Can agroforestry carbon credits open a new income stream for Bangladesh’s farmers?

When smallholder farmers in Bangladesh plant mango trees, they usually think about future harvests, household income and securing their families' livelihoods. However, those same trees are becoming something else: a climate asset capable of generating income long before the first mango is sold.

In May 2026, Bangladesh entered a new chapter in climate finance when Varaha ClimateAg Private Limited and Sustainable Agriculture Foundation (SAF) Bangladesh announced the country's first-ever issuance of agroforestry carbon credits under Verra's Verified Carbon Standard (VCS). 

Registered as VCS Project 4456, the initiative generated more than 60,000 carbon credits from 160 demonstration farms, creating a pathway for smallholder farmers to participate in international carbon markets while restoring degraded land and adopting climate-resilient agricultural practices.

The milestone may appear technical at first glance, but behind the carbon accounting lies a story about agriculture, climate adaptation and the growing effort to turn environmental stewardship into a source of rural income.

Once Verra approves the carbon credits, they can be sold in international carbon markets. Large companies such as Microsoft Corporation and Apple Inc often buy these credits to offset part of their carbon emissions and meet their climate goals.

Understanding carbon credits

At its simplest, a carbon credit is a tradable certificate representing one tonne of carbon dioxide equivalent (tCO₂e) removed from the atmosphere or prevented from being emitted.

Agroforestry carbon credits belong to a specific category generated when farmers deliberately integrate trees into agricultural landscapes. Unlike some industrial offset projects that focus on avoiding future emissions, agroforestry credits are based on physical carbon removal.

As trees grow, they absorb carbon dioxide from the atmosphere and store it in their trunks, branches, roots and surrounding soil. This process creates measurable carbon removals that can be converted into carbon credits and sold in voluntary carbon markets.

The appeal extends beyond carbon storage. Agroforestry systems improve soil health, reduce erosion, regulate water cycles, increase biodiversity and create additional income streams through both carbon payments and agricultural products such as fruits.

According to Christoph Gebald, CEO of Climeworks, agroforestry credits are a type of carbon credit that farmers can earn by planting and maintaining trees on agricultural land.

"The idea is that trees absorb carbon dioxide (CO₂) from the atmosphere as they grow and store that carbon in their trunks, branches, roots, and the surrounding soil. By integrating trees with crops or livestock, farmers can increase the amount of carbon stored on their land compared to conventional farming practices," he explained.

Hasibul Islam Rafi, a Climate and Development Practitioner and a former International Consultant for UNDP Asia and the Pacific, noted, "The process begins with establishing a baseline to estimate how much carbon would be stored if no trees were planted. Experts then use field measurements, soil sampling, satellite imagery and scientific models to estimate additional carbon captured through agroforestry activities.

"The amount of carbon stored beyond the baseline is then verified by independent auditors. After verification, carbon credits are issued based on the amount of carbon dioxide removed from the atmosphere or prevented from being released. Typically, one carbon credit represents one tonne of CO₂ equivalent," he added.

The revenue generated from selling the credits can provide farmers with an additional source of income while encouraging land-use practices that improve soil health, biodiversity, and long-term environmental sustainability, Rafi further said. 

"In simple terms, agroforestry credits work by rewarding farmers for planting and maintaining trees that capture and store carbon. The carbon stored by the trees and soil is measured against a baseline, independently verified, converted into carbon credits, and then sold in carbon markets, creating both environmental and economic benefits."

The Bangladesh model

The credits issued under VCS Project 4456 emerged from a network of 160 demonstration farms where farmers restored degraded land and adopted water-efficient, high-density mango-based agroforestry systems.

The initiative was technically facilitated and supported by 2030WRG, part of the World Bank Group. It was originally designed to test whether high-density mango plantations could work for subsistence farmers in Bangladesh, creating a model that had not previously existed in the country.

Drawing on decades of experience working with rural communities, SAF Bangladesh helped transform that pilot concept into a scalable model. With carbon finance supporting implementation, the project has now expanded its ambition to a target of 30,000 hectares.

The importance of this scale-up lies in overcoming a major obstacle facing smallholders: the four-year gestation period required before mango orchards begin generating significant returns.

"Agroforestry credits work by rewarding farmers for planting and maintaining trees that capture and store carbon. The carbon stored by the trees and soil is measured against a baseline, independently verified, converted into carbon credits, and then sold in carbon markets, creating both environmental and economic benefits."

