Overlooked and Underutilised: Blue Carbon Credits in India’s Voluntary Carbon Market

Introduction

Blue carbon is the organic carbon that is stored and captured by oceans and coastal ecosystems, including seagrass meadows, tidal marshes, and mangroves. Despite covering less than 2 percent of the total ocean surface, these blue carbon ecosystems account for nearly 50 percent of carbon burial in marine sediments.^[1] Their productivity is unparalleled—a square metre of seagrass removes about 0.5 pounds of carbon from the atmosphere yearly. This amount is more than triple the rate of carbon storage of a square meter of tropical rainforest, more than seven times the rate of storage in temperate forests, and more than 10 times the rate of storage of grasslands.^[2] Similarly, mangroves can store up to four times more carbon per unit area than terrestrial forests.^[3] Today, 33 billion metric tons of carbon is stored in blue carbon ecosystems, equal to 81 percent of the emissions produced globally in 2023.^[4] Blue carbon sinks are also more stable than their terrestrial counterparts, as they do not easily release stored carbon back into the atmosphere. Table 1 summarises the components of blue ecosystems, their global extent, and contribution to emissions if converted or degraded. 

Table 1. An Overview of Blue Carbon Ecosystems

Ecosystem	Global Extent (Mha)	Conversion Rate (%/year)	Carbon Emissions (Pg CO2/year)	Estimated Cost (Billion US$/year)
Tidal Marsh	2.2-40 (5.1)	1.0-2.0 (1.5)	0.02-0.24 (0.06)	0.64-9.7 (2.6)
Mangrove	13.8-15.2 (14.5)	0.7-3.0 (1.9)	0.09-0.45 (0.24)	3.6-18.5 (9.8)
Seagrass	17.7-60 (30.0)	0.4-2.6 (2.5)	0.05-0.33 (0.15)	1.9-13.7 (6.1)
Total	33.7-115.2 (48.9)	–	0.15-1.02 (0.45)	6.1-41.9 (18.5)

Source: State of the Blue Carbon Market 2024 ^[5]

Beyond their role in carbon sequestration, blue carbon ecosystems^[a] also provide many co-benefits. They help in nutrient and carbon cycling, serve as nurseries for a broad range of marine and terrestrial species, aid in shoreline protection, and sustain the livelihoods and well-being of local communities.^[6] Mangrove ecosystems alone, for instance, protect more than 6 million people^[7] from being affected by flooding annually and thereby prevent losses of US$24 billion^[8] in productive assets; they also provide support for 80 percent of global fish populations.^[9] This is especially relevant for the Global South, where oceans, and blue carbon ecosystems by extension, hold a different significance, with marine and coastal ecosystems constituting a ‘GDP of the poor’^[10] by providing life-supporting services including food security, income, and disaster-risk reduction for vulnerable populations.

Despite the significance of blue carbon ecosystems, however, human activities have resulted in the loss of about 50 percent of the historical extent of vegetated soft-sediment habitats.^[11] Over the past five decades, 20–35 percent of mangroves have become extinct, mostly due to land-use change from rapid urbanisation and the conversion of mangroves for agriculture, aquaculture, and coastal development.^[12] The stability of these sinks depends on their preservation, and as these ecosystems degrade, they release stored carbon. Moreover, the damage caused is not just limited to carbon-sink degradation. Mangrove loss, for instance, also affects fundamental factors of production,^[13] which are often not accounted for, nor even acknowledged, in the formal market framework.

To address these concerns, blue carbon credits have emerged as a market-based mechanism to finance the protection, restoration, and/or management of these ecosystems. Yet, historically, despite its critical role in carbon sequestration, blue carbon often gets overshadowed by land-based carbon offsets in voluntary carbon markets (VCMs),^[b] as these offer easier, cheaper, and larger-scale operation.^[14]  Blue carbon remains a niche segment within global and national carbon markets, including India’s, with just 10.9 metric tons of carbon dioxide equivalent (MtCO2e) credit volumes traded in the 2020–2023 period.^[15] While India is among the top global suppliers of carbon offsets, issuing 278 million credits in the VCM between 2010–2022, and accounting for 17 percent of the global supply,^[16] most of the projects are renewables and forestry-based. Figure 1 shows the relatively small representation of blue carbon projects in VCMs globally.

