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Socioeconomics of Soil Carbon Sequestration

Dario Schulz
March 21, 2022
min read

This modern era has surpassed the industrial revolution, and deforestation for agriculture & urbanization use and moving towards a “sustainable revolution”. Carbon sequestration through well-known Nature-Based Climate activities could establish a win-win situation from a climate change and sustainable development perspective. Beyond the obvious geological factors limiting soil carbon sequestration, socioeconomic factors heavily influence the feasibility and impact of payments for soil carbon sequestration initiatives. This blog post will highlight the hurdles & importance of the socio-economic benefits of carbon sequestration, in addition to Seqana’s contribution of carbon sequestered in the underlain soil.

In a simple economic sense, the market-based Soil Organic Carbon (SOC) conservation project requires a provisional cost that needs to be smaller than the market value of Carbon Credit that can be obtained from certification organisations, to grow at scale. Assuming all the necessary stakeholders are in place (landowners to certification institution), there are still several reasons why provisional cost trends upward and factors that limit the amount of certifiable sequestered carbon. Understanding these key principles in a socio-economic sense and mapping these factors, will help us narrow down the feasible window for soil carbon sequestration. This further helps us identify suitable sites for carbon farming and regenerative agriculture practices.  

The provisional cost for conversational projects can be defined as the sum of opportunity cost and transaction or implementation cost. Landowners may have very different opportunity costs from that of project developers, so from an efficiency perspective, it could make sense to go to places where opportunity costs are low. For example, targeting degraded land (because you get more carbon for the buck) in a particular area where conversational activities are possible. The landowner could be a governmental institution or big corporation or an individual, all these stakeholders have their own opportunity cost that needs to be identified. For instance, farmers in the USA have an incentive to overstate their true opportunity cost – a problem that the Conservation Reserve Program in the US tries to overcome using auctions in which the true opportunity costs are revealed via a bidding system. Thus identifying low opportunity costs on land that result in high socio-economic value would be an idealistic way to start off the SOC project.

But the true elephant in the room is not the distribution of opportunity costs along socially sensitive gradients. The most important factors for conservation projects are compensative activities, which include the payments or returns on the project (like Carbon Credits) and other benefits with additionality. Arguing what would likely happen in the absence of payments is what we call the baseline. For example, changing climatic conditions that force us to sequester carbon, new legislation or social norms made by the government could mark a change point at which – even without compensation – a farmer or company would decide to adopt the new management regime and sequester soil carbon.

Looking at historical patterns also implies that one tends to reward the ‘bad actors’, namely the ones that depleted their soil carbon (and thus have a high potential to increase stocks again), while the ones that always managed their carbon stocks well receive much less compensation. This could also crowd out motivation, meaning that people, who initially cared about their soil could think: well, others get paid for it, so I will only continue to do so if I also receive money. This could lead to perverse incentives, like degrading one’s soil in order to become eligible to receive payments.

Provision costs also include the transaction costs, which are partly fixed and could account for operational costs. For example, the cost a landowner faces to find information on how and where to sell carbon credits is pretty much the same. Whether a person owns a hectare or thousand hectares, one must also have the resources to pay to do the work necessary. But there are also variable transaction costs that go beyond monetary investment and tend to increase for each unit of the area under contract. For example, monitoring the activities specified in the contract by doing on-site soil organic carbon measurements is time and labour-intensive.

The good news is that satellite imagery can easily cover large geographic areas over a long time period. This is where Seqana comes in and provides a scalable, cost-efficient solution to tracking soil carbon stocks at a high spatial and temporal resolution. Seqana has enabled the building of a SaaS platform for monitoring, reporting and verification (MRV) of SOC projects. We focus on continuous research and development in order to deliver the best analysis we could potentially deliver to our stakeholders. Along with co-development initiatives built on existing relationships with research partners, standards and corporates are key to growing SOC projects at scale.

The willingness to pay for certified carbon credits will depend on their credibility. Therefore, one should embrace these multifaceted challenges with transparency and curiosity, instead of waiting to tackle them in the future. Remote sensing and artificial intelligence can surely be used to obtain accurate measurements of soil carbon stocks. But it can also help to better identify and target those areas that not only bring the highest private, but also social return. After all, it is not only about the quantity of carbon credits, but also about their quality. Soil carbon sequestration can happen on monocultures or in highly diversified agroecological systems; it can happen on a fully mechanized farming estate or on a small-scale family farm. Before we can talk about the demand for different kinds of carbon credits, we first have to be able to describe the commodity – that is, we have to accurately measure its multiple dimensions.

This blogpost was guest-authored by a friend of Seqana Dario Schulz

Soil Organic Carbon
Seqana is an EU-funded, earth observation and ML enabled, SaaS company that is developing credible and cost-efficient soil carbon monitoring, reporting, and verification (MRV) tools for regenerative agriculture. We enable change-makers to combat the effects of climate change by introducing transparent, replicable, and scalable MRV into this nascent market.
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