How India Could Turn Green-Policy Delays into a Digital Advantage

The foundations of carbon markets, laid by the Kyoto Protocol in 1997, allowed trade in “carbon credits” – with each credit the equivalent of a tonne of carbon dioxide (CO2) reduced, avoided or pulled from the air. Buyers of carbon credits can, based on the protocol, offset their actual emissions to meet environmental social responsibility, or ESR, commitments.

Tradable carbon credits are produced by a variety of projects that lead to an overall reduction in emissions, from a wind farm that displaces coal generation, an efficient cookstove programme that uses lesser firewood, a forest protected from logging or restored on degraded land. All such efforts can, in theory, generate credits.

India is currently building its own domestic carbon market. On June 28, 2023, the Union government notified the Carbon Credit Trading Scheme to establish the Indian Carbon Market. In parallel, the Green Credit Programme was launched to incentivise voluntary environmentally-positive actions. These include tree plantation, water conservation, sustainable agriculture, waste management, mangrove restoration and air pollution reduction.

Under the new trading scheme, Tamil Nadu has launched a pilot to restore the Muthupet mangrove forests that are capable of sequestering, in waterlogged soil, several thousand tonnes of carbon per hectare.

Measurement, reporting and verification

However, to go from “a mangrove being planted” to a tradable carbon credit, another crucial piece is required: a methodology that defines how to measure what a project is doing on the ground (or in the water). Then also to report those numbers in a standardised format and, finally, having an independent party to verify the claims being made. This methodology, and the process of executing it, is known as Measurement, Reporting and Verification, or MRV.

Also read: GEI Target Rules: The Cost to Pollute Is Still Too Cheap in India

For a mangrove project, MRV means assessing the coastline before restoration begins, the effectiveness of the restoration, how quickly the restored areas are able to accumulate carbon, and how all of these are converted into “credits”, year after year.

Traditionally, MRV has meant manual surveying with clipboards and GPS devices: field teams laying out sample plots in forests, measuring tree diameters, collecting fuel use data from kitchens or checking documents at power plants. Independent auditors then visit periodically – once every few years – to verify the data and sign off on credits issued.

This approach is expensive. Studies suggest MRV can account for up to 20% of the cost of generating a credit in forest carbon projects. This makes smaller projects economically untenable.

Another issue is that it gives only occasional snapshots of reality in complex systems like forests, farms and communities, which change from season to season. Often, under traditional MRV methodologies, verification only happens once every five or ten years. This is too slow for corporate reporting or investor risk assessments.

Measuring a tree. Photo by Dave Brenner, SNRE, fkxsbo/Flickr.

Most notably, the approach produces imperfect data. First, there is inherent information asymmetry: project developers often control data, while auditors and buyers see only parts of the whole. This creates opportunities for cheating. Second, even with good actors, manual surveying and backend workstreams separated in silos expose projects to a medley of data entry errors, biased assessments and lossy data pipelines.

What you get in the end is a hotchpotch of unstandardised, error-prone metrics.

Also read: Forest Advisory Committee Okays Scheme to 'Trade' Forest Land

With recent “greenwashing” scandals, this model is creaking. Large buyers and Environmental, Social and Governance (ESG) teams now want near-real-time insight into their “nature-based” assets; they want to know if they are thriving, burning or facing community backlash.

These gaps in traditional methodologies are driving a global push towards more digital alternatives or dMRV methodologies that leverage satellites, drones, sensors and machine learning to continuously track projects, inexpensively and accurately – producing better quality data and making cheating hard.

Arriving late

Older, more mature carbon markets like Europe were created when Earth Observation data was sparse and of low quality, and machine learning had still not hit the inflection point after which it could become useful for widespread application on the ground. Consequently, regulations were then wired for traditional methods, not the digital advances of today. It is against this scenario that India is writing its carbon and green-credit rulebook – afresh and with digital technologies already battle-tested and commercially available.