Figure 1. Issuance of Credits in the VCM, by Sector

Source: Howse and Atkinson^[17]

Note: The reported figure likely underestimates the actual market size, as the dataset includes credit issuances only from Gold Standard, Verra, ACR, and CAR, and does not account for issuances from Plan Vivo.

However, given the resurgence of interest in blue carbon projects globally,^[18] and growing demands for transparency and legitimacy, the global VCM is expected to pivot^[19] towards high-integrity credits. Private-sector trade and industry associations have already made bold commitments. Salesforce, for instance, has set a goal to purchase one million tons of high-quality blue carbon credits, equivalent to more than US$10 million, to grow ocean-based markets.^[20] The Symbiosis Coalition, which includes Google, Meta, Microsoft, and Salesforce, has made advance market commitments for up to 20 million tons of nature-based carbon removals, with upcoming funding rounds focused on mangrove restoration.^[21]

Thus, India, with one of the world’s largest mangrove ecosystems, is well positioned to become a global leader in blue carbon credits issuance. India’s mangrove ecosystem covers 4,992 square kilometres,^[22] with the Sundarbans in West Bengal, the Godavari mangroves in Andhra Pradesh,^[23] and the Pichavaram mangroves in Tamil Nadu^[24] constituting carbon sinks that hold immense potential for blue carbon projects. India is also home to seagrass ecosystems in Tamil Nadu, Lakshadweep, and the Andaman and Nicobar Islands, which can be leveraged to generate carbon credits.

Given the significance of blue carbon credits, and their untapped potential in the VCM, this brief identifies the opportunities and challenges related to blue carbon credits in India’s VCM. It describes official initiatives to utilise blue carbon, identifies the barriers to credit adoption, and explores strategies to promote blue carbon projects in India’s VCM.

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Current Blue Carbon Initiatives

Recognising the importance of conserving blue carbon resources, the Indian government has launched the Mangrove Initiative for Shoreline Habitats & Tangible Incomes (MISHTI) scheme to provide financial assistance to local communities to undertake mangrove plantation activities.^[25] MISHTI’s funding is drawn from various schemes and programmes implemented by both the Central and state governments and is not structured to directly generate tradable carbon credits. At the state level, Gujarat has signed three memorandums of understanding (MoUs) that will generate carbon credits worth INR 2,217 crore or over US$266 million from planting mangroves.^[26]

Similar blue initiatives are being developed by other players. For instance, Kosher Climate’s proposed activity under Verra aims to restore up to 2,000 hectares of degraded mangrove ecosystems in India. The project also aims to ensure the active participation of women in various stages of project implementation and post-implementation management.^[27] Another project, which is under validation at the time of writing, seeks to enhance blue carbon sequestration, improve coastal protection, support biodiversity, and create sustainable livelihoods for vulnerable communities.^[28] While such projects are a step in the right direction, they will take time to successfully contribute to scaling up blue carbon projects.

The Sundarbans Mangrove Restoration project is another key initiative (Table 2).^[29] Unlike conventional carbon offset projects that sell credits in the VCM, the Sundarbans project takes a different approach. Rather than offering credits for corporate purchase, Livelihoods Fund, a private entity that has covered the project costs, has no plans to sell the credits currently. It is instead using the credits as part of a socially and environmentally valuable emissions reduction offset strategy for the company.^[30] However, the project’s impact on the broader carbon market remains constrained as the credits are not actively traded.

Table 2: Verra’s Sundarbans Mangrove Restoration Project in India

Case Study	India Sundarbans Mangrove Restoration Project
Project Registration Date	2020
Crediting Period Term	1st, 28/09/2010 – 27/09/2030
Proponent	Livelihoods Fund SICAV SIF, Paris, France
Size	6,000 ha
Summary	1. This reforestation project is a community initiative aiming to provide a new financing mechanism and to allow communities to benefit from the carbon market 2. Livelihoods currently is not planning to sell the credits. 3. The project costs have been covered by Livelihoods and these costs include supporting the local community restoration activities.

