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Accessing contemporary carbon markets and other market-based instruments to create a Universal Basic Income for forest-dependent communities in Nagaland, India
Nagaland, located in northeastern India, is renowned for its rich biodiversity and extensive forest cover, which constitutes approximately 52% of its geographical area (Nagaland Forest Department, 2023). These forests range from tropical and subtropical evergreen types to unique broad-leaved moist temperate forests, supporting a rich biodiversity, including over 360 orchid species and a wide array of endemic flora and fauna (Nagaland Forest Department, 2023). This biodiversity makes Nagaland (as part of the Indo-Burma Biodiversity hotspot) one of the top 35 biodiversity hotspots in the world (Edake et al., 2015).
Nagaland is home to around 2 million people, predominantly belonging to 16 major tribes with unique cultural practices, many of which are deeply intertwined with the forests (Census of India, 2011). Current forest management strategies include community-led conservation initiatives and state interventions, but challenges persist in balancing sustainable livelihoods with ecological preservation. Understanding and enhancing forest governance is crucial for securing biodiversity and improving the resilience of Nagaland’s forest-dependent communities, who face significant socioeconomic and environmental challenges.
Rapid population growth and economic pressures have led to increased deforestation, biodiversity loss, and land degradation. Shifting cultivation, also known as slash-and-burn cultivation (or Jhum in the local language), practiced by over 60% of rural households, accelerates soil erosion, reduces forest biomass, and threatens ecological balance (Jamir, 2021). This cycle of poverty and environmental degradation intensifies reliance on natural resources, creating unsustainable practices that further degrade ecosystems.
Nagaland’s forest management system is unique in India, shaped by its customary land tenure system and community-led conservation practices. Approximately 88.3% of Nagaland’s forests are under private or community control, governed by traditional village councils and tribal institutions under the protection of Article 371A of the Indian Constitution (Edake et al., 2015). Unlike the vast majority of Indian forest, which come under the purview of Indian Forest Service, Nagaland’s framework grants its tribes significant autonomy over its forests, enabling locally-driven management and conservation initiatives.
Because land is primarily owned and managed by individuals, clans, or communities, with village councils overseeing its use (Edake et al., 2015), there is strong community participation in conservation efforts, allowing for adaptive governance tailored to local ecological and cultural contexts.
This can be seen with the establishment of Community-Conserved Areas (CCAs), where communities voluntarily set aside patches of forest for protection. CCAs aim to address challenges such as forest degradation, declining biodiversity, and water scarcity. These areas are governed through customary laws, bans on unsustainable practices, and, in some cases, formalized through Memorandums of Understanding (MoUs) with the state forest department.
CCA committees create Community Conservation Management Plans (CCMPs or CCPs), which provide guidelines for sustainable resource use of the forest, monitoring and enforcement strategies, and conflict resolution mechanisms. While these plans are substantive and detailed in outlining, the committees often lack the resources required to implement conservation activities or enforce consequences for breaking the bylaws (Edake et al., 2015). They also lack the required funding for the latest forest monitoring and biodiversity tracking technology, often relying on voluntary labor from the community to physically safeguard forest boundaries, which can be unreliable or ineffective.
Despite the localized land tenure system and robust CCA institutional structure for forest management, this lack of funding blocks any real conservation progress and drives the need to explore alternative sources of income, such as carbon markets. CCAs could leverage their existing forest conservation efforts into carbon sequestration projects through ARR, REDD+, and other voluntary carbon market projects, which would generate financial incentives for conservation while providing income to forest-dependent communities. The MoU framework used in CCAs could serve as a model for carbon market agreements, ensuring equitable benefit-sharing and strong local governance.
In Nagaland, poverty and environmental degradation are deeply interlinked because of communities’ heavy dependence on natural resources for livelihoods.
Nagaland’s high population growth, combined with a high poverty rate, have worsened environmental conditions over the last four decades; the pressure for economic development has only compounded the “large scale environmental degradation” in the region (Jamir, 2021). Because clearing land for agricultural use is the primary reason behind deforestation, the rapidly growing population has meant an increased demand for food and fuel and decreased land availability for agriculture, causing an overall increase in Jhum cultivation, which has led to rapid deforestation. The state saw 24% of its forest cover eroded in the last 20-30 years due to Jhum cultivation, logging, and other unsustainable practices to support the growing population (Rawat et al., 2018).
