In this study, we examine the spatial and dynamic implications of policies aimed at increasing carbon sequestration in agricultural soils. We consider incentive mechanisms designed to encourage the planting of energy multi-annual crops that allow higher carbon sequestration rates for a longer period of time. By using a dynamic micro-economic model, we simulate the sequence of crop plantings over a given time horizon and investigate different payment mechanisms (per-ton or per-hectare). We discuss their implications in terms of regulation policy and efficiency. This model is then applied to the Central Plains of Thessaly, Greece, to assess the marginal costs of carbon sequestration and the optimal timing of switching to multi-annual energy crops. To do so, we combine the dynamic microeconomic model with a carbon accounting model and a geophysical database. We assess the efficiency loss of constant per-hectare payments compared to per-ton mechanisms. The dynamic and spatial implications of these mechanisms are compared and discussed.


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