Carbon Streaming Announces $3.3 Million for Sustainable Rice Farming Stream
US$3.3 Million for Improved Rice Cultivation Practices Reducing Methane Emissions, and Water and Energy Consumption
Carbon Streaming Corporation is pleased to announce that it has entered into a carbon credit streaming agreement with Core CarbonX Solutions Pvt Ltd. and its services provider, Core CarbonX Solutions Private Limited, to develop its Nalgonda Rice Farming methane avoidance grouped project located in the Nalgonda District, Telangana State, India.
The Project enrolls rice farmers in a program to reduce greenhouse gas emissions by improving their rice cultivation practices and rewards participants with a portion of the proceeds received through the sale of Verified Carbon Units generated. The improved cultivation practices and resulting GHG emission reductions are achieved through implementing Alternate Wetting and Drying and Direct-Seeded Rice farming methods.
Streaming Agreement Highlights:
- The Project is expected to generate approximately 2.5 million VCUs over seven years, in a range of approximately 300,000 to 400,000 VCUs annually, and is expected to be independently verified and registered through Verra.
- Carbon Streaming will receive 100% of the VCUs generated by the Project, with ongoing payments to Core CarbonX for each VCU sold.
- Core CarbonX is expected to make its first delivery under the Carbon Stream in the second half of calendar year 2023.
- Carbon Streaming has made an initial upfront deposit of US$1.55 million on closing, with an additional payment of US$1.78 million as the Project achieves registration and credit issuance milestones.
- With the Project focused on methane avoidance and strong co-benefits, the Company expects VCUs generated to be sold at a premium to market pricing, which has ranged from approximately US$6.50/VCU to US$9/VCU year to date.
- Carbon Streaming expects payback in less than four years assuming current market pricing for agricultural methane avoidance credits.
- The Project focuses on enrolling rice farmers in a program to implement AWD rice cultivation practices and educate them on the benefits of this technique.
- The AWD protocol decreases water consumption by up to 30% and allows for more oxygenation of soil, reducing anaerobic decomposition and methane emissions by up to 50%.
- All emission reductions from the Project are considered methane avoidance, delivering action towards the UN Global Methane Pledge.
- The Project targets six UN Sustainable Development Goals, including Climate Action (13), No Poverty (1), Zero Hunger (2), Decent Work and Economic Growth (8), Responsible Consumption and Production (12), and Partnerships for the Goals (17).
Carbon Streaming Founder and CEO Justin Cochrane stated: “We are delighted to announce our first carbon stream on an agricultural project and partnership with Core CarbonX. This stream continues to diversify our high-quality portfolio by project type and geography.”
Mr. Cochrane continued: “Core CarbonX has been collaborating with organizations and guiding clients successfully for more than a decade on climate mitigation projects and supporting communities to achieve alternative, sustainable sources of income to improve livelihoods.”
“We are excited to collaborate with our new partner, Carbon Streaming, to bring Alternate Water Management Practices (AWD and DSR) to rice fields in the Nalgonda District of Telangana State, India,” said Niroj Mohanty, Managing Director of Core CarbonX. “Carbon Streaming’s innovative climate financing allows us to leverage our considerable expertise to provide enrolled farmers with tools to farm more sustainably and reduce methane emissions.”
Core CarbonX Solutions Private Limited was established in India in 2008 as a climate and sustainability consulting firm, serving clients in more than 10 countries. It has been active in both the voluntary and compliance carbon markets, facilitating the generation of one million carbon credits from renewable energy and nature-based solutions.
For this Project, Core CarbonX is partnering with farmer producer organizations and local universities to educate farmers on the benefits of implementing the AWD and DSR methods, and to provide implementation training. The participating farmers will shift from continuously flooding the fields to the AWD method, and from the transplanting to DSR method. As part of the Project, Core CarbonX will also install field water tubes to monitor the water depth to notify farmers when to irrigate their fields. The conventional rice cultivation practice of continuous flooding requires large amounts of water and also results in methane production through anaerobic decomposition of soil. By converting to the AWD protocol, water usage is expected to decrease up to 30%, resulting in energy conservation from reduced water pumping, and GHG emissions are estimated to decrease by up to 50%.
Pursuant to the project plan, the Project expects to enroll 40,000 hectares (“ha”), with full enrollment anticipated by the end of 2022. The Project is expected to reduce approximately 2.5 million tCO2e emissions and generate an equivalent number of carbon credits over the seven-year term of the Carbon Stream, in a range of approximately 300,000 to 400,000 VCUs annually commencing in the second half of calendar year 2023. The Company will receive 100% of the VCUs generated by the Project and will have the option to renew the Carbon Stream for up to 14 additional years, upon mutual agreement of the parties. Emission reductions generated by the Project are expected to be independently verified and registered by Verra as Core CarbonX is currently engaging an auditor for validation.
Under the terms of the Nalgonda Rice Farming Stream, the Company has made an initial upfront deposit of US$1.55 million upon closing. The Company will make an additional milestone payment of US$1.78 million as the Project achieves various milestones, including reaching enrollment of farmers representing a total of 40,000 ha, Project verification by Verra and credit issuance. Carbon Streaming will also make ongoing delivery payments to Core CarbonX on the sale price for each VCU sold under the Carbon Stream, which is within the range indicated for the Company’s other carbon credit streaming agreements. Proceeds from the Carbon Stream are expected to be used for Project implementation and registration costs.
In partnering with Core CarbonX, the Company is mindful of the passage of the Energy Conservation (Amendment) Bill, 2022 in India, which will ban the export of certain carbon credits until the country meets its climate goals. Following significant analysis, the Company believes that this Bill pertains primarily to the renewable energy sector and is not directed at voluntary carbon credits such as those produced by the Project, which are outside of this sector.
The Company expects VCUs from the Project to be sold at a premium to typical avoidance-based credits pricing due to emission reductions being entirely from methane avoidance as well as the strong co-benefits of the Project. Pricing for other methane avoidance credits ranged from approximately US$6.50/VCU to US$9/VCU year to date. Based on these prices, the Company expects to achieve a payback on its capital investment in less than four years.
Source: Carbon Streaming