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Contract Design to Sequester Carbon in Agricultural Soils

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  • Mireille Chiroleu-Assouline

    () (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Sébastien Roussel

    () (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Université Montpellier I - CNRS : UMR5474 - Institut national de la recherche agronomique (INRA) : UR1135 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM])

Abstract

According to several studies, agricultural carbon sequestration could be a relatively low cost opportunity to mitigate greenhouse gas (GHG) concentration and a promising means that could be institutionalised. However the potential for additional carbon quantities in agricultural soils is critical and comes from the agricultural firms behaviour with regards to land heterogeneity. In this paper, our aim is to set incentive mechanisms to enhance carbon sequestration by agricultural firms. A policymaker has to arrange incentives as agricultural firms have private information and do not spontaneously switch to the required practices. Moreover, a novelty in our paper is to show that the potential for additional carbon sequestration is similar to an exhaustible resource. As a result, we construct an intertemporal principal-agent model with adverse selection. Our contribution is to specify contracts in order to induce truthful revelation by the firms regarding their intrinsic characteristics towards carbon sequestration, while analytically characterizing the optimal path to sequester carbon as an exhaustible resource.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00505137.

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Date of creation: Mar 2010
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Handle: RePEc:hal:cesptp:halshs-00505137

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Keywords: Adverse selection ; agriculture ; carbon sequestration ; incentives ; land-use;

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  1. de Cara, Stephane & Rozakis, Stelios, 2004. "Carbon sequestration through the planting of multi-annual energy crops: A dynamic and spatial assessment," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 5(1), January.
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Cited by:
  1. Mireille Chiroleu-Assouline & Jean-Christophe Poudou & Sébastien Roussel, 2012. "North / South Contractual Design through the REDD+ Scheme," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00747405, HAL.

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