Carbon Credits and Ecosystem Service Valuation as Economic Pathways for Sustainable Agriculture and Rural Livelihood Enhancement

Abstract

Climate change is increasingly degrading agricultural productivity and ecosystem health, necessitating economic mechanisms that reconcile sustainable rural livelihoods with environmental sustainability. This study aims to examine the role of carbon credits and Ecosystem Service Valuation (ESV) in promoting sustainable agriculture and enhancing rural livelihoods. Using evidence-based synthesis of global carbon pricing mechanisms and Payments for Ecosystem Services (PES) initiatives, the study highlights a comparative investigative approach to assess their economic, social, and environmental co-benefits. The results indicate that well-designed carbon and PES schemes effectively internalize environmental costs, diversify farmers’ income sources, reduce poverty, and enhance climate resilience among smallholders. Indicatively, significant trade-offs persist between carbon sequestration and key ecosystem processes such as biodiversity conservation, soil fertility, and water management. Additionally, valuation challenges, land-use trade-offs, and institutional gaps limit large-scale effectiveness. The study recommends strengthening governance frameworks, monitoring systems, and policy integration to optimize outcomes. It concludes that aligning carbon markets with ecosystem valuation can effectively support sustainable agricultural systems and the United Nations Sustainable Development Goals.