Environmental degradation disproportionately affects the poorer strata of a community because it directly impacts the essential resources they rely on for survival. For example, the destruction of forests limits access to fuelwood and timber, essential for daily living and income generation. Over time, degradation reduces the productivity of crops, raising the cost of production and lowering earnings for those dependent on agriculture, a sector where many underprivileged individuals work (Jamir, 2021).
Poverty drives unsustainable practices, like overexploitation of natural resources, while degradation worsens poverty by depleting those same resources. Nagaland is the 10th poorest state in India, with 25.23% of its population classified as “multidimensionally poor” (Niti Aayog’s Multidimensional Poverty Index (MPI) Report, 2021). Poor communities reliant on forests for fuelwood, agriculture, and livelihoods often engage in unsustainable practices such as Jhum and deforestation, which exhaust natural resources and perpetuate poverty (Jamir, 2021).
This creates a feedback loop where the poor are both contributors to and victims of environmental harm. Unlike the rich, who can adapt or invest in alternatives, the poor are left more exposed, deepening the challenges they face.
Innovative financial mechanisms like carbon markets provide a dual benefit: generating income for forest-dependent communities while incentivizing sustainable environmental management. By monetizing the carbon stored in its forests, Nagaland can secure global financial capital to fund the local conservation efforts of CCAs, community development initiatives, infrastructure development, and livelihood generation, breaking the cycle of poverty and ecological decline.
Several examples demonstrate the importance of green financing and carbon credits in high-quality economic development and poverty reduction. In China, as the economy shifts from “high-speed” to “high-quality” development, green credits have been instrumental in achieving economic growth while reducing carbon dioxide emissions, showcasing the link between market incentives and environmental conservation (Li et al., 2022).
In addition, a 14-year-long case study in Panama highlights how carbon offset payments from a forest conservation and agroforestry project provided income, capital to invest in income-generating activities, and, perhaps most importantly, financial stability for poorer participants (Shinbrot et al., 2022). The study found that carbon offset payments accounted for an average of 11% of participants' annual incomes, increasing to as much as 26% for poorer participant households.
Prior to the project, poor participants faced economic insecurity due to unpredictable earnings and irregular, subsistence-level agriculture; therefore, while all wealth groups saw an increase in income during the carbon project, it was particularly life-changing for poorer participants because it provided a steady source of income and opened avenues for other income-generating activities, such as agroforestry. One lower-income participant noted, “I wanted to have a farm of fruit trees, but it was difficult, and we didn’t have much money [but] in 2009 the project started, and in 2016 we produced 30 cans of coffee [an agroforestry crop],” indicating the compound effect of the carbon project on agroforestry and participants’ ability to scale their livelihood opportunities (Shinbrot et al., 2022).
Utilizing financial mechanisms such as the carbon market and green financing will link conservation with economic development by channeling global capital into local projects. Nagaland’s existing commitment to conservation and community-driven governance structure of CCAs position the state uniquely to benefit from these mechanisms.
By monetizing the ecosystem services provided by its forests, Nagaland can secure sustainable funding for conservation and forest management while improving livelihoods and reducing poverty, fostering longterm socioeconomic benefits for its forest-dependent communities.
Key market-based instruments (MBIs) like carbon markets, biodiversity credits, and water credits, along with mechanisms like Conservation Basic Income (CBI) and cash transfer programs, highlight how direct financial support to communities can incentivize sustainable practices and reduce deforestation (Sheehan et al., 2023). Forest-dependent communities can monetize carbon sequestration and other ecosystem restoration activities through MBIs and financial mechanisms to receive a steady income.
Nagaland’s extensive natural capital in its forests make it suitable for a diverse portfolio of carbon credit projects that can address both conservation and community development goals. Projects like REDD+ can help prevent deforestation and enhance carbon stocks within Nagaland's extensive forests and CCAs, generating significant revenue while preserving biodiversity. Afforestation, reforestation, and revegetation (ARR) projects can restore degraded lands, particularly areas affected by Jhum, by planting native species that improve biodiversity and create sustainable livelihoods. Improved Forest Management (IFM) can optimize existing conservation efforts and capitalize on properly implemented CCMPs to increase carbon storage and ensure long-term conservation, complementing ARR efforts.
