This paper assesses the impact of an EU-wide policy to expand grassland area and increase carbon sequestration in soils. The paper uses the economic Common Agricultural Policy Regionalized Impact (CAPRI) model which represents the EU Agriculture by 2,450 mathematical programming farm type models in combination with the biogeochemistry model CENTURY which determines the carbon sequestration at a high resolution level. Both models are linked at the NUTS3 level using the location information in the Farm Accounting Data Network. We simulated a grassland premium such that farmers increase grassland by 5% cost efficiently, whereas we assumed that farmers with lower costs can contribute more. Our findings are that the GHG mitigation potential and costs depend on carbon sequestration rates, the land market and the induced land use changes, and the regional agricultural production structure. The overall net effect in Europe simulated with the model is a reduction of 4.3 Mio t CO2e (equivalents) when converting 2.9 Mio ha into grassland. A premium was calculated so that farmers increase grassland voluntary. It amounts on average to 238 EUR/ha, summing up to a total cost of 417 Mio EUR. The net abatement costs are based on the premium payments and account on average 97 EUR/t CO2e. Substantial carbon sequestration (28% of the total sequestration) can be achieved already with 50 EUR/t CO2e. The carbon sequestration would be most effective in regions in France, Italy and Spain, the Netherlands and Germany. Larger farms and farm types specialized in cereals and protein crops, mixed field cropping, granivores and the mixed crops-livestock farming have the highest potential to relatively low costs.