We present stable carbon isotope (δ13C) data from modern carbonate sediment that require a decoupling of the carbon cycles in the global ocean versus shallow carbonate shelves. This realization is important because, for the first 97% of Earth history, many inferences about global paleoclimate and seawater chemistry rely on interpretations of shallow carbonates. We use modern observations and a simple model to show how ordinary diurnal carbon cycling in shallow waters is sufficient to produce anomalously positive δ13C on shelves today, and in the geological record. Our results alleviate the need to interpret positive δ13C excursions in the geological record as global reorganizations of the carbon cycle and instead link δ13C to local and/or global paleoenvironmental and paleoecological controls.In the past 3 billion years, significant volumes of carbonate with high carbon-isotopic (δ13C) values accumulated on shallow continental shelves. These deposits frequently are interpreted as records of elevated global organic carbon burial. However, through the stoichiometry of primary production, organic carbon burial releases a proportional amount of O2, predicting unrealistic rises in atmospheric pO2 during the 1 to 100 million year-long positive δ13C excursions that punctuate the geological record. This carbon–oxygen paradox assumes that the δ13C of shallow water carbonates reflects the δ13C of global seawater-dissolved inorganic carbon (DIC). However, the δ13C of modern shallow-water carbonate sediment is higher than expected for calcite or aragonite precipitating from seawater. We explain elevated δ13C in shallow carbonates with a diurnal carbon cycle engine, where daily transfer of carbon between organic and inorganic reservoirs forces coupled changes in carbonate saturation (ΩA) and δ13C of DIC. This engine maintains a carbon-cycle hysteresis that is most amplified in shallow, sluggishly mixed waters with high rates of photosynthesis, and provides a simple mechanism for the observed δ13C-decoupling between global seawater DIC and shallow carbonate, without burying organic matter or generating O2.