Willingness to accept carbon farming contracts: an experimental auction

Agricultural residues serve dual purposes: they sustain soil fertility and carbon storage, but they can also be used for bio-based products or energy. Balancing these competing uses is vital for long-term environmental and economic sustainability. Carbon farming—now promoted by the EU’s Carbon Removals and Carbon Farming Regulation (CRCF, 2024) and international initiatives like REDD+ and the voluntary carbon market (VCM)—offers a promising path toward climate mitigation and rural development. In low- and middle-income countries, such as the Philippines, carbon farming could provide stable income, food security and environmental benefits, but its success depends on broad and sustained farmer participation. Smallholder farmers face barriers such as small landholdings, insecure tenure, and delayed returns on investment. To understand the viability of carbon faming, is therefore key to understand its challenges by examining how institutional design, collective action, and incentive mechanisms affect farmers’ enrollment decisions. Against this background, this study investigates smallholder farmers’ decisions to participate in carbon farming programs, which aim to sequester carbon in below and above ground through sustainable land-use and residue management practices. The study focuses on understanding farmers’ willingness to accept (WTA) payments for participanting in carbon farming contracts, the role of group coordination and cooperation in program participation, and the credibility of self-reported bids under truth-telling incentives. Because carbon sequestration is a public good, individual farmers bear private costs while benefits are shared globally. Carbon credit markets aim to bridge this gap but often fail due to low prices and high transaction costs. The study therefore emphasizes behavioral and institutional conditions that influence farmers’ willingness to engage in long-term carbon sequestration practices. Three central questions guide the study: 1. What is the individual WTA of farmers for adopting sustainable coconut farming practices, and how does this compare to their self-reported costs? 2. How does group decision-making influence collective bids compared to individual valuations? 3. To what extent do truth-telling incentives (via the Bayesian Truth Serum) enhance the credibility of farmers’ reported bids?