Source: Author’s own

Barriers to the Uptake of Blue Carbon Credits in India’s VCM

While India holds immense potential in blue carbon ecosystems, its VCM has not capitalised on these opportunities. The following paragraphs discuss these reasons in turn.

Institutional Barriers

The absence of an enabling institutional environment is one of the primary obstacles to scaling blue carbon projects in India. Land-based carbon offsets, particularly through renewable energy and afforestation credits, benefit from clearer institutional structures and corporate investments, which blue carbon credit projects often lack. Unlike solar, wind, or forestry-based projects, blue carbon projects fall into the regulatory grey zones that involve multiple authorities—the Ministry of Environment, Forest and Climate Change, the State Coastal Zone Management Authorities (SCZMAs), the forest departments, and the fisheries departments.^[31]  This institutional fragmentation results in slow approvals and bureaucratic hurdles.

In addition, unlike land-based projects that have relatively straightforward ownership models,^[32] blue carbon ecosystems are often classified as common property resources, or protected areas. This makes companies hesitant to invest in such projects where long-term carbon tenure rights are unclear. Ambiguous benefit-sharing mechanisms with local communities further complicate the situation. At present, there are no standardised models in India that guarantee a fair distribution of revenues from carbon credits to stakeholder communities. This lack of clarity discourages active community participation, which undermines long-term project sustainability.

Measurement, Reporting, and Verification (MRV) Gaps and Valuation Challenges

Measurement, Reporting and Verification (MRV) processes are essential to ensure the credibility of any carbon credit project. Investors require baseline data, performance indicators, and impact metrics to assess the financial viability and environmental returns of a project.  In the absence of well-defined MRV mechanisms, issues such as greenwashing (or, in this case, ‘blue-washing’) and low investor confidence emerge. Unlike terrestrial projects, where carbon sequestration can be estimated using established satellite-based models and other existing methods, blue carbon MRV is relatively new, especially for region-specific data.^[33] The existing methods are expensive, time consuming, and require specialised knowledge. In addition, while research that supports coastal carbon initiatives has seen substantial progress, the dissemination of findings to a broader audience is often inadequate.^[34]

This underdevelopment of MRV mechanisms for blue carbon credits also hinders their accurate valuation. Uniform valuation approaches cannot be applied to ecologically heterogenous coastal ecosystems—carbon sequestration rates vary by site, species composition, and local environmental conditions. Co-benefits are also often not factored in when determining credit prices. Thus, in the absence of clear valuation methodologies, blue carbon projects risk being perceived as high-cost and low-return, especially when compared to terrestrial projects.

Environmental Risks

Environmental risks further limit corporate investments in blue carbon projects. While terrestrial projects, such as those aimed at forests, can be protected through legal land tenure and conservation policies, blue carbon ecosystems are relatively more sensitive to climate change. For instance, sea level rise and coastal erosion pose a significant threat to mangrove and wetland ecosystems.^[35] In the Sundarbans Delta in India, soil erosion has resulted in the loss of about 24.55 percent of mangroves over the last three decades.^[36] Similarly, ocean acidification can degrade seagrass and impact its ability to store carbon.^[37] Tidal wetlands also face higher degradation rates due to climate change than terrestrial ecosystems.^[38] These factors impact sequestration permanence, which is critical for carbon credit credibility.

Opportunities for Blue Carbon Projects in India’s VCM

Despite the underexplored status of blue carbon projects in India, pathways exist to increase their scale. Given the constraints discussed earlier, strategic interventions in finance, MRV, policy regulations, and environmental risk management would help encourage broader integration of blue carbon in India’s carbon credit ecosystem.

