Pricing Benefit Externalities of Soil Carbon Sequestration in Multifunctional Agriculture

“Multifunctionality†emphasizes the benefit externality properties of nonfood products that coincide with agricultural commodity production, some of which also have public-good properties. However, determining the willingness to pay for local benefit externalities is seen as necessary but daunting. This paper pursues the idea that the valuation process might first start by estimating the incentives required to supply various levels of a benefit externality. With the use of carbon sequestration through the adoption of no-till cultivation as an example of a multifunctional benefit externality, mathematical programming is used to derive representative price schedules. The implication for incentive prices are examined in light of risk aversion.