers may have to be incentivised to encourage the recycling of solar panels. In India, which is looking at 8-10 GW of solar capacity deployment every year by 2030 through the tendering route, sustainable solar waste management guidelines and requirements at the end-of-life of a project could be built into the tender me­chanisms. This may make it mandatory for developers to put in place solar was­te ma­nagement mechanisms and encourage solar recycling.

The ecosystem will require low-cost investments to effectively develop the required technology and provide recycling and reuse services at affordable prices. Climate finance may be required in the form of public-private partnerships. Initially, government efforts might be nee­ded to push the mandates and set up facilities. However, the future of the circular solar economy lies in engaging with the private sector. It may be necessary for large-scale solar manufacturers to de­velop this technology using low-cost investments to ensure in-house circularity of the process. Alternatively, third-party recyclers may be encouraged to develop a technological core competency, which may further be licensed to provide de­centralised recycling systems. Many te­chnology start-ups are taking positive steps towards this.

Challenges and outlook

The price volatility of metals extracted from used solar panels could create a ch­allenge in determining a standard economic model for recycling of solar waste. Moreover, technologies are being explo­red for replacing rare earth elements in the solar cell development process, whi­ch, if popularised, may make the investments in the circular solar economy un­jus­tifiable. Further, quantification of the sustainability quotient of solar panel production and recycling is not currently avai­lable, which may be able to provide a definite direction for creating the circular solar economy.

Every solar panel ever deployed presents an opportunity for recycling and can play an important role in building a circular solar economy. According to Mercom In­dia, it is ex­pected that the global solar ca­pa­city may increase to around 3,000 GW by 2030. The amount of solar waste generated during this period and beyond presents a colossal challenge to the sustainability of the sector and the environment. It is, therefore, the right time to build mechanisms, technologies and processes to en­able a circular solar economy and make solar more sustainable.

The Government of Maharashtra and World Bank, in a joint endeavour, have launched the ‘SMART Agtech Integration Facility 2022’ to transform rural Maharashtra through Disruptive Agricultural Technologies (DATs).

This facility is presently seeking applications from DAT solution providers, with a presence in India, to bring in digital and technical innovations in the agriculture sector. The facility will enable selected DAT solution providers to work directly with the Community Based Organizations (CBOs) in Maharashtra to implement transformative solutions.

The facility is a part of US$ 300 million Hon. Balasaheb Thackeray Agribusiness and Rural Transformation (SMART) project, which aims to enable collectives of smallholder farmers to participate in competitive agriculture value chains, facilitate agri-business investments, increase market access and productivity, and build resilience of crops to recurrent floods or droughts in the state. A key sub-component under the project is to facilitate adoption of DATs among CBOs in the state.

The SMART Agtech Integration Facility 2022 will identify relevant DAT solution providers and facilitate interactions between the technology providers and CBOs to enable customization and adoption of appropriate solutions.

Speaking about the launch, the Agriculture Commissioner, Dheeraj Kumar, Govt of Maharashtra said, “We are excited to launch this facility and to have DAT solution providers from across India to work with the Government of Maharashtra (SMART) to build a resilient and robust agriculture technology ecosystem in the state. This is a unique collaborative concept which will connect DAT solution providers with Community Based Organization (CBOs) and provide them with the most relevant solutions to address their critical technological needs”.

The SMART Agtech Integration Facility 2022 is supported by a grant from the Korea World Bank Partnership Facility (KWPF), a collaboration between Korea’s Ministry of Economy and Finance (MoEF) and the World Bank. The grant marks the first KWPF initiative in India. Intellecap, a pioneer in enabling ecosystems and channeling capital to nurture a sustainable and equitable society, is supporting the execution of the grant.

Manivannan Pathy and Adarsh Kumar, Team Leaders of the SMART project from the World Bank said, “The SMART Agtech Integration Facility addresses a critical challenge of harnessing the innovation and dynamism happening in the DAT space to improved outcomes for farmers in Maharashtra through supporting partnerships between farmers and selected DATs. This facility has the potential to demonstrate innovative solutions that can be scale up nationally.”

