Carbon supply elasticity and determinants of farmer carbon farming decisions

Summary

This 2024 analysis of a 2021 U.S. Midwest farmer survey quantifies the price elasticity of carbon farming adoption and identifies the farm and farmer attributes that determine participation across different price regimes. The findings demonstrate that carbon supply responds elastically only within an intermediate price band ($20–50/Mg), whilst at lower and higher prices participation becomes inelastic, with different drivers—co-benefits dominating at low prices and farmer demographics and soil quality at higher prices. These results suggest that policy interventions to boost carbon farming adoption should be tailored to price level, balancing economic incentives with co-benefit communication and uncertainty reduction.

UK applicability

Whilst the study focuses on U.S. Midwest farming systems and market conditions, the methodological framework for understanding price elasticity and heterogeneous farmer responses could inform UK carbon farming policy design, particularly schemes under the Environmental Land Management framework. UK applicability would depend on whether price ranges, co-benefits profile, and farmer demographics in schemes translate comparably to Midwest conditions.

Key measures

Willingness to accept (WTA) payment for carbon farming; price elasticity of carbon supply at three price bands ($10–20, $20–50, $50–70 per Mg); farmer demographic variables (age, education); farm characteristics (size, soil quality); perceived co-benefits

Outcomes reported

The study measured farmers' willingness to accept (WTA) payment for carbon sequestration at different price points and identified which farmer and farm characteristics influence participation decisions. Price elasticity of carbon supply varied significantly across price ranges, with differential influences of co-benefits versus structural farm variables.

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