The Economic Value of Soil Carbon - Soil Carbon: Science, Management and Policy for Multiple Benefits - page 184

it in terms that are comparable with services
from human-made assets. Hence, soil car-
bon valuation can be used to unravel the
complexities of social ecological relation-
ships in relation to soil carbon, to make ex-
plicit how economic decisions would affect
such values, and to express such value
changes in some unifying metric such as
money in order to be incorporated in policy
decision processes (Mooney et al ., 2005).
Policy failure stems from intentional
policies that bias values associated with
land-use decisions. For example, economic
policy environments for agriculture and
rural development in most countries are
driven by heavy subsidized agriculture,
which is in part responsible for a regulatory
environment that creates conditions for
farmers to mine soil carbon as an economic
rational response (Antle et al ., 2003). This is
associated, for instance, with the creation of
the economic conditions for certain land
management not to be sufficiently attractive
to farmers, such as soil restoration, wood-
land regeneration, no-till farming, using cover
crops, nutrient management and manure and
sludge application, among others (Lal, 2004).
Since soil carbon accumulation is a function
of past land-use and management practices,
policy failures need to be addressed with a
long-term perspective.
One way to solve the market failure of
soil carbon is to create a market for it. This
requires, one way or the other, commodify-
ing of soil carbon. That is, bringing it to the
market sphere by converting it into a good
that has exchange value. There are various
approaches that could be used to allow in-
ternalizing the economic value of soil carbon
through a market-based approach. This can
take different forms, and several examples
have been reported in the literature for dif-
ferent natural assets (Ribaudo et al ., 2010).
One approach is based on directly creating a
market for soil carbon credits that can be
traded. Soil carbon credits for sequestration
are a type of offset trade, and the stored car-
bon may be leased or sold (Jones, 2007).
A well-known example is an emissions
trading market developed by a regulatory
agency. This agency would stimulate de-
mand for soil carbon by requiring regulated

agents, farmers for example, to have enough
allowances to meet a regulatory require-
ment and enforce property rights. Farmers
would be allowed to trade the discharge
allowances (water-quality trading and car-
bon cap-and-trade programmes). Members in
this programme can meet their obligations
by purchasing offsets from qualifying emis-
sions reductions projects, including carbon
sequestration in agricultural soils. However,
the effectiveness of such a mechanism needs
a solid regulatory framework to support purely
voluntary exchanges. For instance, the Chicago
Climate Exchange (CCX) in North America,
which began in 2003 including over 350
companies and the public sector in the USA,
Australia, Brazil, China, India and Costa Rica,
traded 35 million tonnes (Mt) of CO 2 equiva-
lents, from which sequestration in soils con-
tributed to 46% of these. But for trading of soil
carbon to be an efficient mechanism, the price
of soil carbon needs to be attractive to farmers,
and currently voluntary markets are under-
valuing soil C. In fact, in 2010, the exchange
of carbon credits ceased due to their low price
(Holderieath et al ., 2012).
A second possibility is using direct
payment schemes to incentivize individ-
uals to accumulate soil carbon. These are so-
called soil carbon incentive payment (SCIP)
schemes and are akin to payments for en-
vironmental services (Ferraro and Kiss, 2002;
Kinzig et al ., 2011). An emergent body of
the theoretical literature (Antle and Diagana,
2003; Antle et al ., 2003; Antle and Stoorvo-
gel, 2008) has analysed the potential effects
of soil carbon contracts with small farmers
in developing countries to solve the reason
for market failure. Such contracts imply
direct payments to farmers and require
them to adopt certain land-use or manage-
ment practices. Such contracts would
allow a flexible opt-in and opt-out approach
by farmers without compromising the long-
term permanence of soil carbon stocks, and
thus without imposing excessive oppor-
tunity costs on farmers in the form of uncer-
tainty about the long-term benefits of changed
land management, commodity price uncer-
tainty and other inherent risks associated
with small, semi-subsistence agricultural
systems.