Smallholder farmers in Maharashtra face myriad challenges across the value chain. Though CBOs such as Farmer Producer Companies (FPCs) and Primary Agricultural Credit Societies (PACS) play a significant role in helping farmers get access to finance, inputs, farm technologies, and agricultural market, technological limitations affect their ability to achieve their potential to increase productivity, efficiency, and competitiveness of farming operations.

According to Santosh Kumar Singh, Managing Director, Intellecap, “The SMART Agtech Integration Facility is a novel way for DATs to solve a real-time problem, the underlying impact of which is significant. We are excited to work with the Govt. of Maharashtra and the World Bank in finding solution providers who will be joining us in this journey to help discover and transform rural Maharashtra through their innovative ideas, which in turn will enable CBOs and farmers, address a few critical challenges across the value chain and improve agricultural productivity across the state”.

The SMART AgTech Integration Facility is seeking support from DAT solution providers specifically for

Interested DAT Solution providers can apply to the SMART Agtech Integration Facility 2022 on the official site smartagtech.org/#

The government of Maharashtra and World Bank, in a joint endeavour, have launched the ‘SMART Agtech Integration Facility 2022’ to transform rural Maharashtra through Disruptive Agricultural Technologies (DATs).

MUMBAI, 17 May 2022: The government of Maharashtra and World Bank, in a joint endeavour, have launched the ‘SMART Agtech Integration Facility 2022’ to transform rural Maharashtra through Disruptive Agricultural Technologies (DATs).

MUMBAI, 17 May 2022: The government of Maharashtra and World Bank, in a joint endeavour, have launched the ‘SMART Agtech Integration Facility 2022’ to transform rural Maharashtra through Disruptive Agricultural Technologies (DATs).

This facility is presently seeking applications from DAT solution providers, with a presence in India, to bring in digital and technical innovations in the agriculture sector. The facility will enable selected DAT solution providers to work directly with the Community Based Organizations (CBOs) in Maharashtra to implement transformative solutions.

The facility is a part of US$ 300 million Balasaheb Thackeray Agribusiness and Rural Transformation (SMART) project, which aims to enable collectives of smallholder farmers to participate in competitive agriculture value chains, facilitate agri-business investments, increase market access and productivity, and build resilience of crops to recurrent floods or droughts in the state.

A key sub-component under the project is to facilitate adoption of DATs among CBOs in the state. The SMART Agtech Integration Facility 2022 will identify relevant DAT solution providers and facilitate interactions between the technology providers and CBOs to enable customization and adoption of appropriate solutions.

Speaking about the launch, the Agriculture Commissioner, Dheeraj Kumar, Govt of Maharashtra said, “We are excited to launch this facility and to have DAT solution providers from across India to work with the Government of Maharashtra (SMART) to build a resilient and robust agriculture technology ecosystem in the state. This is a unique collaborative concept which will connect DAT solution providers with Community Based Organization (CBOs) and provide them with the most relevant solutions to address their critical technological needs”.

The SMART Agtech Integration Facility 2022 is supported by a grant from the Korea World Bank Partnership Facility (KWPF), a collaboration between Korea’s Ministry of Economy and Finance (MoEF) and the World Bank. The grant marks the first KWPF initiative in India. Intellecap, a pioneer in enabling ecosystems and channeling capital to nurture a sustainable and equitable society, is supporting the execution of the grant.

Manivannan Pathy and Adarsh Kumar, Team Leaders of the SMART project from the World Bank said, “The SMART Agtech Integration Facility addresses a critical challenge of harnessing the innovation and dynamism happening in the DAT space to improved outcomes for farmers in Maharashtra through supporting partnerships between farmers and selected DATs. This facility has the potential to demonstrate innovative solutions that can be scale up nationally.”

Smallholder farmers in Maharashtra face myriad challenges across the value chain. Though CBOs such as Farmer Producer Companies (FPCs) and Primary Agricultural Credit Societies (PACS) play a significant role in helping farmers get access to finance, inputs, farm technologies, and agricultural market, technological limitations affect their ability to achieve their potential to increase productivity, efficiency, and competitiveness of farming operations.