Hasibul Islam Rafi, Climate and Development Practitioner

Carbon finance effectively bridges that gap. Farmers can earn revenue from the carbon stored by growing trees while waiting for future agricultural income, making long-term investments financially viable.

Md Farhad Zamil, executive director of SAF Bangladesh, said "The first issuance is expected to channel hundreds of thousands of dollars in carbon revenue sharing to participating farmers in 2026 alone, with further payments expected as future credit vintages are sold."

Speaking about SAF Bangladesh, he explained, "Our mission is to empower smallholder farmers with innovative tools, technologies, and climate-smart practices to enhance their livelihoods and promote sustainable agriculture.

"We are committed to creating value through market development, capacity building, and agri-digitalisation, addressing the critical challenges faced by farmers in a changing climate. Together with our partners, we strive to transform agriculture into a driver of prosperity for smallholder families, rural communities, and nature."

Why Verra approval matters

Generating a carbon credit is not as simple as just planting trees. According to Verra, the process is governed by rigorous international standards designed to ensure that climate benefits are real, measurable and long-lasting.

Verra's Verified Carbon Standard is among the world's most widely recognised carbon certification systems. Agricultural and agroforestry projects fall under its AFOLU (Agriculture, Forestry and Other Land Use) category, which is subject to particularly stringent requirements.

The process begins with selecting an approved methodology and preparing a detailed Project Description or Project Design Document outlining project boundaries, baseline conditions and evidence of additionality. The project is then listed publicly and subjected to a mandatory 30-day public consultation period.

Next comes validation. An independent Validation and Verification Body (VVB) reviews the project design, examines GPS-based geospatial data, evaluates baseline evidence and assesses risks such as fire, pests or land-tenure disputes.

Only after validation can implementation proceed.

During monitoring periods that typically last between one and five years, project developers collect detailed information on tree survival, growth rates, biomass accumulation and soil carbon. Monitoring increasingly combines field sampling with satellite imagery, artificial intelligence and other digital technologies.

Verification follows. Independent auditors inspect records and conduct field visits to confirm reported outcomes. If a project claims thousands of trees have survived and accumulated a specific amount of biomass, auditors physically measure representative samples to confirm those claims.

Another key requirement involves permanence risk. Because trees can be lost to droughts, pests, disease or land-use changes, Verra requires projects to contribute a risk-adjusted percentage of credits, typically around 15% to 20%, to a pooled buffer account that functions as insurance.

Only after passing all these stages does Verra issue Verified Carbon Units (VCUs), each representing one metric tonne of carbon dioxide removed from the atmosphere.

Meeting the criteria

For Varaha and SAF Bangladesh, approval required demonstrating several critical elements.

First, they had to prove additionality by showing that the carbon sequestration would not have occurred without carbon finance. The four-year income gap associated with mango cultivation became central evidence supporting this claim.

Second, they demonstrated ecological benefits beyond carbon storage. The project restored degraded land, improved water efficiency and strengthened climate resilience.

Third, they established transparent monitoring, reporting and verification systems capable of tracking outcomes across 160 dispersed farms.

Finally, they demonstrated fair revenue-sharing mechanisms that ensure farmers remain the primary beneficiaries of carbon credit revenues.

"This is a remarkable moment for Bangladesh and a strong validation of the collective effort of every team involved," said Md Farhad Zamil.

"Seeing the country's first agroforestry carbon credits issued under Verra is deeply meaningful, not just as a milestone for our partnership with 2030WRG, but as a tangible step forward for the smallholder farmers whose work is at the heart of this project."

Growing opportunity

The significance of the project extends beyond a single carbon issuance.

The initiative aligns closely with Bangladesh's broader ambitions for climate resilience, efficient land use and agricultural modernisation. It also highlights the growing economic potential of carbon markets.

Saimum Parvez, Special Assistant to the Prime Minister of Bangladesh for Environment, Forests, and Climate Change, sees substantial opportunities ahead.

"The concept of carbon credit is not new, but for Bangladesh, the discussion is relatively new. According to World Bank reports, Bangladesh can earn $1 billion every year by trading carbon credits," he said.

"One of the core electoral pledges of the BNP government is to plant 25 crore trees in 5 years. We have already made a committee for it, and it will be done very soon, which will grant us carbon credits that will bolster our economy and support the environment."