Skip to main content Accessibility help

Uncertainty Discounting for Land-Based Carbon Sequestration

  • Man-Keun Kim (a1) and Bruce A. McCarl (a2)


The effect of stochastic factors on soil carbon makes the quantity of carbon generated under a sequestration project uncertain. Hence, the quantity of sequestered carbon may need to be discounted to avoid liability from shortfalls. We present a potentially applicable uncertainty discount and discuss difficulties that might arise in empirical use. We insist that the variance in historical crop yields across geographical areas is used to derive a proxy variance for forming an uncertainty discount for carbon projects. Application of our approach suggests that project level uncertainty discounts would be 15-20% for the East Texas region.



Hide All
Adams, R., Adams, D., Callaway, J., Chang, C., and McCarl, B.A.Sequestering Carbon on Agricultural Land: Social Cost and Impacts on Timber Markets.Contemporary Policy Issues 11(1993):7687.
Antle, J.M., Capalbo, S.M., Paustian, K.H., and Ali, K.Estimating the Economic Potential for Agricultural Soil Carbon Sequestration in the Central United States using an Aggregate Econometrie-Process Simulation Model.Climatic Change 80,1-2(2007):145–71.
Birdsey, R.A., and Heath, L.S.Carbon Changes in US Forests.” Productivity of America's Forests and Climate Change. Joyce, L.A., ed. General Technical Report RM-271, USDA Forest Service, Rocky Mountain Forest and Range Experiment Station, Fort Collins, CO, 1995.
Butt, T.A., and McCarl, B.A.On-Farm Carbon Sequestration: Can Farmers Make Money?Choices 19,3(2004):2731.
Canada. “Methodological Issues, Inventories and Uncertainties.” United Nations Framework Convention on Climate Change, Subsidiary Body for Scientific and Technological Advice. Additional submissions by parties to the Ninth Session at Buenos Aires, 2-13 November 1998, Item 4 of the provisional agenda. Other Matters, Approaches to resolving methodological issues related to national communications from Annex I Parties, 1998. Internet site:
Chicago Climate Exchange (CCX). “Soil Carbon Management Offsets.” 2007. Internet site:
Heath, L.S., and Smith, J.E.An Assessment of Uncertainty in Forest Carbon Budget Projections.Environmental Science & Policy 3(2000):7382.
Intergovernmental Panel on Climate Change (IPCC). Land Use, Land-Use Change, and Forestry, Summary for Policymakers. Cambridge, UK: Cambridge University Press, 2000.
Intergovernmental Panel on Climate Change (IPCC). Climate Change 2007: Synthesis Report. Geneva, Switzerland: Contribution of Working Groups I, II and III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change IPCC, 2007a.
Intergovernmental Panel on Climate Change (IPCC). Climate Change 2007: Mitigation. Cambridge, UK and New York, NY: Contribution of Working Group III to the Fourth Assessment Report of the IPCC, Cambridge University Press, 2007b.
Izaurralde, R.C., Williams, J.R., McGill, W.B., Rosenberg, N.J., and Quiroga, M.C. Jakas. “Simulating Soil Carbon Dynamics with EPIC: Model Description and Testing Against Long Term Data.Ecological Modelling 192(2006):362–84.
Kennedy, P. A Guide to Econometrics. 5th ed. Cambridge, MA: The MIT Press, 2003.
Kim, M.-K., and McCarl, B.A.Carbon Sequestration and Its Trading in U.S.” Invited paper prepared for presentation at the Symposium on Measures to Climatic Change in the Agricultural Sector, Rural Development Administration (RDA), (Korea) National Institute of Agricultural Science and Technology (NIAST), Seoul, Korea, September 7-11, 2008.
Kim, M.-K., McCarl, B.A., and Murray, B.C.Permanence Discounting for Land-Based Carbon Sequestration.Ecological Economics 64,4(2008):763–69.
