Choi, Suk-won (The Ohio State University, AED Economics, 2120 Fyffe rd., Columbus, OH, 43210; Phone: 614-292-9424; Email: choi.151@osu.edu)

Economic Analysis of Soil Carbon Sequestration:Dynamic Model on Corn and Soybean in the Midwest US

S.Choi *, B.Sohngen

This study investigates the cost and potential of carbon sequestration in agricultural soils in three Midwestern states (Ohio-Indiana-Illinois). Previous economic studies have ignored several important features of soil carbon sequestration policy, such as the broad range of residue management intensity level observed in practice, the potential for emissions when the land is tilled, the cyclical patterns of crop rotations, and the spatial pattern of soil carbon. To investigate the influences of these factors, this study develops a dynamic model that maximizes the net present value of market welfare on corn and soybean, and chooses optimal solutions for residue management intensity, crop choices between corn and soybean. The model is implemented in 48 soil regions of a 3 state region- Ohio, Indiana, and Illinois. Two different carbon policies are examined: a program that rents new and additional carbon, and a program that offers a fixed payment to maintain land in permanent conservation tillage or no-tillage. For the fixed payment scenario, we examine two additional alternatives, one that requires only 35% residue to enter the program (i.e. conservation tillage), and one that requires more than 75% residue to enter the program (i.e. no-tillage). The results suggest that under the carbon renting program it is possible to sequester 5-50 million tC (1 tC = 1000 kg C), or 0.1 to 1.9 million tC per year (annual equivalent amounts using discounting techniques) of carbon for a marginal cost of $10 - $150 per tC. For a low carbon price of $10 per tC, the area of cropland in conservation tillage increases about 1.5 times over the baseline, although the average residue management is only about 43% for corn and 56% for soybeans. Under a higher price of $40 per tC, the area of cropland in conservation tillage rises by 2.3 times and average residue management rises to 53% for corn and 68% for soybeans. In general, the adoption rate of conservation practices is higher in soybean and low quality soil classes than in corn and high quality soil classes. The fixed payment scenario is substantially more expensive because it requires permanent adoption of conservation tillage or no tillage. For the fixed payment scenario that allows entrance into the program for 35% minimum residue management, to the marginal costs of sequestering 0.2 to 1.6 million tC per year are $40-$1000 per tC. For the fixed payment scenario that allows entrance into the program for 75% minimum residue management, to the marginal costs of sequestering 0.4 to 0.7 million tC per year are $18-$700 per tC. These results suggest that developing policies to spur continuous adoption of no-tillage could be fairly expensive in this region. In addition to examining potential carbon sequestration for the region as a whole, the results show which counties within the region have the greatest potential for sequestration under various policies and prices. In general, the largest gains in carbon occur in mid-productivity soils. Highly productive soils are less efficient in no-tillage, whereas the lowest soil productivity classes have already shown high adoption rates. The results also suggest that leakage is not a great concern with carbon sequestration in soils.