Contract Duration and Carbon Permanence

In public debates about soil carbon sequestration, much has been made of the idea that soil carbon is not necessarily permanently stored in soils (Marland et al., 2001). However, these discussions have considered permanence as a biophysical phenomenon. From an economic point of view, the permanence of carbon in the soil is also an issue of how farmers choose to manage land, and it is related to adoption thresholds, as now explained.

In public debates about soil carbon sequestration, much has been made of the fact that biological forms of carbon sequestration, including soil carbon, are not necessarily stored permanently in soils. Forests can be harvested and used for fuel; abandonment of soil carbon-sequestering practices could likewise cause carbon to be released back into the atmosphere through the same processes that cause soil carbon to be released when agriculture was first introduced.

Soil science has established that there is a steady-state level for soil C that can be stored in the soil for a given soil under specified practices, referred to by Ingram and Fernandes (2001) as the "attainable maximum." Thus, under a specified set of conditions, carbon can be said to accumulate at an average annual rate only for a certain number of years, at which time the soil becomes "saturated." In addition, soil research has shown that sequestered carbon is volatile, and that if soil C sequestering practices are discontinued, the C stored in the soil can be released back in to the atmosphere in a short period of time. For example, if a farmer were to revert from reduced tillage to conventional plowing, the accumulated soil C may be released back to the atmosphere and the soil C level may return to the level it was at before reduced tillage was adopted.

A simple way to address the permanence issue is to view farmers who enter into soil C contracts as providing a service in the form of accumulating and storing soil C. During the time period in which C is being accumulated, the farmer is providing both accumulation and storage services. Once the soil C level reaches the saturation point, the farmer is providing only storage services. However, both accumulation and storage services would depend on the farmer continuing to maintain the land use or management practices that make the accumulation possible. Therefore, if carbon storage practices are less profitable than the conventional practices that release carbon for the duration of the contract, farmers will have to be provided an incentive for the time that the carbon sequestering and storing practices are to be maintained, not just for the sequestration period.

The discussion in the previous section noted that in many cases, practices that store carbon may also yield higher returns to farmers over time, although these higher returns may come with a lag. When this is the case, the model presented in the previous section (Equation 28.1) can be used to show that during the initial phase of adoption, when the conventional practice yields higher returns than the conservation practice, farmers may require a positive financial incentive to bear the fixed and variable costs of adopting it. However, this model also can be used to show that once the practice becomes more profitable, and once the fixed costs of adoption have been borne, farmers should be willing to maintain the practice indefinitely without additional financial incentives for carbon sequestration. Therefore, we can conclude that if the carbon sequestration practices become profitable at some point before the contract expires, the carbon sequestered through adoption and maintenance of these practices is likely to be permanent as long as the practices remain profitable. Thus, with conservation practices that enhance the productivity of the production system, thus making the practices profitable, carbon permanence can become an emergent property of the system once the practice is adopted and maintained for a sufficient amount of time. This may occur despite farmers' unwillingness to adopt or maintain the practices initially without incentives.

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