Enhancing Finance Mechanisms

A key limitation of blue carbon projects in India is that blue carbon credits are not as widely traded, or recognised as liquid assets, as renewable energy or forest-based credits are. This is partly due to blue carbon credits being more expensive than typical carbon credits. In Asia and Central America, mangrove carbon credits cost US$13 to US$35 per metric ton of carbon dioxide removed, whereas standard carbon credits average around US$7.53 per ton.^[39]

Blended finance mechanisms have had success in addressing this issue globally.^[40]

One of the most successful international models for blue carbon finance is the Seychelles Blue Bond (Table 3).^[41]  With support from the World Bank and The Nature Conservancy, Seychelles raised US$15 million through the bond, to finance marine conservation and blue carbon initiatives. India could replicate this model through blue carbon–focused municipal bonds, especially in states with extensive mangrove and seagrass cover. The bonds could be guaranteed by state governments and multilateral institutions to reduce investor risk. India has already demonstrated success with municipal green bonds—Vadodara initiated India and Asia’s first certified green municipal bond for sustainable water infrastructure in 2024.^[42] Using a similar framework, other states could raise funds from capital markets to develop, restore, and protect critical blue ecosystems, with revenue streams linked to carbon credit sales.

Table 3. Seychelles Blue Bond Model

Case Study	Seychelles Blue Bond
Year	2018
Amount	US$15 million
Partners	Government of Seychelles, World Bank, The Nature Conservancy
Summary	1. The world’s first sovereign blue bond to finance marine protected areas, fisheries management, and support for small-scale fishers. 2. It enabled Seychelles to exceed its goal of protecting 30 percent of its exclusive economic zone
Relevance for India	India could explore similar blended finance instruments, especially in coastal states.

Source: Author’s own, with insights from The Nature Conservancy, “Blue Bonds”^[43]

Another international financing model is Australia’s Blue Carbon Accelerator Fund (BCAF), which supports coastal restoration projects by providing upfront capital, that it later recoups through carbon credit sales.^[44] Unlike a direct investment fund, it provides early-stage technical and financial support for blue carbon projects to reach commercial viability. In Madagascar, for instance, BCAF supports the development of 2,000 hectares of mangrove restoration and conservation projects^[45] (Table 4). While India does not have a similar fund on a national level yet, Tamil Nadu has set up a special purpose vehicle (SPV) funded by the state government and the World Bank to promote the blue economy in the state.^[46] Other states could consider setting up similar institutions like Tamil Nadu’s SPV, backed by public and multilateral financing. Furthermore, to make more projects more financially attractive to investors, India should consider establishing a dedicated national blue carbon fund, similar to BCAF.

Table 4: Blue Carbon Accelerator Fund’s Mangrove Restoration Project

Case Study	UNIMA Madagascar, World Wildlife Fund, and TERAKA–led Mangrove Restoration Project in Madagascar
Year	2022
Supported By	Australia’s Blue Carbon Accelerator Fund
Summary	1. The project is planning to protect and restore 2,000 hectares of mangrove forest across three sites on the north-western coast of Madagascar. 2. In addition to the development of a new income stream from carbon credits, this project will also help increase fish stocks, protect freshwater, and increase habitat for biodiversity.
Relevance for India	Early support of similar small projects can lead to multiple benefits, including attracting private capital, conserving and protecting vulnerable ecosystems, and creating new revenue streams for local communities.

Source: Author’s own, with insights from Blue Natural Capital, “Blue Carbon Accelerator Fund”^[47]

Building Policy and Regulatory Frameworks

Strong policy and regulatory backing are required for blue carbon to succeed in India’s VCM. As a first step, to overcome regulatory overlaps between different authorities, India should establish a centralised blue carbon authority, similar to the National Institute of Wind Energy, the National Institute of Solar Energy, or the Sardar Sawan Singh National Institute of Bio-energy.^[48] India’s VCM system would benefit from a clear taxonomy that recognises blue carbon as a distinct project category, as it would help provide clarity for developers, investors, and verifiers, and ensure environmental integrity.

Integrating blue carbon projects in India’s existing carbon markets can also drive greater corporate investments. Australia, for instance, has incorporated blue carbon into its Emissions Reduction Fund,^[49] ensuring that these credits have compliance-grade status. India’s updated Nationally Determined Contributions emphasise ecosystem-based approaches to climate mitigation. While blue carbon is not explicitly mentioned, the focus on forests and wetlands creates an opportunity to include it in future revisions.^[50] In addition, as seen in forest-based REDD+ (reduce emissions from deforestation and forest degradation) projects, benefit-sharing mechanisms are central to success—a similar approach is needed for blue carbon.

