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Contract Design to Sequester Carbon in Agricultural Soils

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Abstract
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

Suggested Citation

  • Mireille Chiroleu-Assouline & Sébastien Roussel, 2010. "Contract Design to Sequester Carbon in Agricultural Soils," Documents de travail du Centre d'Economie de la Sorbonne 10060, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:10060
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    1. Mireille Chiroleu-Assouline & Jean-Christophe Poudou & Sébastien Roussel, 2012. "North / South Contractual Design through the REDD+ Scheme," Post-Print halshs-00747405, HAL.

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    More about this item

    Keywords

    Adverse selection; agriculture; carbon sequestration; incentives; land-use;
    All these keywords.

    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; Modern Monetary Theory
    • 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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