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Contract Design to Sequester Carbon in Agricultural Soils

  • Mireille Chiroleu-Assouline


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

  • Sébastien Roussel


    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - CNRS - Institut national de la recherche agronomique (INRA) - UM1 - Université Montpellier 1 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM])

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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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
Date of revision:
Publication status: Published in Documents de travail du Centre d'Economie de la Sorbonne 2010.60 - ISSN : 1955-611X. 2010
Handle: RePEc:hal:cesptp:halshs-00505137
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  1. Stéphane De Cara & Stelios Rozakis, 2004. "Carbon sequestration through the planting of multi-annual energy crops: A dynamic and spatial assessment," Working Papers 2004/05, INRA, Economie Publique.
  2. S De Cara & P-A Jayet, 2000. "Emissions of greenhouse gases from agriculture: the heterogeneity of abatement costs in France," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 27(3), pages 281-303, September.
  3. repec:inr:wpaper:156214 is not listed on IDEAS
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