This paper explores the potential impacts of payments for agricultural soil carbon sequestration on poverty of farm households and on the sustainability of agricultural systems, using economic theory combined with evidence from three case studies in Kenya, Peru, and Senegal. The case studies indicate that the likely impact of carbon contracts will be to raise rural incomes and reduce the rate of soil carbon loss. In some cases, carbon contracts may be able to stabilize soil carbon stocks at a higher level than would otherwise be economically feasible. These findings suggest that carbon payments could have a positive impact on the sustainability of production systems while also reducing poverty. The analysis indicates that payments for environmental services are most likely to have a positive impact when they are implemented in an enabling economic and institutional environment.