In addition to direct forest-related carbon credits, initiatives such as improved cookstoves and biochar production directly engage communities by reducing reliance on fuelwood, improving air quality, and enhancing soil fertility. Soil carbon sequestration initiatives can transition traditional farming systems toward regenerative practices, increasing agricultural productivity and resilience. Incorporating agroforestry can further diversify livelihoods by integrating tree planting with farming systems, while wetland restoration projects, though limited in scope, can enhance water security and ecological balance (Verified Carbon Standard).
Combining these projects can generate multiple revenue streams through carbon credits, create robust funding for local development, and ensure holistic ecosystem management.
A large, integrated state-wide carbon project in Nagaland that encompasses forest protection, reforestation, improved forest management, agroforestry, and other non-forest activities could theoretically yield $90+ million in ideal conditions.
Forest-based interventions would include REDD+, ARR, and IFM. Land-use and agricultural interventions would include agroforestry, soil carbon sequestration, and biochar application. Other carbon credit generating income would include cookstove projects, which I included due to its relation with fuelwood collection and reduced deforestation.
Other sources of carbon credits can include improved irrigation and fertilizer management in rice paddies, livestock and pastoral management interventions, waste management projects, energy installations, and improved charcoal production. Blue carbon initiatives, such as mangrove or wetland restoration, could offer additional opportunities. These potential revenue sources were not included due to their relatively small scale, their emerging status in the carbon market, and the current lack of data on pricing and history.
In the following calculations, each hectare or emission reduction activity is accounted for only once. That means if a given piece of forested land is counted under REDD+, it cannot claim the same gains again under IFM on the exact same carbon pool. Similarly, agroforestry and soil carbon improvements on the same plot must be integrated carefully.
Per the following estimates, forest-related activities have the potential to generate a total of $62 million in annual revenue from carbon credits. Other carbon credit project types can bring up to $29 million in annual revenue. Total potential is $90+ million in annual revenue. However, this estimation relies on simplified data, land use and sequestration rate assumptions, and pricing hypotheticals. Given the current volatility in carbon markets, this is an optimistic scenario, assuming all interventions are fully implemented at scale and achieve stated carbon benefits. In reality, the potential will be significantly less; however, given Nagaland’s Gross State Domestic Product of $5.6 million, even a conservative estimate of carbon credit potential is not negligible (PRS Report, 2024).
Nagaland can also leverage other natural capital credits, such as biodiversity credits and water credits. Other emerging credits, such as those for pollination services or soil health, remain largely experimental and lack established methodologies or pricing benchmarks (Verified Carbon Standard). Since these non-carbon credits are new, markets are less liquid, methodologies are evolving, and buyers are still scarce, their revenue potential is currently difficult to predict.
In addition to natural capital credits, Nagaland can tax or penalize environmentally degrading activities to generate revenue and disincentivize ecological harm. Many Nagamese CCAs already utilize some of these penalty mechanisms to raise funds for their collective development funds.
Nagaland can diversify revenue streams beyond carbon credits, creating a more stable and resilient financial base. It can expand and scale up the CCA model, where penalties imposed on environmental infractions, such as unsanctioned logging, hunting, and other resource extraction, are pooled into collective funds used for forest conservation, village infrastructure, or community development efforts.
With funds from market-based instruments and the revenue sources listed above, the CCA model can also be used as the foundation for a more formalized, state-level Universal Basic Income (UBI).
Implementing a Universal Basic Income (UBI) in Nagaland could transform economic resilience and environmental sustainability by addressing poverty and fostering conservation.
While there are different methods of distribution for cash transfer programs (CTPs), unconditional distribution is agreed upon as the most effective for reducing poverty and addressing the causes of environmental degradation (Sheehan et al., 2023). Conditional distribution is difficult to enforce, whereas poverty-based or tiered distribution disincentivizes the privileged wealthy who may have an outsized say in conservation. Geographically-targeted distribution excludes vulnerable populations living outside the agreed-upon boundaries who may still be contributing to conservation efforts (Sheehan et al., 2023). Shinbrot’s carbon offset project study in Panama notes that payments to participants of different wealth groups did not exacerbate wealth inequalities, despite fears of doing so, indicating that universal, unconditional cash distributions have a significant potential to alleviate poverty but do not have the assumed negative side effects (Shinbrot, 2022).
