Kurkalova, Lyubov (Iowa State University, 560A Heady Hall, Iowa State University, Ames, IA, 50011-1070; Phone: 515-294-7695; Fax: 515-294-6336; Email: lyubov@iastate.edu)

Carbon Sequestration in the Upper Mississippi River Basin: Implications for Geographical Distribution of Economic Benefits

H. Feng, L. A. Kurkalova *, C. L. Kling, P. W. Gassman

This study investigates the carbon sequestration potential and co-benefits from policies aimed at retiring agricultural land in the Upper Mississippi River Basin, a large, heavily agricultural area. We extend the empirical measurement of co-benefits from the previous focus on environmental benefits to also include economic transfers, which have often been mentioned as a co-benefit, but little empirical work measuring the potential magnitude of these transfers has previously been undertaken. We compare and contrast five targeting schemes, each based on maximizing different physical environmental measures, including carbon sequestration, soil erosion, nitrogen runoff, nitrogen leaching, as well as the area enrolled in the program. In each case, the other environmental benefits and economic transfers are computed. We find that the geographic distribution of co-benefits (including economic transfers) varies significantly with the benefit targeted implying that policy design related to targeting can have very important implications for both environmental conditions and income distributions in sub regions.