This study develops an integrated assessment approach for analysis of the economic potential for carbon sequestration in agricultural soils. By linking a site-specific economic simulation model of agricultural production to a crop ecosystem model, the approach shows the economic efficiency of soil carbon (C) sequestration depends on site-specific opportunity costs of changing production practices and rates of soil C sequestration. An application is made to the dryland grain production systems of the U.S. Northern Plains which illustrates the sensitivity of the sequestration costs to policy design. The marginal cost of soil C ranges from $12 to $500 per metric ton depending upon the type of contract or payment mechanism used, the amount of carbon sequestered, and the site-specific characteristics of the areas.