Carbon has achieved something environmental policy struggled with for decades: It has made at least one service provided by nature financially visible. A tonne of carbon dioxide avoided or removed can be measured, verified, registered and traded. This has allowed private capital to enter forests, agroforestry, mangroves, agriculture and land restoration, while creating additional-income opportunities for farmers and communities. But carbon should not be mistaken for a complete financing model for nature. A forest is not simply a collection of tonnes of carbon; a wetland does not exist merely to sequester greenhouse gases; and a farmer’s land produces environmental value far beyond the carbon stored in its trees and soils.
The financing numbers make this limitation difficult to ignore. UNEP’s State of Finance for Nature 2026 estimates that about $220 billion flowed into nature-based solutions globally in 2023, while $7.3 trillion flowed into activities that damage nature. Private finance contributed only about $23 billion, roughly a tenth of nature-positive investment, while nearly 90% came from public sources. To meet global climate, biodiversity and land-restoration goals, annual investment in nature-based solutions must rise to about $571 billion by 2030. For every dollar financing nature, roughly $30 still supports activities that degrade it. Carbon markets can help close this gap, but they cannot carry a financing challenge of this scale alone.
India faces the same problem. Its biodiversity expenditure review estimated average annual biodiversity-related expenditure of about ₹32,207 crore between 2017-18 and 2021-22. The updated National Biodiversity Strategy and Action Plan estimates an annual requirement of roughly ₹81,665 crore for 2024-25 to 2029-30, more than two-and-a-half times the earlier annual average. The Kunming-Montreal Global Biodiversity Framework also calls for at least $200 billion annually for biodiversity by 2030 from multiple sources, including public and private finance, blended finance, green bonds, payments for ecosystem services and biodiversity credits.
The economic case for diversification is also ecological. Mangroves store carbon while protecting coastlines, supporting fisheries and reducing cyclone risk. Wetlands regulate floods and provide habitat. Grasslands may store less above-ground carbon than forests but sustain biodiversity and pastoral livelihoods. Agroforestry can remove carbon while improving soil health, reducing erosion and diversifying farm income. Yet carbon is the service for which we have built the clearest unit, registry and market. What is easiest to measure can therefore become what we value most. A fast-growing plantation may accumulate carbon rapidly, but it cannot automatically be treated as ecologically equivalent to restoring a diverse native ecosystem.
{{/usCountry}}The economic case for diversification is also ecological. Mangroves store carbon while protecting coastlines, supporting fisheries and reducing cyclone risk. Wetlands regulate floods and provide habitat. Grasslands may store less above-ground carbon than forests but sustain biodiversity and pastoral livelihoods. Agroforestry can remove carbon while improving soil health, reducing erosion and diversifying farm income. Yet carbon is the service for which we have built the clearest unit, registry and market. What is easiest to measure can therefore become what we value most. A fast-growing plantation may accumulate carbon rapidly, but it cannot automatically be treated as ecologically equivalent to restoring a diverse native ecosystem.
{{/usCountry}}India should, therefore, move from a carbon-finance mindset towards a broader nature-finance architecture. Carbon markets should continue financing verified emission reductions and removals. Biodiversity finance can support measurable improvements in habitat condition and ecological connectivity. Payments for ecosystem services can reward watershed protection or soil conservation. Public expenditure should finance high-social-value outcomes that cannot generate commercial returns, while blended finance can absorb early project risk. Green bonds can provide longer-term restoration capital; CSR and philanthropy can support pilots; and adaptation finance can fund ecosystems that reduce climate vulnerability. The objective is not to turn every ecological function into another tradable credit, but to create several credible routes through which nature can attract capital.
This matters especially for farmers. An agroforestry farmer may sequester carbon while improving soil, creating habitat and generating timber or fruit income. A rice farmer adopting improved water management may reduce methane while saving groundwater and electricity. A coastal community restoring mangroves may generate carbon removals while gaining from stronger fisheries and storm protection. If finance rewards only carbon, much of the environmental value created by these communities remains unpaid. Nature finance can therefore become an additional-income architecture for rural India, but only if farmers and communities receive a transparent share of the value generated.
Multiple revenue streams, however, create an integrity challenge: Can one hectare receive carbon finance, biodiversity finance and a watershed payment? Potentially yes, but the principle should be simple: Stack finance, not claims. The same environmental outcome should never be sold twice under different labels. Carbon sequestration, independently demonstrated biodiversity improvement and a separately verified water service are not necessarily the same outcome. India needs rules defining additionality, attribution, double counting, disclosure and benefit sharing before multiple nature markets scale independently.
A National Nature Finance Framework could provide that foundation. It should establish a common taxonomy for carbon, biodiversity, water, soil, restoration and resilience outcomes; define when different instruments can coexist; and set minimum safeguards for communities. A digital layer using satellite data, field monitoring, land records and appropriately validated Artificial Intelligence (AI) could reduce monitoring costs and make project boundaries and claims more transparent. Technology should support ecological science, not replace it.
Carbon markets have shown that environmental performance can attract private capital. The next challenge is to build around that success. India will need public finance as the anchor, carbon and biodiversity markets for measurable outcomes, blended capital to reduce risk, and payments for ecosystem services to reward benefits that conventional markets ignore. A tonne of carbon has a price. A functioning ecosystem has many values. India’s nature-finance architecture must learn how to finance them.
(The views expressed are personal)
This article is authored by Sayanta Ghosh, senior associate fellow, Land Resources Division, The Energy and Resources Institute (TERI), New Delhi.