Everyone want carbon credits: What really is it and why is it needed?

In India’s latest budget for 2026–27, the government announced a comprehensive plan to tackle climate change while uplifting its economy and those who drive it.

A rupees 20,000 crore programme to help capture and store carbon was announced as part of the budget by Finance Minister Nirmala Sitharaman. ,

This program will not only help industrial titans but also farmers. They can join in by changing how they farm to trap more carbon in the soil and trees. In return, they get “carbon credits” they can sell for extra money.

This scheme is part of India’s push to create a carbon market where people trade these credits, like goods.

But what exactly are carbon credits?

WHAT ARE CARBON CREDITS?

Imagine carbon credits as special points or certificates.

Each one stands for reducing one tonne of carbon dioxide (CO2) or other harmful gases that contribute to a warming planet through high levels of emissions and pollution.

These emissions trap heat and are warming the planet at an alarming rate, and, if not curbed, would eventually lead to catastrophic consequences.

Here’s how credits work.

If a company pollutes a lot, it might have to buy credits to offset or balance out its bad emissions.

On the other hand, if someone, like a farmer, does something good, like planting trees that absorb CO2, they earn credits. These credits can then be sold to polluters who need them. It’s like a reward system. Good actions get paid, bad ones cost money.

Think of it as a school points system. Kids who clean the classroom get points (credits) they can trade for prizes. Kids who make a mess have to buy points from others. This encourages everyone to be cleaner.

HOW CAN CARBON CREDITS HELP INDIA?

Carbon credits can help India in key ways.

The nation aims to reach net-zero emissions by 2070. In simpler words, India has until 2070 to grow efficiently by removing as much pollution as it creates.

Carbon credits come in as an incentive.

They push big industries to cut emissions, and they also push farmers to practice greener agriculture, like using less fertiliser, or more efficient rice farming to reduce methane emissions. Methane is more potent than carbon when it comes to trapping heat.

While nations find ways to beat climate change, carbon credits can help, while also boosting the economy. This makes it particularly compatible with India, a nation looking to retain the momentum of its growth while also battling climate change.

The carbon market, where these credits are usually dealt, creates jobs and improves earnings for farmers.

Many Indian farmers struggle with low incomes and bad weather. Carbon credits can help them deal with both.

It gives extra money besides what they earn from crops. They can plant trees, use natural fertilisers, or improve water use in rice fields to earn credits. They sell these credits and get cash to buy better seeds, tools, or help their families, especially when crops don’t sell well or weather turns bad.

For the country, it means cleaner air, better soil, and fewer climate problems.

Big factories and industries buy these credits to follow pollution rules, so they try to pollute less. This cuts down harmful gases, helps control extreme weather like floods and heatwaves, and makes cities healthier to live in. It also grows a greener economy with new jobs in clean farming and technology.

With them, India can grow economically and sustainably, and meet global climate committments like the Paris Agreement, which aims to limit the planet's warming to 1.5C.

The scheme brings clear wins for farmers and for India as a whole.

WHY DO CARBON CREDITS MATTER?

India is one of the world’s biggest countries, with the highest population of over 1.4 billion people.

And it is also on the front line of climate change impacts, ranging from extreme heat and cold, erratic weather patterns and other factors compounding these impacts.

Every summer, like 2025 proved, millions face prolonged heatwaves, rising energy demands, water scarcity, and droughts. Monsoon lashes regions in the country that are not used to it and the ones that see scant rain.

The winters so far have been an extreme and unpredictable one. With dipping temperatures in unusual regions, pollution mixing with fog, and a lack of snowfall in the mountains.

These impacts don't discriminate. They hit across the board. They hit farms, homes, factories, mountains, plains, coasts, and even deserts.

What is clear is India needs whichever solution, big or small, it can work with.