Influence of Project Scale and Carbon Variability on the Costs of Measuring Soil Carbon Credits

A large body of research suggests that US cropland soils can also sequester significant amounts of C and are a promising source of C credits. This paper presents a framework for assessing the transactions costs associated with per-hectare and per-credit contract types and addresses the potential magnitude of transactions costs associated with measuring soil C credits under a per-credit contract within the dry-land crop region of Montana, USA. In the empirical analysis, we estimate the total measurement costs for soil C credits and investigate how changes in contract (and region) size as well as increases in C credit variability affect total measurement costs. The empirical analyses suggest that increasing the size of the contract and aggregating credits over a larger number of producers can lower measurement costs associated with the per-credit contract, even in the face of increasing C variability. Thus contracts for large quantities of soil credits increase the likelihood that the per-credit contract remains more efficient than the per-hectare contract. However, these empirical results reflect the specific data and conditions present within the case study region. The theoretical expectation is that sample size and measurement costs can either increase or decrease as the population to be sampled increases. Thus the measurement costs associated with a per-credit contract could respond differently from this analysis across the spatial extent of the US.