This document presents a bio-economic model of conservation agriculture and soil carbon sequestration. It examines how conservation agriculture increases soil carbon concentrations while generating private benefits for farmers and public benefits in carbon sequestration. The model conceptualizes farmers optimally allocating crop residues between soil improvement and livestock fodder, and derives the optimal incentive required for farmers to internalize the carbon sequestration externality. An empirical analysis of soil and socioeconomic data from Kenyan farms identifies determinants of crop residue quality and potential for carbon sequestration through conservation agriculture.