In Nagaland’s case, the $90+ million potential revenue from carbon credits; additional revenue from biodiversity, water, and other future natural capital credits; and fees, taxes, and levies from environmentally-degrading activities can be pooled into a state-wide natural resource fund and distributed to the people on Nagaland. For ease of calculation, a total of $150 million in revenue from all listed sources will be used. With Nagaland’s adult population of 1.2 million, this results in $125 per person per annum, which would be a 7.16% increase in per capita income (CEIC Report, 2023). This $125 can be further compounded if invested by the government in a pension fund or managed investment fund.
A Nagamese UBI can complement CCAs’ efforts by enabling communities to invest in resilient agricultural practices, climate-smart technologies, and sustainable livelihoods. However, success requires robust governance with transparent fund management; inclusive and equitable participatory decision-making; and complementary programs like environmental education (Bauer, 2014). While logistical challenges and risks of fund misuse exist, integrating UBI with conservation and CCA offers a sustainable path for Nagaland’s socio-economic development and biodiversity preservation.
In addition to the UBI, the Nagamese forest-dependent communities would also benefit from an improved and restored environment, which would enhance other monetary and non-monetary livelihoods. In Thailand’s community forest model, communities like the Doi Saket community use their collective fund to establish a local enterprise, which generates additional income from their forest conservation fund (Dispanadda, 2023). In Nagaland, this could be replicated by structuring the UBI to fund CCAs or village panchayats (formal village councils) for grassroots community management.
In Panama, in addition to cash payments, the pivot to agroforestry has provided impoverished families with income and food from their harvests (Shinbrot et al., 2022). Because CCAs in Nagaland already have collective agroforestry efforts where harvests are shared, scaling and formalizing these efforts can address multidimensional poverty and reduce food insecurity.
There are over 54 natural resource funds (NRFs) around the world, at a national or state level, deriving funds from petroleum, minerals, or gas, that provide funds in some form to citizens, either as direct dividend, pension fund, or investments into infrastructure and citizen health (Bauer, 2014). These conventional NRFs are financed by the extraction of finite resources such as oil, gas, and minerals and exacerbate environmental degradation while failing to align with long-term sustainability goals.
In contrast, a UBI funded through the restoration of natural resources presents an innovative shift from traditional NRFs. A restorative NRF tied to forest conservation, environmental restoration, and Nagaland’s extensive natural capital, would address socioeconomic inequalities through the UBI mechanism and incentivize environmental regeneration, as opposed to environmental extraction.
Despite its novel nature, there is a wealth of infrastructure for a restorative NRF and UBI to draw upon. Established NRFs, such as Norway's sovereign wealth fund or Alaska’s Permanent Fund, provide frameworks for governance, transparency, and fiscal management that can be integrated with the institutional capacity, tribal collectivism, and grassroots participation systems Nagaland’s CCs provide.
A conservation-focused UBI in Nagaland will encourage Nagamese forest-dependent communities to prioritize sustainable resource management while maintaining their traditional livelihoods. By guaranteeing a minimum financial cushion, community members will feel less pressure to engage in environmentally damaging activities to meet immediate needs, as proven in other contexts like Panama, Indonesia, and Namibia (Sheehan et al., 2023).
Because a potential Nagamese UBI would be a natural extension of CCAs’ existing efforts, communities would actually be compensated for the time spent on forest and nature conservation. Even if initial annual payments are small and “play a relatively minor role in improving household incomes directly,” consistent payments and stable incomes increase household livelihood generation indirectly by allowing families to diversity into agroforestry, artisanal crafts, and business with low-impact forest products (Shinbrot, 2022 & Dispannada, 2023).
In Shinbrot’s Panamanian case study, payments were also effective in encouraging longterm adoption of reforestation and agroforestry even after payments stop. The primary reason was the recognition in the value and future benefit of reforestation, especially for their descendants, with one participant noting, “In five years, the trees had grown five meters tall… Putting yourself underneath a tree, you felt something different, fresher. It was there I understood that tree carbon would help improve the climate” (Shinbrot, 2022).
