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Contract Design to Sequester Carbon in Agricultural Soils


  • Sébastien ROUSSEL


According to several studies, agricultural carbon sequestration could be a relatively low cost opportunity to mitigate greenhouse gas (GHG) concentration and a promis-ing means that could be institutionalised. However the potential for additional carbon quantities in agricultural soils is critical and comes from the agricultural .rms behaviour with regards to land heterogeneity. In this paper, our aim is to set incentive mechanisms to enhance carbon sequestration by agricultural .rms. A policymaker has to arrange incentives as agricultural .rms 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 .rms regarding their intrinsic characteristics towards carbon sequestration, while analytically characterizing the optimal path to sequester carbon as an exhaustible resource.

Suggested Citation

  • Mireille CHIROLEU-ASSOULINE & Sébastien ROUSSEL, 2010. "Contract Design to Sequester Carbon in Agricultural Soils," Working Papers 10-07, LAMETA, Universtiy of Montpellier, revised Jul 2010.
  • Handle: RePEc:lam:wpaper:10-07

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    References listed on IDEAS

    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.
    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.
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    Cited by:

    1. Mireille Chiroleu-Assouline & Jean-Christophe Poudou & Sébastien Roussel, 2012. "North / South Contractual Design through the REDD+ Scheme," Working Papers 2012.89, Fondazione Eni Enrico Mattei.

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    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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