According to Santosh Kumar Singh, Managing Director, Intellecap, “The SMART Agtech Integration Facility is a novel way for DATs to solve a real-time problem, the underlying impact of which is significant. We are excited to work with the Govt. of Maharashtra and the World Bank in finding solution providers who will be joining us in this journey to help discover and transform rural Maharashtra through their innovative ideas, which in turn will enable CBOs and farmers, address a few critical challenges across the value chain and improve agricultural productivity across the state”.

The SMART AgTech Integration Facility is seeking support from DAT solution providers specifically for (1) implementing digitization solutions for farmer collectives, (2) building value chain actor aggregation platforms, (3) enabling precision agriculture and automation services, (4) working with urban food systems and logistics solutions, (5) developing market linkage and traceability solutions, and (6) facilitating access to financial services.

Interested DAT Solution providers can apply to the SMART Agtech Integration Facility 2022 here

The SMART Agtech Integration Facility 2022 is supported by a grant from the Korea World Bank Partnership Facility (KWPF), a collaboration between Korea’s Ministry of Economy and Finance (MoEF) and the World Bank.

The Government of Maharashtra and World Bank, in a joint endeavor, have launched the ‘SMART Agtech Integration Facility 2022’ to transform rural Maharashtra through Disruptive Agricultural Technologies (DATs). This facility is presently seeking applications from DAT solution providers, with a presence in India, to bring in digital and technical innovations in the agriculture sector.
The facility will enable selecting DAT solution providers to work directly with the Community Based Organizations (CBOs) in Maharashtra to implement transformative solutions.

The facility is a part of US$ 300 million Hon. Balasaheb Thackeray Agribusiness and Rural Transformation (SMART) project, aims to enable collectives of smallholder farmers to participate in competitive agriculture value chains, facilitate agri-business investments, increase market access and productivity, and build the resilience of crops to recurrent floods or droughts in the state.

A key sub-component of the project is to facilitate the adoption of DATs among CBOs in the state. The SMART Agtech Integration Facility 2022 will identify relevant DAT solution providers and facilitate interactions between the technology providers and CBOs to enable customization and adoption of appropriate solutions.

Speaking about the launch, the Agriculture Commissioner, Mr. Dheeraj Kumar, Govt of Maharashtra said, “We are excited to launch this facility and to have DAT solution providers from across India to work with the Government of Maharashtra (SMART) to build a resilient and robust agriculture technology ecosystem in the state. This is a unique collaborative concept which will connect DAT solution providers with Community-Based organizations (CBOs) and provide them with the most relevant solutions to address their critical technological needs”.

The SMART Agtech Integration Facility 2022 is supported by a grant from the Korea World Bank Partnership Facility (KWPF), a collaboration between Korea’s Ministry of Economy and Finance (MoEF) and the World Bank. The grant marks the first KWPF initiative in India. Intellecap, a pioneer in enabling ecosystems and channeling capital to nurture a sustainable and equitable society, is supporting the execution of the grant.

Smallholder farmers in Maharashtra face myriad challenges across the value chain. Though CBOs such as Farmer Producer Companies (FPCs) and Primary Agricultural Credit Societies (PACS) play a significant role in helping farmers get access to finance, inputs, farm technologies, and the agricultural market, technological limitations affect their ability to achieve their potential to increase productivity, efficiency, and competitiveness of farming operations.

The SMART AgTech Integration Facility is seeking support from DAT solution providers specifically for implementing digitization solutions for farmer collectives, building value chain actor aggregation platforms, enabling precision agriculture and automation services, working with urban food systems and logistics solutions, developing market linkage and traceability solutions, and facilitating access to financial services.

