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Blue ecosystems, primarily comprised of mangroves, seagrass meadows, and tidal marshes, store 33 billion metric tonnes of carbon, accounting for 81 percent of the emissions produced globally in 2023. Yet, their climate potential remains largely overlooked in India’s booming Voluntary Carbon Market (VCM). The term ‘blue carbon’ was coined in 2009 to highlight the degradation of marine and coastal ecosystems, recognising their immense carbon storage potential. This sparked a global interest in using these ecosystems as nature-based climate solutions, especially in generating carbon credits. Today, market-based blue carbon projects span across 29 countries, covering approximately one million hectares.
The term ‘blue carbon’ was coined in 2009 to highlight the degradation of marine and coastal ecosystems, recognising their immense carbon storage potential.
Despite compelling science, with a square metre of seagrass removing more than triple the amount of carbon from the atmosphere yearly than tropical rainforests, India is yet to capitalise on this opportunity. Nearly half the historical extent of vegetated soft-sediment habitats has been lost. While blue carbon credits have emerged as a market-based mechanism to finance the conservation of blue ecosystems, these projects are often overshadowed by land-based projects, which offer easier, cheaper, and larger-scale operation. This is surprising, as for a country with over 7,500 kilometres (KM) of coastline and extensive mangrove and seagrass cover, India has both the natural endowment and policy momentum to lead in this space. This article identifies the barriers to blue carbon credit adoption in India’s VCM and explores strategies to promote blue carbon projects.
Barriers to the Uptake of Blue Carbon Projects
One of the primary obstacles to adopting large-scale blue carbon projects in the VCM is the lack of an enabling institutional environment. 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 (MoEFCC) for conservation policies, the State Coastal Zone Management Authorities (SCZMAs) for land-use planning, the Forest Departments for mangrove areas classified as forest land, and the Fisheries Department for coastal livelihoods and marine resources. While land-based projects have relatively straightforward ownership models, blue carbon ecosystems are often classified as common property resources or protected areas, which leads to slow approvals and unclear long-term carbon sequestration rights. Additionally, unclear benefit-sharing mechanisms for local communities further complicate the situation. Presently, there are no standardised models in India guaranteeing a fair revenue distribution from carbon credits to stakeholder communities. This lack of clarity may discourage active community participation and undermine long-term project sustainability. As seen in forest-based Reducing Emissions from Deforestation and Forest Degradation (REDD+) projects, benefit-sharing mechanisms are central to their success. For blue carbon to succeed in India’s VCM, a similar approach is needed.
Blue carbon MRV is relatively new compared to terrestrial projects, and is often more expensive, time-consuming, and requires specialised knowledge.
Another obstacle is the absence of well-defined Measurement, Reporting, and Verification (MRV) processes, essential to ensure the credibility of any carbon credit project. Blue carbon MRV is relatively new compared to terrestrial projects, and is often more expensive, time-consuming, and requires specialised knowledge. India also lacks large-scale dedicated MRV infrastructure for blue carbon projects, which leads to developers relying on international standards such as Verra’s Verified Carbon Standard (VCS). This reliance increases compliance costs and extends the timeline for credit issuance, making blue carbon less attractive to both developers and investors. In addition, limited baseline data and scientific uncertainty compound this issue. Many regions in India lack reliable information on the spatial extent and ecological condition of mangroves, seagrass, and tidal marshes.
Beyond regulatory and MRV challenges, environmental risks further hinder corporate investments in blue carbon projects. Blue carbon ecosystems are comparatively more dynamic than terrestrial forests, highly sensitive to climate change, and difficult to manage over long periods. Factors including sea level rise, ocean acidification, and extreme weather events can impact sequestration permanence, which is critical for carbon credit credibility. Investors might be concerned that their credits could be devalued if these ecosystems deteriorate.
Institutional and Financial Pathways to Scale Blue Carbon in India
The combination of market uncertainty, regulatory issues, and ecological instability ultimately limits large-scale enthusiasm for blue carbon investments and keeps these projects on the margins of India’s VCM. However, there remain pathways to improve their viability and uptake.
A key limitation is that blue carbon credits are not as widely traded or recognised as liquid assets, unlike renewable energy or forest-based credits. However, it can be addressed through blended finance mechanisms. A successful model that can be used in India is the Seychelles Blue Bond. With support from the World Bank and the Nature Conservancy, the bond raised US$15 million to finance marine conservation and blue carbon initiatives. India could replicate this model through blue-carbon-focused municipal bonds, particularly in states with extensive mangrove and seagrass cover. The country has already demonstrated success with municipal green bonds. Vadodara initiated India and Asia’s first certified Green Muni Bond for Sustainable Water Infrastructure in 2024. Using a similar framework, other states could raise funds from capital markets with revenue streams linked to carbon credit sales.
The Indonesian Peat and Mangrove Restoration Agency (BRGM) has partnered with academic institutions to refine sequestration baselines and standardise methodologies.
Technological innovation and institutional capacity building are both essential to address MRV challenges. Indonesia provides a successful model for strengthening blue carbon MRV. The Indonesian Peat and Mangrove Restoration Agency (BRGM) has partnered with academic institutions to refine sequestration baselines and standardise methodologies. India could also benefit by formalising blue carbon MRV protocols in its Green Credit Programme.
Furthermore, India’s fragmented institutional landscape creates another major barrier, with regulatory overlaps between different authorities delaying project approvals and increasing compliance burdens. India should establish a centralised blue carbon authority, similar to the National Institute of Wind Energy (NIWE), the National Institute of Solar Energy (NISE), and the National Institute of Bioenergy (NIBE), to overcome this hurdle.
One of the main concerns for corporate investors is the environmental volatility associated with blue carbon ecosystems. Globally, climate-resilient frameworks have helped mitigate these risks to an extent. Indonesia, for instance, has implemented adaptive management plans that integrate mangrove restoration with community-based conservation initiatives, ensuring that projects are maintained even under shifting environmental conditions. In addition, insurance mechanisms of the Caribbean region (particularly the Mesoamerican Reef or MAR Insurance Programme), which links blue carbon projects with parametric insurance schemes to ensure financial stability in the event of climate-induced losses, can be a potential solution. Buffer credit mechanisms, which act as risk reserves, can also be introduced to offset environmental uncertainties. The Verified Carbon Standard (VCS) already mandates buffer reserves for afforestation projects, and India should extend this approach to blue carbon projects to enhance investor confidence.
The Verified Carbon Standard (VCS) already mandates buffer reserves for afforestation projects, and India should extend this approach to blue carbon projects to enhance investor confidence.
Blue carbon ecosystems are one of the most underrated tools to fight climate change. These ecosystems present a unique opportunity for India to achieve its sustainable development goals along with climate mitigation and adaptation efforts. However, they remain a niche segment in the VCM both internationally and in India. Institutional fragmentation, complex MRV processes, and environmental risks have hindered their widespread adoption. By reforming current practices and policies and by using international best practices, India can certainly position itself as a leader in blue carbon projects.
Abhishree Pandey is a Research Assistant at the Observer Research Foundation.
Note: This short form is based on the author’s research on blue carbon credits in India, originally explored in detail in their under-review long-form Overlooked and Underutilised: Blue Carbon Credits in India’s Voluntary Carbon Market.
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