NO TAKERS?

INDIA'S CARBON-CREDIT START-UPS ARE ATTRACTING GLOBAL INTEREST FROM THE LIKES OF AMAZON AND MICROSOFT, BUT VENTURE CAPITAL REMAINS CAUTIOUS BECAUSE OF LONG GESTATION CYCLES AND CREDIBILITY CONCERNS

- BY PALAK AGARWAL

IN THE RICE fields of north India, crop residue that was once burned is now being mulched back into the soil, basalt rock powder is being spread across farms, and agricultural waste is being converted into biochar. These practices are quietly feeding a new climate economy where carbon itself has become a tradable asset in the form of carbon credits.

When Amazon signed a $30 million carbon-credit deal linked to India’s The Good Rice Alliance, it signalled something larger than a sustainability partnership. It underscored the growing global interest in sourcing carbon credits from India's farms and rural ecosystems. But, beyond a handful of marquee deals, India's voluntary carbon market remains fragmented and fragile. While climate tech continues to attract investor attention, venture capital (VC) has largely stayed cautious on carbon credit start-ups, wary of long project cycles, credibility concerns, and uncertain returns. The result is a sector caught between enormous climate promises and persistent market scepticism.

Vasudha Madhavan, CEO at Ostara Advisors, one of India's first climate-tech focused investment banking firms, points out that investments in climate tech have broadened significantly beyond electric vehicles (EVs), which was among the first focus areas. It has moved to battery storage, precision agriculture, biofuels and so on.

However, the carbon credit ecosystem remains immature, and the start-ups are at a very early stage.

Carbon credits are certificates generated by projects that reduce, avoid, or remove greenhouse gas emissions from the atmosphere.

The climate impact of these projects is scientifically measured, and independent auditors verify the amount of carbon reduced or removed. Each carbon credit typically represents one tonne of carbon dioxide (CO2), which companies can buy to offset their own emissions and meet climate goals.