Another notes “Before, I never had fruit or timber and now, my children will have it and benefit will come to my family... I could die any day and now I will leave this for my children,” with another remarking “At the start, I didn’t like the idea. I thought ‘How is carbon going to be captured?’ But I have a future now, I am leaving behind something for my grandchildren and that is very important for me” (Shinbrot, 2022).
Despite being continents away, the Panamanian participants echoed the sentiments of Nagamese communities who formed CCAs and wildlife reserves to ensure a sustainable future for their descendants (Edake et al., 2015), showcasing the shared sentiments and solidarity of forest-dependent groups.
The primary barrier to actualizing this vision is political will. Realizing a conservation-focused universal basic income in Nagaland depends on the sustained commitment and proactive engagement of political leaders, especially because even just the setup of such a massive project will outlast political election cycles. Policy champions must be willing to invest political capital, actively communicate the program’s broader ecological and economic benefits, and persuade wary constituencies of its long-term value. Support at multiple levels of governmental and society structures, state and local government, traditional village authorities, and civil society, is needed to confront entrenched interests, budgetary constraints, and competing policy priorities.
There is hope, however, due to Nagamese state government’s commitment to encouraging REDD+ projects, with 30 CCAs forming a 20-year Carbon Finance Project with the assistance of Agriculture Production Commissioner of Nagaland (Nagaland Post, 2022). Also, India has pledged to create an additional carbon sink of 2.5–3 billion tons of CO₂ equivalent through forest and tree cover by 2030, a goal that Nagaland’s forests could significantly contribute to (Ministry of Environment, Forest and Climate Change, 2024). This is a robust first step in recognizing the role of market-based instruments in carbon sequestration, income generation, and community development.
Another major concern is cost. Establishing a restorative NRF requires upfront investment to seed projects that generate carbon credits or other ecosystem services. However, these initial costs can be externalized by engaging carbon credit buyers in voluntary carbon markets, creating and negotiating a viable, upfront funding stream (Verified Carbon Standard). Costs can also be absorbed by traditional financiers of economic development, such as the government or multilateral organizations like the World Bank.
In addition, price volatility in carbon trading systems could undermine long-term financial stability. Fluctuations in demand for carbon offsets or altered regulatory requirements could threaten the predictable income stream that the policy aims to guarantee. Verification authorities have attempted to address recent volatility by consistently updating methodologies to focus on proving additionality and safeguarding against false carbon sequestration and offset claims (Verified Carbon Standard).
Additional challenges include administrative difficulties and inconsistent governance structures in Nagaland. Governance structures may not be uniformly equipped to handle large-scale monetary interventions, and divergent political interests could spark contention, especially between the diverse tribal groups within Nagaland (Census of India, 2011). In areas with inconsistent governance and spotty administration, fears of mismanagement and corruption can arise. The challenging terrain and limited infrastructure could complicate the delivery of funds, especially to remote settlements that lack reliable banking services (Edake et al., 2015). These challenges can be overcome by leveraging India’s sweeping digital monetary infrastructure, such as the UPI system, which has expansive reach even in remote India.
Per Bauer’s survey of effective NRFs, “good natural resource fund governance is essential for transforming natural resource wealth into citizen well-being” (Bauer, 2014). Figure 9 has overall recommendations for effective NRF governance. In addition to recommendations in Figure 9, the following can also be implemented by the Nagamese state government to ensure efficiency, inclusion, and transparency:
Creating a UBI based on ecological restoration may not be feasible in the immediate future due to factors like political complexity, market volatility, funding uncertainties, and infrastructural gaps. However, recognizing the concept’s value is an important step toward rethinking traditional economic models and shifting development paradigms from short-term gains that view forests as resources to be exploited for personal gain into long-term welfare that values them as thriving ecosystems to be nurtured, as the Nagamese tribes do.
Decoupling development from environmental exploitation and compensating communities for restorative actions rather than harmful extraction marks a seismic mindset shift. This shift views safeguarding ecosystems, alleviating poverty, and investing in economic development as one and the same because of their potential to reinforce each other and demonstrate that it is possible to achieve human development without degrading natural capital.
For regions like Nagaland, where the wellbeing of communities and the health of ecosystems are intricately linked, market-based instruments and financial mechanisms like NRFs and UBIs are scalable tools to address pressing social and environmental challenges.
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