December 9th, 2022 – The current intensive agriculture system has led to global soil degradation and rising carbon emissions. Without protecting 4 billion acres of cultivated farmland, 8 billion acres of pasture land and 10 billion acres of forest land, it will be impossible to feed the world, keep global warming below 2°C or stop the loss of biodiversity.  Regenerative agriculture is a holistic farming system that focuses on soil health, food quality, biodiversity improvement, water quality and air quality.  It also aims at enhancing water-holding capacity and carbon sequestration.  It is forecasted that regenerative farming on 40% of the world’s cropland would save around 600 million tons of emissions.

Importance of Nature-Based Solutions as Carbon Offsets

Nature-based solutions, including afforestation, reforestation and wetland restoration, can sequester large amounts of carbon dioxide and mitigate rising emissions.  The rising demand for nature-based credits is propelled by a combination of factors, including the critical need to address climate change, the global pressure to halt biodiversity loss, policy and legislation pressures, and the expectations of society and customers. Embracing nature-based solutions and investing in nature-based or carbon credits not only contributes to achieving net-zero goals but also demonstrates a commitment to environmental stewardship.

Carbon offsets are project backed, for example, project developers build a reforestation project, plant trees to sequester carbon from the atmosphere, allow it to be independently certified by adhering to particular standards, and then issue offsets that companies can buy voluntarily.

Carbon offset projects can be segregated into two major types:

1. Avoidance: Avoid carbon from being released by capturing these emissions from industrial factories, storing and reutilizing this energy into useful, greener fuels, as well as preventing deforestation.

2. Removal: Remove carbon emissions that are already present in the atmosphere include projects that sequester carbon, through man-made processes such as direct air carbon capture, or nature-based such as reforestation and ocean algae cultivation.

Companies such as Microsoft, for example, have laid out a plan to be carbon negative by 2030, including a shift away from carbon avoidance and a $1 billion investment in carbon removal technology.  On carbon removal, man-made solutions such as Direct Air Capture with Carbon Storage (DACCS) – technologies that use chemical processes to capture and separate CO2 directly from ambient air – and Bioenergy with Carbon Capture and Storage (BECCS) - capture and permanent sequestration of biogenic CO2 – remain expensive, espouse long lead times, and are championed mainly by the large oil majors, such as Shell, BP, and Aramco.

By contrast, nature-based solutions have been tested for millions of years, are less uncertain and less expensive, and involve conserving, restoring, or better managing existing ecosystems. These ‘carbon sink’ solutions are often referred to as green (carbon sequestered by land ecosystems such as natural forests and soil), brown (carbon sequestered by industrial forests), blue (carbon sequestered by ocean ecosystems), and teal carbon (carbon stored in inland freshwater wetlands).

India is well-positioned to harness nature-based solutions for the voluntary carbon markets – 25% of India is covered in forests, India has the second most cultivable, arable land in the world at 169 million hectares which is well-positioned for regenerative agriculture, and India’s coastal regions boast access to algae, coral and other marine biodiversity reserves. 

Interestingly, mangroves or ocean (blue carbon) credits sequester 10 times the carbon sequestered on a similarly sized plot of land in a forest.  Verra, a standard for certifying carbon reduction emissions, has issued 970,000 credits to blue carbon projects. Over the past year, companies such as Gucci, Apple, and Procter & Gamble, have announced mangrove protection and ocean restoration projects to as part of their carbon removal offsets.

Varaha’s Technology Stack, with Underlying Focus on Nature-Based Solutions

Varaha is building a technology platform to enable decarbonization for smallholder farmers. They generate verifiable and additional “nature-based”, carbon offset credits via science and digital measurement, reporting and verification (MRV).

We chose to take a bet on Varaha for the following reasons:

1. Deep connections to farmer communities and producer organizations across the supply chain in India, with extensive experience in project development and training in zero-tillage, crop diversification, cover cropping, crop residue incorporation; applied based on specific soil and crop type;

2. Ability to harness carbon finance market tools, such as forward pricing, to lock in the demand side, namely international buyers and incentivize sustainable practices through project finance; and

3. Data collection and ground data validation processes prove “additionality” on a farm level, through a farmer-held app and physical soil samples to collect ground-level data, combined with highly sophisticated technologies like remote-sensing-based Machine Learning (ML) models and Light Detection and Ranging (LIDAR).

Varaha shares ~70% of revenue from carbon credit sales directly with their 100,000+ smallholder farmers and land steward partners. They have pre-financed a large portion of their carbon credits through forward contracts, and their ongoing projects are spread over 1 million hectares across five countries (India, Nepal, Bangladesh, Kenya, Tanzania). Apart from directly increasing farmer incomes and reducing CO2 emissions, their projects help improve soil organic matter, reduce erosion, and improve water quality.