Kimble, J.M.Private Communication on Carbon Sequestration and Crop Yield.” At the Energy Agriculture Forum in CASMGS, College Station, TX, January 2004.
Kurkalova, L.A.Carbon Sequestration in Agricultural Soils: Discounting for Uncertainty.Canadian Journal of Agricultural Economics 53,4(2005):375–84.
Lewandrowksi, J.M., Jones, P.C., House, R., Sperow, M., Eve, M., and Paustian, K.. Economics of Sequestering Carbon in the U.S. Agricultural Sector. Technical Bulleting 1909. Washington, DC: U.S. Department of Agriculture, Economic Research Service, 2004.
Lieberman and Warner Bill. S.2191: Lieberman-Warner Climate Security Act of 2007, 2007. Internet site:
Lubowski, R.N., Plantinga, A.J., and Stavins, R.N.Land-Use Change and Carbon Sinks: Econometric Estimation of the Carbon Sequestration Supply Function.Journal of Environmental Economics and Management 51,2(2006):135–52.
McCarl, B.A., and Schneider, U.A.The Cost of Greenhouse Gas Mitigation in U.S. Agriculture and Forestry.Science 294(2001):248182.
Mooney, S., Antle, J., Capalbo, S., and Paustian, K.Influence of Project Scale and Carbon Variability on the Costs of Measuring Soil Carbon Credits.” Environmental Management 33(2004): S252–63.
Moore, D.S., and McCabe, G.P.. Introduction to the Practice of Statistics. 2nd ed. New York: W.H. Freeman and Company, 1993.
Parks, P.J., and Hardie, I.W.Least-Cost Forest Carbon Reserves: Cost-Effective Subsidies to Convert Marginal Agricultural Land to Forests.Land Economics 71(1995):122–36.
Parton, W.J., Schimel, D.S., Ojima, D.S., and Cole, C.V.A General Model for Soil Organic Matter Dynamics Sensitivity to Litter Chemistry, Texture and Management.” Quantitative Modeling of Soil Forming Process. Bryant, R.B. and Arnold, R.W., eds. SSSA Special Publication 39, Soil Science Society of America, Madison, WI. 1994.
Plantinga, A.J., Mauldin, T., and Miller, D.J.An Econometric Analysis of the Cost of Sequestering Carbon in Forest.American Journal of Agricultural Economics 81(1999):812–24.
Seton's EH&S Compliance Resource Centers. Chapter I, Part 77,40-CFR Protection of Environment, 2003. Internet site:
Smith, J.E., and Heath, L.S.Identifying Influences on Model Uncertainty: An Application Using a Forest Carbon Budget Model.Environmental Management 27(2001):253–67.
Stavins, R.N.The Costs of Carbon Sequestration: A Revealed-Preference Approach.The American Economic Review 89(1999):9941009.
Thomson, A.M., Rosenberg, N.J., Izurralde, R.C., and Brown, R.A.Climate Change Impacts for the Conterminous USA: An Integrated Assessment; Part 2: Models and Validation.Climatic Change 69,1(2005):2741.
United Nations Framework Convention on Climate Change (UNFCCC). Kyoto Protocol, 1994, Internet site: htç.y/mifcœ.int/essential_background/kyoto_protocol/items/1678.php.
United States Department of Agriculture (USDA). Farms and Land in Farms, National Agricultural Statistics Service, 2004. Internet site:
United States Environmental Protection Agency (US EPA). Office of Atmospheric Programs, Greenhouse Gas Mitigation Potential in U.S. Forestry and Agriculture, EPA 430-R-05-006, Washington, DC, November 2005, Internet site:
West, T.O., and Post, W.M.Soil Organic Carbon Sequestration Rates by Tillage and Crop Rotation: A Global Data Analysis.Soil Science Society of America Journal 66(2002):193046.
West, T.O., Marland, G., King, A.W., Post, W.M., Jain, A.K., and Andrasko, K.Carbon Management Response Curves: Estimates of Temporal Soil Carbon Dynamics.Environmental Management 33(2004):507–18.


Uncertainty Discounting for Land-Based Carbon Sequestration

  • Man-Keun Kim (a1) and Bruce A. McCarl (a2)


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed