Agricultural ecosystems are a source of greenhouse gas (GHGs) emissions and losses of nutrients to waterways. Several studies have recognized this and have documented the potential to reduce GHG fluxes and nutrient loss to waterways by using carbon offsets to fund the implementation of land retirement and afforestation. However, the ability to use land for both agricultural production and environmental conservation is also important. This study develops a novel analytical framework that is used to examine the cross-media (water and air) environmental effects of implementing offset-funded conservation practices in a working-lands setting. The framework is applied to a case study which examines the extent to which carbon pricing can affect practice implementation costs and the optimal distribution of these practices throughout an agricultural watershed. Results indicate that carbon offsets can reduce conservation practice implementation costs and have the potential to reduce greater amounts of nonpoint source pollution for a given cost of implementation. This conclusion has significant implications for policymaking, particularly with regard to using markets for GHG emissions to achieve water quality improvements where water quality trading or government conservation programs have historically been unsuccessful. (C) 2011 Elsevier B.V. All rights reserved.
