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Carbon Sequestration in Agricultural Soils: Discounting for Uncertainty

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  • Lyubov A. Kurkalova

Abstract

The study presents a conceptual model of an aggregator who selectively pays farmers for altering farming practices in exchange for carbon offsets that the change in practices generates. Under the assumption that the offsets are stochastic and that the aggregator maximizes the sum of the offsets from the purchase that he/she can rightfully claim with a specified level of confidence subject to a budget constraint, we investigate the optimal discounting of expected carbon offsets. We use the model to estimate empirically the optimal discounting levels and costs for a hypothetical carbon purchasing project in the Upper Iowa River Basin.

Suggested Citation

  • Lyubov A. Kurkalova, 2005. "Carbon Sequestration in Agricultural Soils: Discounting for Uncertainty," Center for Agricultural and Rural Development (CARD) Publications 05-wp388, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:05-wp388
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    1. Lyubov A. Kurkalova & Christopher Burkart & Silvia Secchi, 2004. "Cropland Cash Rental Rates in the Upper Mississippi River Basin," Center for Agricultural and Rural Development (CARD) Publications 04-tr47, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Lyubov A. Kurkalova & Christopher Burkart & Silvia Secchi, 2004. "Cropland Cash Rental Rates in the Upper Mississippi River Basin," Center for Agricultural and Rural Development (CARD) Publications 04-tr47, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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    Citations

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    Cited by:

    1. Sergey S. Rabotyagov & Adriana M. Valcu-Lisman & Catherine L. Kling, 2016. "Resilient Provision of Ecosystem Services from Agricultural Landscapes: Trade-offs Involving Means and Variances of Water Quality Improvements," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(5), pages 1295-1313.
    2. Amy W. Ando & Shibashis Mukherjee, 2012. "Benefits of pollution monitoring technology for greenhouse gas offset markets," Economics Bulletin, AccessEcon, vol. 32(1), pages 122-136.
    3. Gren, Ing-Marie, 2024. "A trading market for uncertain carbon removal by land use in the EU," Forest Policy and Economics, Elsevier, vol. 159(C).
    4. Timothy Capon & Michael Harris & Andrew Reeson, 2013. "The Design of Markets for Soil Carbon Sequestration," Economic Papers, The Economic Society of Australia, vol. 32(2), pages 161-173, June.
    5. repec:bla:canjag:v:58:y:2010:i:s1:p:411-431 is not listed on IDEAS
    6. Zhen, Chen & Zheng, Xiaoyong, 2015. "Measuring the Informational Value of Interpretive Shelf Nutrition Labels to Shoppers," 2016 Allied Social Sciences Association (ASSA) Annual Meeting, January 3-5, 2016, San Francisco, California 212812, Agricultural and Applied Economics Association.
    7. Gren, Ing-Marie & Carlsson, Mattias & Elofsson, Katarina & Munnich, Miriam, 2012. "Stochastic carbon sinks for combating carbon dioxide emissions in the EU," Energy Economics, Elsevier, vol. 34(5), pages 1523-1531.
    8. Santiago Bucaram & Mario Andrés Fernandez & Diego Grijalva, 2016. "Sell the oil deposits!: A financial proposal to keep the oil underground in the Yasuni National Park, Ecuador," WIDER Working Paper Series wp-2016-14, World Institute for Development Economic Research (UNU-WIDER).
    9. Springborn, Michael & Yeo, Boon-Ling & Lee, Juhwan & Six, Johan, 2013. "Crediting uncertain ecosystem services in a market," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 554-572.
    10. Kim, Man-Keun & McCarl, Bruce A. & Murray, Brian C., 2008. "Permanence discounting for land-based carbon sequestration," Ecological Economics, Elsevier, vol. 64(4), pages 763-769, February.
    11. Sergey S. Rabotyagov, 2010. "Ecosystem Services under Benefit and Cost Uncertainty: An Application to Soil Carbon Sequestration," Land Economics, University of Wisconsin Press, vol. 86(4), pages 668-686.
    12. Santiago Bucaram & Mario Fernandez & Diego Grijalva, 2016. "Sell the oil deposits! A financial proposal to keep the oil underground in the Yasuni National Park, Ecuador," WIDER Working Paper Series 014, World Institute for Development Economic Research (UNU-WIDER).
    13. Attila Bai & József Popp & Károly Pető & Irén Szőke & Mónika Harangi-Rákos & Zoltán Gabnai, 2017. "The Significance of Forests and Algae in CO 2 Balance: A Hungarian Case Study," Sustainability, MDPI, vol. 9(5), pages 1-24, May.

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    More about this item

    Keywords

    carbon sequestration in agricultural soils; offset discounting; uncertainty.;
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