Farmers Get Paid for Soil Carbon: How the New Carbon Market Works

Farmers in Punjab and Haryana are among the first in India to receive direct payments linked to carbon stored in their farm soils. More than 2,500 smallholder farmers are set to receive over ₹2.9 crore under a farmer carbon programme that links regenerative farming practices with payments from carbon credits.

The first payments were released on September 17 at Punjab Agricultural University in Ludhiana. The programme covers farmers who adopted practices such as direct-seeded rice, reduced tillage and crop-residue management. The changes were monitored, measured and independently verified before carbon credits were issued.

How Farmers Earn From Carbon Credits

The programme, called Aadi, was launched in 2019 with technical guidance from ICAR. It measures changes in greenhouse-gas emissions and soil carbon resulting from specified farming practices. Once the reductions and carbon gains are verified, credits can be issued and farmers receive a share of the resulting revenue.

The first issuance covered about 30,000 acres and more than 50,000 carbon credits. Participating farmers received approximately ₹3,000 to ₹15,000, depending on their share of the credits generated from their fields. Farmers who joined after 2022 will receive payments in later monitoring cycles.

The programme covers more than two million acres and over 100,000 farmers across seven states. It uses the Verra VM0042 methodology for agricultural carbon credits. Farmers do not receive money simply for calling a practice regenerative. Their changes need to be measured and verified before credits can be issued.

The payment system gives farmers two options under the programme. They can choose an assured upfront payment or receive 75% of the net carbon revenue after the credits are sold. Grow Indigo said it released payments from its own funds before the credits were fully sold.

Which Farming Practices Can Generate Credits?

Direct-seeded rice is one of the practices included in the programme. Instead of raising rice seedlings and transplanting them into puddled fields, farmers directly sow rice seed. The practice can reduce irrigation requirements compared with conventional transplanting, though its suitability depends on soil, weather and farm management.

Reduced tillage is another practice used in the programme. Farmers disturb the soil less during cultivation, which can affect fuel use, soil structure and carbon levels. The benefits depend on the crop, soil and farming system, so farmers need locally suitable recommendations before changing their tillage practices.

Crop-residue management also forms part of the programme. Instead of burning residues after harvest, farmers can retain, incorporate or otherwise manage them. The government said the enrolled fields kept more than two lakh tonnes of crop residue out of fires and avoided an estimated 1,000 tonnes of PM2.5 emissions.

For the enrolled fields between 2019 and 2022, the programme estimates that farming changes saved about 45 billion litres of water. These figures come from the programme’s assessment and should not be treated as a guaranteed saving for every farmer adopting the same practice.

ICAR researchers have supported the programme through greenhouse-gas accounting, soil sampling, crop modelling, field training and satellite and remote-sensing work. These measurements matter because carbon-credit payments depend on demonstrating that claimed changes actually occurred and can be independently verified.

What This Means For Farmers

The new payments create another possible source of farm income, but carbon credits are not a guaranteed payment for every sustainable farming practice. Farmers need to participate in an eligible programme, follow its requirements and maintain records that allow changes in farming practices and carbon outcomes to be assessed.

Farmers should also understand how payments are calculated. The amount depends on the carbon credits generated and the terms of the programme. Costs of measurement, verification, programme management and credit sales can affect the money ultimately reaching farmers.

The carbon market is also linked to changes already being encouraged through agricultural programmes. Residue management, reduced soil disturbance, diversified cropping, efficient water use and direct seeding can have effects beyond carbon accounting. Farmers should consider whether a practice suits their farm rather than adopting it only for a possible payment.

Punjab has also reported a sharp decline in farm-fire incidents. Government data cited in the September 17 announcement recorded 5,114 farm-fire incidents during the 2025 paddy harvesting season, 93% lower than 2021 and 90% lower than 2022.

For farmers, the bigger question is how the carbon market develops. If more programmes begin measuring soil carbon and emission reductions, farmers could have another route to earn from changes that conserve water, reduce residue burning and improve soil management.

The first payments show that carbon credits are no longer only a market concept being discussed in policy circles. Farmers are now receiving money linked to measured changes in their fields. The model will need continued monitoring and clear payment terms as more farmers enter carbon programmes.

Farmers considering such programmes should ask who measures the carbon, which methodology is used, how credits are verified, what share goes to farmers and when payments are made. These details can determine the actual value of participation.

For now, the Punjab and Haryana payments provide an early example of how agricultural practices can be linked to a new income stream. The experience of these farmers will also help show how carbon-credit programmes work when they move from policy and research into actual farm payments.