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Atmospheric concentrations of greenhouse gases can be reduced by withdrawing carbon from the atmosphere and sequestering it in soils and biomass. This report analyzes the performance of alternative incentive designs and payment levels if farmers were paid to adopt land uses and management practices that raise soil carbon levels. At payment levels below $10 per metric ton for permanently sequestered carbon, analysis suggests landowners would find it more cost effective to adopt changes in rotations and tillage practices. At higher payment levels, afforestation dominates sequestration activities, mostly through conversion of pastureland. Across payment levels, the economic potential to sequester carbon is much lower than the technical potential reported in soil science studies. The most cost-effective payment design adjusts payment levels to account both for the length of time farmers are willing to commit to sequestration activities and for net sequestration. A 50-percent cost-share for cropland conversion to forestry or grasslands would increase sequestration at low carbon payment levels but not at high payment levels.

Society has recently increased the value it places on the services that wetlands provide, including water quality improvements, flood control, wildlife habitat, and recreation. However, owners of wetlands are often unable to profit from these services because the benefits created are freely enjoyed by many. This report examines differences between public and private incentives regarding wetlands. Federal wetland policy has shifted in recent decades--from encouraging wetland conversion to encouraging wetland protection and restoration--in an effort to balance public and private objectives. The report assesses the need for continued wetlands protection policies as the United States approaches achieving the goal of no net loss of wetlands.