Put simply, while international carbon markets are reworking legacy frameworks to make room for digital methodologies, India has the unique opportunity to bake dMRV into its rules from day one. This integration could help scale the carbon credit market domestically, bringing smaller projects into the fold, but also establishing international credibility for its domestic credits.

Space and AI boom

Further, India’s space policy and Artificial Intelligence ambitions lay the groundwork for what could be a thriving domestic dMRV industry.

The Indian Space Policy, 2023, moved towards deregulating the space sector, with limited government oversight on highly sensitive data. The policy explicitly allowed Indian entities to produce and distribute Earth Observation-based data and services, and on the other end, users of space services to freely procure these outputs.

At the same time, the Union cabinet has approved a national-level India AI Mission with an outlay of Rs 10,371.92 crore to build public AI compute, datasets and indigenous models under the “Make AI in India, Make AI Work for India” banner.

Destruction of dense forests is one of the main reasons behind the decline in carbon stock. Photo: Kanchan Srivastava/Mongabay India.

Both moves facilitate increased domestic participation in modern geospatial intelligence services, the cornerstone of dMRV. India has already seen rapid mobilisation in this aspect. Fast-growing start-ups like Pixxel and GalaxyEye are delivering the end-to-end pipeline: They are building and launching satellites with advanced Earth Observation imagery, clubbed with frontier analytics in domains such as agriculture, aquaculture, forestry, energy and climate, to name just a few.

Some are already doing it

The subcontinental private sector is already engaged in large-scale application of dMRVs for carbon projects.

Boomitra, a global climate-tech company, works with tens of thousands of smallholder farmers across India, using satellites and machine learning models trained on soil samples to estimate changes in soil carbon – instead of sending surveyors to every field.

Another company, Varaha, a Gurugram-based venture, tracks such “regenerative agriculture” projects using a similar technology stack. Their latest project, Kheti, has attracted Rs 3 crore funding to work with 3,37,000 smallholder farmers over 6,75,000 hectares in Haryana and Punjab.

Also read: Why the Soil and Trees May Not Absorb as Much Carbon as We Think

Anaxee Digital Runners does things a little differently: it has combined geo-tagged photos taken on smartphones with drones and satellite imagery in a system that can track millions of trees for afforestation projects.

These examples illustrate the potential for dMRV in India. The space is nascent and nature-focused tech providers are still few in number. Effective policy could help nurture this space.

India is yet to decide

Read the official notifications, though, and “digital MRV” barely appears. The Bureau of Energy Efficiency has published a detailed framework for the compliance side of the Indian Carbon Market and talks about “accurate, transparent and credible” MRVs, but does not explicitly mention monitoring technology.

The same is true for the Green Carbon Programme. A recent revision to the methodology for tree-plantation credits hints at a more digital future, but falls short of anything more concrete. With the update, Green Credits will be awarded only after at least five years of restoration and once a minimum 40% canopy density is achieved. In practice, this is hard to do cost effectively without remote sensing. It looks like a digital-ready rule, even if it doesn’t announce itself as one.

Following the breadcrumb trail, a Food and Agriculture Organisation-convened workshop in New Delhi in June called for “strengthening digital MRV systems through AI, remote sensing, and blockchain” to deal with the complexity of agricultural projects. The workshop hosted representatives from environment and agriculture ministries, the NITI Aayog, the NABARD, and even companies like Boomitra.

Climate consultancies, too, are nudging policymakers towards tech-led MRV. A recent analysis of India’s carbon market architecture by Crisil and Eversource Capital argued that dMRV will be critical to credibility as the Indian Carbon Market rolls out.

For now, though, most of the discourse around dMRV lives in workshops, white papers and start-up blogs, not in binding regulation. Policymakers are yet to decide on the role dMRV will play in India’s domestic carbon and nature markets and, consequently, in India’s role in the global ecosystem.

One thing is clear though. dMRV is slowly becoming the status quo. India can build for the new normal – or play catch-up in a few years.

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