Environment and Development Economics

Research Article

Poverty, risk, and the supply of soil carbon sequestration

JOSHUA GRAFF-ZIVINa1 and LESLIE LIPPERa2 c1

a1 Department of Health Policy and Management, Mailman School of Public Health and SIPA, Columbia University

a2 Agricultural and Development Economics Division, Food and Agriculture Organization of the UN, Viale delle Terme di Caracalla, 00100 Rome Italy. Tel. 39 06 5705 5342. Fax 39 06 5705 5522. Email: leslie.lipper@fao.org

ABSTRACT

We explore poor farmers' incentives to adopt production systems that increase soil carbon sequestration, focusing on the impact of risk. A dynamic optimization model of conservation agriculture adoption is presented, where farmers optimize over expected utility of profits from agriculture and carbon sequestration. Adoption impacts on agricultural productivity are modeled as a combination of the technological effects of the new system, and productivity effects of changes in soil carbon on agricultural output. Comparative static results indicate increases in soil carbon sequestration price and the discount rate have unambiguous impacts on equilibrium soil carbon levels; the former leading to higher, and the latter to lower, carbon levels. Increases in the price of agricultural output and risk aversion have ambiguous impacts, depending on the relative strength of the productivity and technology effects. The paper concludes with a discussion of designing soil carbon payment mechanisms to benefit low income farmers.

Correspondence

c1 Corresponding author.