The potential and cost of carbon sequestration in agricultural soil: Empirical study of dynamic model in the midwestern United States

This study investigates the cost and potential of carbon sequestration in agricultural soil in the Midwest U.S. Previous economic studies ignored several important features such as the range of residue management intensity level, dynamic soil carbon properties, cyclical patterns of crop rotations, alternatives on the baseline scenarios, and spatial pattern of carbon gains.; Developing the empirical dynamic model that maximizes the net present value of market welfare on corn and soybean, two different carbon programs are applied: carbon renting program and fixed payment per hectare with minimum residue management intensity. Several empirical estimations are employed to obtain parameters for the dynamic model, in particular, residue management impacts on crop yield and carbon dynamics are estimated. The crop yield loss by conservation practice is greater in high quality soil than the low quality class. Sensitivity analysis on different baseline scenario suggests that carbon sequestration path could be altered by different assumptions. It suggests that the estimates of the carbon gains from any carbon policy would be sensitively affected by how baseline scenario is assumed. In general, the adoption rate of conservation practice is higher in soybean and low quality soil classes than in corn and high quality soil classes.; Carbon renting analysis shows that corn price could rise and soybean price could decrease, but the magnitude is not immense. Overall, the average cost of carbon sequestration is the lowest with carbon renting policy and the highest with fixed payment per hectare with low minimum residue management requirement. The average cost rages from {dollar}0.06 to {dollar}4.50 per ton with carbon renting scenario. With fixed payment scenario, the average cost rises to {dollar}40--{dollar}613 per ton with 35% minimum residue management and {dollar}18--{dollar}304 per ton with 75% minimum residue management requirement.; The area with high yield potential does not necessarily provide the carbon gains because the residue management intensity is minimal at 35%. The source of carbon gains in the study region is from the middle quality soil class. However, low quality soil class does not provide carbon either because conservation practice adoption rate was already high in the baseline scenario and also the total potential for the carbon gain is small.