Profitability of Carbon Sequestration in Western Rangelands of the United States

Concerns over climate change have increased interest in carbon sequestration in agricultural lands. While the per-hectare carbon capture potential of rangelands is less than either cropland or forests, existing research suggests modest changes in carbon storage on rangelands can potentially alter the global carbon cycle. This paper examines the potential firm-level revenues from voluntary carbon offset programs, such as the Chicago Climate Exchange (CCX) Rangeland Soil Carbon Offset program. We estimate revenues for short-term voluntary offsets given historical prices and prices projected with potential cap-and-trade legislation. We also estimate revenues assuming 100-yr offsets are required to meet international sequestration standards. Simulation results indicate a relatively wide range of modest revenues from recent CCX contracts and carbon prices. The analysis suggests that recent carbon prices or low-end projected prices from cap-and-trade legislation are not likely to encourage producer participation. Medium and high carbon price projections for cap-and-trade legislation may make carbon sequestration a more attractive option for rangeland managers, but given potential requirements for projects to meet international guidelines for greenhouse gas offset projects, many issues remain before range managers may be interested in carbon sequestration as an enterprise.