April 22^nd, 2022: On the occasion of Earth Day, Venkat Kotamaraju, Director, Circular Apparel Innovation Factory was on a Special Earth Day panel discussion with ET Rise, talking about ‘Why businesses need to embrace sustainability and prioritise the planet’

There is increasing awareness that businesses need to be sustainable and ensure they do not have a negative impact on the environment and the society. With the United Nations spelling out the Sustainable Development Goals (SDGs), there is a clear, well-defined path for different stakeholders to undertake the sustainability journey. It is also increasingly clear that being green is also good for business.

In the Earth Day webinar, Venkat was joined Rene van Berkel, Representative, UNIDO in India, Mahadev Chikkanna Founder CEO, Mynusco, and Kunal Sood, founder of WeThePlanet, talking about sustainable business in India and the way forward.

Watch the video on ET Rise – Click here  

Mumbai, 13^th April:  Recently The Ken interviewed  Vineet Rai , Founder and Chairman, Aavishkaar Group on how India’s best known impact investor is raising the world’s largest carbon-only fund, which will sequester carbon in trees and give returns to its LPs in Carbon.

Through the interview, the Ken finds out, what does Vineet Rai know that the EU and World Bank don’t ?

Trees can cool the planet. They can also buy us some time. Or can they?

Last week, some banner news neatly aligned on an arc that was quite revealing.

India’s largest impact investor, Aavishkaar, raised its latest fund. Sized at Rs 1,000 crore ($130 million), Aavishkaar says the fund will “also focus” on climate. But when I spoke with Aavishkaar founder Vineet Rai, I learned that it will only “opportunistically” invest in climate-related ventures.

However, there’s a bigger, and I must add, more interesting fund that he is raising. If all goes well, by December this year, he will launch the US$300-US$500 million Carbon First Fund. Which, you guessed it, will deal with carbon units even while returning capital to its investors. Meaning, investors will get their returns in carbon units unless they specifically ask for cash.

Meanwhile, in the rich world, the punt on capturing carbon grew bigger. Climeworks, a Switzerland-based D2C (direct-to-capture) startup, raised US$650 million from a bunch of professional and corporate investors. One of the few companies in the world to capture CO2 from air and inject it deep underground for permanent storage, Climeworks’ scale is very modest today—4,000 tonnes of carbon captured per year, which is equivalent to the Co2 emissions from 600 EU residents.

Finally, if you missed it—or consciously avoided it, for which I wouldn’t blame you—the UN’s Intergovernmental Panel on Climate Change (IPCC) released its third report on climate change. This time, with many solutions for mitigating its impact. Among other things, the report says greenhouse gas emissions must peak by 2025. That is, we have just about 30 months to keep the hope of limiting warming at 1.5°C above pre-industrial levels alive.

So, Aavishkaar’s timing is right.

But what else does Rai aim to get right, knowing that most carbon credit schemes so far have oversold and under-delivered?

When climate change blunts impact investment

Focused on humans, Aavishkaar was started 21 years ago “with the idea of making the poor rich”.

A lot of its social impact investments over the years can be categorised as climate change-alleviating investments, but Rai is quick to dismiss this. For instance, he says, the fund invested in a waste-recycling startup called Nepra not because it was good for the climate, but because it wanted to help ragpickers.

But in the last few years, Rai and his team have seen climate change un-doing much of their social impact work. “It was like we were building a sandcastle which was getting washed away by the waves,” he says. Since the fund also has a microfinance unit, Arohan, Rai could see that states such as Orissa and Bihar had to deal with cyclones and floods every other year. Insurance provided relief to an extent, but farmers faced enormous damage.

What they started realising, he says, is that however much work was done on the human side, the damage from the climate is now “sustained” and consistent.

Rai went back to the drawing board. The goal was to figure out ways in which the fund could intervene with climate change “as its first port of call”. But the work would still be impactful.

“The more time we spend, the more we realise that the best tech in the world to clean up carbon is to plant trees, it’s way superior than anything Elon Musk can consider”

Today, Rai says Aavishkaar is more than half way to raising a large fund—which it claims is the largest carbon-only fund in the world—that could be anywhere between US$300 million and US$500 million.

