Work

Practice- or results-based subsidies: balancing the direct costs for soil carbon sequestration and transaction costs for farmers and monitoring agencies

Year: 2026

Type: article

Abstract: Policymakers increasingly seek to promote agricultural carbon sequestration, avoiding both income losses for farmers and excessive public implementation costs. This study compares practice- and results-based subsidies to soil carbon sequestration with respect to their total costs, sequestration achieved, and income effects. We develop a numerical model that maximizes social net benefits while accounting for private transaction costs, public monitoring costs, and regional and farm type heterogeneity. The findings reveal that results-based subsidies deliver higher net benefits and sequestration. The per hectare monitoring costs for a practice-based scheme must be less than 30 per cent of those for a results-based scheme for the former to deliver higher net benefits, given a carbon price of 250 €/tCO₂e. Sensitivity analysis shows that higher carbon prices require the monitoring costs of a practice-based scheme to be even lower relative to those of a results-based scheme in order to outperform it.

Source: Q Open

Authors: Luiza M Karpavicius, Katarina Elofsson

Institutions: University of Copenhagen, Aarhus University, Södertörn University

Language: English

Topic: Agricultural Economics and Policy

Subfield: General Agricultural and Biological Sciences

Field: Agricultural and Biological Sciences

Domain: Life Sciences

SDGs: Climate action, Zero hunger

Open Access status: gold

Estimated APC paid: $1,882

Funder: Danmarks Frie Forskningsfond