What the Carbon Credit Market Misses in Building Climate-Resilient Agriculture
Placing farmers’ resilience at the forefront of climate investment.
Amid an increasingly unpredictable climate, agriculture faces mounting pressure. Farmers everywhere need innovations that enhance resilience, yield, and efficiency. The global conversation on climate action in agriculture has become narrowly focused on carbon credits, with funding and attention increasingly driven by the promise of monetizing emissions reductions rather than supporting practical adaptation on the ground. This fixation has distorted funding priorities, drawing attention and capital toward what can be measured in carbon terms while pushing aside the urgent work of helping farmers adapt to a changing environment. Smallholder farmers (SHFs) produce 80% of food in Asia and South Saharan Africa and are essential to the stability of global food systems. Yet they are especially vulnerable to the risks and inefficiencies of carbon credit markets, which often exclude them or fail to deliver fair, reliable benefits.
Carbon credits emerged from environmental economics as a market-driven tool to reduce emissions. A carbon credit is a tradable instrument (typically a virtual certificate) that conveys a claim to avoid GHG emissions or to enhance removal of GHG from the atmosphere (https://offsetguide.org/what-are-carbon-credits/). In principle, such mechanisms can create new revenue streams for farmers. In consequence, nature-based climate solutions like tree planting, soil carbon storage, or agroforestry, fit neatly into carbon market frameworks because they produce quantifiable, tradable units. Yet these are primarily mitigation measures. While they bring benefits like flood protection and reduced soil erosion, they are not the adaptation strategies that are not usually built around smallholder farmer challenges. With the climate crisis already unfolding and certain to intensify, adaptation must stand alongside mitigation as an essential response.
On the ground, this distortion leaves many smallholder farmers behind. Carbon markets often favor large-scale operations capable of handling complex verification requirements and upfront costs. Smallholders, by contrast, face barriers such as high participation fees, delayed payments, and credits too low in value to justify their effort. In 2025 a case study in India demonstrated that only a handful of small farmers benefited from cash payments as part of a large-scale carbon project, and even then, amounts were nominal, barely offsetting their participation costs (https://www.maastrichtuniversity.nl/file/dunja-lange-thesisfinalpdf). In many other contexts, farmers express frustrations with excessive bureaucracy, unclear methodology for credits, and weak decision-making power in market participation. When projects are not designed around core farming needs, initial enthusiasm fades, leading to disappointment, abandonment of sustainable practices, and even increased risk as farmers revert to more familiar but less sustainable methods.
What smallholders need are the tools and systems that allow them to adapt. Investments in efficient irrigation, digital advisory platforms, and regenerative soil management deliver far greater long-term benefits than narrowly focused carbon schemes (https://www.evergreen-innovation.com/smallholder-needs-assessment-report-2025-1-1). These solutions strengthen livelihoods, stabilize yields, and build local economies. Yet they often go underfunded precisely because they do not generate immediate, monetizable carbon outcomes.
However, some emerging models show that carbon finance can support, rather than distort, agricultural adaptation. Mirova’s recent $30.5 million investment in Indian climate-tech startup Varaha illustrates this potential (https://techcrunch.com/2025/11/12/kering-backed-fund-mirova-pours-30-5m-into-indias-varaha-for-regenerative-farming-push/). By integrating upfront financing, streamlined MRV (Measurement, Reporting, Verification), and a revenue-sharing model, Varaha overcomes the common obstacles that limit smallholder participation in carbon credit markets. The platform directs carbon revenue toward regenerative farming practices, defined as management methods that restore degraded soils. For example, adaptive grazing, no-till planting, and reduced reliance on pesticides and synthetic fertilizers. This approach is already helping hundreds of thousands of farmers improve soil health, water efficiency, and yields. When designed around farmers’ needs, carbon-credit programs like these can link climate mitigation with on-the-ground resilience, proving that carbon credit markets can complement adaptation instead of undermining it.
A balanced approach to climate-smart agriculture is now essential. Carbon credits can play a role, but they must be integrated into a wider framework that values resilience, productivity, and equity. Carbon credits should help finance and reduce the risk of farmers’ longer-term investments by serving as a funding stream linked to the outcomes of the innovations or solutions they implement. While mitigation, reducing or avoiding emissions, is relatively straightforward to measure, adaptation focuses on building resilience to climate impacts, which is harder to quantify and often context-specific, leaving it underfunded despite its critical importance. Addressing this imbalance requires robust methods to measure adaptation outcomes, capturing the real improvements in resilience generated on the ground. By restoring adaptation to its rightful place alongside mitigation, agricultural climate action can serve both farmers and the planet, ensuring the climate conversation addresses not only what can be counted in carbon but what truly counts for people and food systems.
About the Author
Francesca Knoell-Harris,
EIP Communications and Impact Lead
Francesca leads Communications at EIP, shaping the organization’s voice and strategic positioning across the agri-tech and impact ecosystem. She also contributes to Impact Measurement and oversaw the development of the EIP Impact Methodology.