Carbon sequestration in agricultural soils: A dynamic assessment Paper prepared for presentation at the American Agricultural Economics Association

Abstract. We examine the spatial and dynamic implications of policies aimed at encouraging carbon seques-tration in agricultural soils. We consider incentive mechanisms to encourage the planting of energy multi-annual crops that allow higher carbon sequestration rates for a longer period of time. By using a dynamic micro-economic model, we simulate the sequence of crop plantings over a given time horizon and investigate different payment mechanisms (per-ton or per-hectare). We discuss their implications in terms of regulation policy and efficiency. This model is then applied to the Central Plains of Thessaly, Greece to assess the marginal costs of carbon sequestration and the optimal timing of switching to multi-annual energy crops. To do so, we couple the dynamic microeconomic model with a carbon accounting model and a geophysical database. We provide an assessment of the potential loss of efficiency related to the use of constant per-hectare payments. We also discuss the dynamic implications of these mechanisms, as well as their results in terms of spatial distribution