Local governance institutions such as municipal bodies can also help in scaling blue carbon initiatives. Such institutions are often responsible for land-use planning and community engagement, and their involvement can help improve monitoring, promote fair benefit-sharing, and enhance social legitimacy. One such promising project, which is under development across 650 hectares in several village councils in the Sundarbans region, combines mangrove restoration with community development efforts addressing health, livelihoods, and education.^[51]

Strengthening MRV and Certification Processes

Addressing MRV gaps requires both technological innovation and institutional capacity building. Indonesia provides a successful model for strengthening blue carbon MRV. Its Peatland and Mangrove Restoration Agency has partnered with academic institutions to refine sequestration baselines and standardise methodologies.^[52] Currently, India lacks a specific certification framework for blue carbon projects,^[c] which forces developers to navigate complex international verification processes.^[53] India would benefit by formalising blue carbon MRV protocols in its Green Credit Programme. A domestic registry is crucial to streamline credit issuance. In addition, the adoption of emerging technologies such as environmental DNA—which provides a quick and consistent method to assess biodiversity and health, and a non-invasive way to monitor blue carbon co-benefits^[54]—can also help strengthen valuation processes and MRV.

Addressing Environmental Risks and Improving Project Risk Profile

One of the main concerns for corporate investors is the environmental instability of blue carbon ecosystems. Internationally, developing climate-resilient frameworks for blue carbon projects have helped mitigate these risks, at least to an extent. Indonesia, for instance, has implemented adaptive management plans^[55] that integrate mangrove restoration with community-based conservation initiatives, which ensures that projects are maintained even under shifting environmental conditions.

India should adopt a similar approach. A national guideline for climate-resilient blue carbon projects, which incorporates criteria for site selection, species choice, and adaptive management, can be developed.^[56] Insurance mechanisms like the Mesoamerican Reef Insurance Programme,^[57] which link blue carbon projects with parametric insurance schemes to ensure financial stability in the event of climate-induced losses, can also be explored. Buffer credit mechanisms, which act as risk reserves, can be introduced to offset environmental uncertainties.^[58] The internationally recognised Verified Carbon Standard already mandates buffer reserves for afforestation projects,^[59] and India could extend this approach to blue carbon projects to enhance investor confidence.

Conclusion

Blue carbon projects remain a niche segment in the VCM, with institutional fragmentation, policy gaps, complex MRV processes, and environmental risks hindering their widespread adoption. Indeed, blue carbon ecosystems are one of the most underrated tools in the fight against climate change.

For India, especially, with its vast coastline of over 7,500 kilometres and significant blue carbon resources, these ecosystems present a unique opportunity to achieve its sustainable development goals along with climate mitigation and adaptation efforts. These benefits are underscored by the projected growth of the VCM, which is expected to increase 15-fold by 2030 and be 100 times larger by 2050.^[60] Companies, especially those whose business is closely linked to the world’s oceans, are increasingly looking for co-benefits along with emissions reductions, which blue credits provide. By reforming current practices and policies, India can position itself as a leader in blue carbon projects.

Endnotes

^[a] ‘Blue carbon’ refers to the carbon captured and stored in marine and coastal ecosystems, whereas blue carbon ecosystems (such as mangroves, tidal marshes, and seagrasses) are the natural systems responsible for this carbon sequestration.

^[b] Voluntary Carbon Markets (VCM): Decentralised markets where individuals, companies, and other entities can voluntarily purchase carbon credits to offset their greenhouse gas emissions. Such markets operate outside of the compliance market.

^[c] In India, blue carbon credits are certified through international standards like the Verified Carbon Standard (VCS). Once verified, these credits can be used for internal offsetting (as in the Sundarbans project) or traded in the voluntary carbon market.

NOTE – This article was originally published in ORF Online and can be viewed here