Agricultural residue to functional carbon: Feedstock hoarding risk and farmer income insurance economics

Agricultural residues represent a globally abundant feedstock for producing functional carbon materials, yet the supply chain between farm gate and biorefinery is systematically disrupted by farmer hoarding behavior and price speculation. This paper examines the intersection of feedstock hoarding risk and farmer income insurance economics within agricultural residue-to-carbon value chains. The study develops a theoretical model of hoarding behavior rooted in prospect theory and option value reasoning, demonstrates its empirical consequences using cross-sectional survey data from 2840 farm households in Pakistan's major residue-producing districts, and proposes actuarially designed income insurance instruments calibrated to suppress speculative storage while maintaining farmer welfare. Biochar and activated carbon yield characteristics are assessed across five major residue categories under varied pyrolysis conditions. A cost-benefit analysis of six thermochemical conversion pathways reveals that chemical activation yields the highest net present values, with internal rates of return between 28 and 35 %. The insurance modelling shows that group-based index products with 85 % coverage triggers and 40 % government premium subsidies can reduce hoarding incidence by 38–44 % while sustaining actuarial loss ratios below 0.95. The findings carry direct implications for carbon market certification, bioenergy policy design, and climate-smart agricultural finance in South Asian low-income farming contexts.