His math goes like this: it costs US$4 to grow a tree in India versus US$16-US$17 in Europe. The carbon credits that a tree can fetch would be between US$12-US$50 depending on the type of sequestration that is required, and the market is going to grow exponentially. Rai says that 15,000 global companies “declaring to become carbon-neutral or net-zero in the next two-three decades” will create an acute supply crunch for negative carbon emissions.

In principle, he is right. The new IPCC report says ecosystem restoration—which includes afforestation and forest cover restoration—has the maximum potential to mitigate climate change. Yet, it has received the least amount of venture capital investment globally.

While the chart above reflects global trends, India is no different. As we wrote earlier, in the 22 months up to November 2021, 66% of all the investments in India in the name of climate tech (or clean tech) went into electric vehicles and mobility, which has the least impact on carbon dioxide reduction. Yet, risk capital continues to flow into e-mobility. (If you’ve watched electric two-wheelers go up in flames and are wondering why everyone and their aunt got on the EV gravy train, you have company.)

Some VCs tell me risky and transformative climate tech investment in India is a few years away.

“Why should private investors fund this? Money is not for doing good, it is for making more money,” Rai quips. “But there are fools like me who will do it. You need to create a crop of dumb idiots who have other priorities than just making money.”

But it’s not like such projects are exactly new in India.

Carbon credit projects have a dud record

Planting trees for concerted carbon removal is at least a decade-old practice. India, in fact, has the largest share of such projects globally at 28%—or 19 out of the 67 initiatives worldwide that are registered as afforestation/reforestation clean development mechanism (A/R CDM) projects.

Incidentally, last year, a series of studies poked holes in not just Indian carbon credit projects but also some high-profile initiatives globally. This also includes one in California in the US which over-counted how much carbon was being sequestered due to forests.

In India, a 2021 study by IIM Lucknow professor Ashish Aggarwal into two such large forest carbon projects showed that both have failed to sequester carbon in line with initial estimates. In Haryana, just 37.45% of the projected target was sequestered in 12 years; in Himachal Pradesh it was only 3% after nearly 14 years. The two projects are being supported by the European Union and the World Bank, respectively.

On the three stated key objectives—mitigation of global warming, improvement of local environmental conditions, and livelihoods of local communities—neither project can be called successful.

When I asked Rai about this study, he seemed unaware, but he also appeared unfazed by the findings. In government-backed projects, he says, funds are generally misused. “The role of our fund will be to direct capital to trees. Because this is the only thing that will save you.”

Aavishkaar’s idea is to bring professional services and expertise to afforestation and reforestation programmes. For instance, if someone wants to make the mangroves in Mumbai denser, the fund would bring in capital and work with the state forest department to rope in professional capabilities for management and measurement.

There’s nothing complicated in growing trees, it will reduce carbon, Rai says emphatically. As a trained forest professional, he is putting money where his real-world experiences lie. And he says he will get “very long-term” capital to the poor of Asia; it’s going to be a 15-year fund, not the regular seven-year fund that most investors work with.

Rai has seen up-close what can be achieved in the long term. “When we first did microfinance in 2002, India’s total outstanding was Rs 100 crore (~US$21 million then), today it’s Rs 300,000 crore (~US$40 billion). Banks used to laugh about microfinance, today RBI doesn’t tire of talking about it. It has happened in front of my eyes,” says Rai.

Ditto agri-tech.

When he made the first agri-tech investment at Aavishkaar in 2008, “people fell off their chair”. Today there are 700 agri-tech companies in India, he says.

The world has to get on an accelerated path to carbon reduction. For the last 20 years, climate remained a global discourse on policy; it was never a capital discourse. That changed with the COP26 summit in Glasgow, Scotland. “Now there’s a serious acceptance that it has become a capital discourse. In the next 10-15 years you will see significant change,” says Rai.

Never underestimate the power of an investor, especially an impact investor. Let’s just say the optimism is Greta Thunberg-esque.

What caught our eye

Of the 76 economies ranked on their readiness for a low-carbon future, Europe leads the pack with 16 countries in the top 20. India is among the laggards and is one of the 20 countries that are making uneven progress.