Abstract The Clean Development Mechanism (CDM) of the Kyoto Protocol of the United Nations Framework Convention on Climate Change allows a country that emits C above agreed-upon limits to purchase C offsets from an entity that uses biological means to absorb or reduce greenhouse emissions. The CDM is currently offered for afforestation and reforestation projects, but may apply subsequently to sequestration in agricultural soils. Additionally, markets outside of the Protocol are developing for soil C sequestration. In theory, C markets present win-win opportunities for buyers and sellers of C stocks. In practice, however, C markets are very complex. They presuppose the existence and integration of technical capacity to enhance C storage in production systems, the capacity for resource users to adopt and maintain land resource practices that sequester C, the ability for dealers or brokers to monitor C stocks at a landscape level, the institutional capacity to aggregate C credits, the financial mechanisms for incentive payments to reach farmers, and transparent and accountable governance structures that can ensure equitable distribution of benefits. Hence, while C payments may contribute to increasing rural incomes and promoting productivity enhancement practices, they may also expose resource users to additional social tensions and institutional risks.