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Evaluating impacts of agricultural cost sharing on water quality: Additionality, crowding In, and slippage

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  • Fleming, Patrick
  • Lichtenberg, Erik
  • Newburn, David A.

Abstract

We evaluate three farmer behavioral responses to incentive payments for ecosystem services, specifically a cover crop cost-share program aimed at reducing nitrogen loads in the Chesapeake Bay. Using farmer survey data in Maryland, we estimate a two-stage simultaneous equation model to correct for voluntary enrollment. Econometric model results are integrated with the Chesapeake Bay Program watershed model to estimate nitrogen abatement for the Bay and associated abatement costs. Estimated additionality for nitrogen abatement is 97% for enrolled farmers when only the direct treatment effect on cover crops is taken into account, but reductions in vegetative cover (slippage) and indirect effects on conservation tillage are consequential. Slippage is particularly large among farmers not currently enrolled in the program, indicating that loss of vegetative cover may substantially offset pollution abatement if cost sharing is extended to this group. These findings suggest that unenrolled farmers may not be a low-cost source of pollution abatement as is often assumed.

Suggested Citation

  • Fleming, Patrick & Lichtenberg, Erik & Newburn, David A., 2018. "Evaluating impacts of agricultural cost sharing on water quality: Additionality, crowding In, and slippage," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 1-19.
    • Handle: RePEc:eee:jeeman:v:92:y:2018:i:c:p:1-19
    DOI: 10.1016/j.jeem.2018.08.007
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    Cited by:

    1. Chai, Yuan & J. Pannell, David & G. Pardey, Philip, 2023. "Nudging farmers to reduce water pollution from nitrogen fertilizer," Food Policy, Elsevier, vol. 120(C).
    2. Fleming, Patrick & Lichtenberg, Erik & Newburn, David, 2018. "Water Quality Trading Program Design with Heterogeneous Behavioral Responses," 2018 Annual Meeting, August 5-7, Washington, D.C. 274429, Agricultural and Applied Economics Association.
    3. Joshua M. Duke & Robert J. Johnston & Amy L. Shober & Zhongyuan Liu, 2023. "Improving targeting of farmers for enrollment in agri‐environmental programs," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 1072-1096, June.
    4. Sheng Gong & Jason.S. Bergtold & Elizabeth Yeager, 2021. "Assessing the joint adoption and complementarity between in-field conservation practices of Kansas farmers," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-24, December.
    5. Lichtenberg, Erik, "undated". "Additionality of Conservation Cost Sharing," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259939, Agricultural and Applied Economics Association.
    6. Thompson, Nathanael M. & Reeling, Carson J. & Fleckenstein, Michelle R. & Prokopy, Linda S. & Armstrong, Shalamar D., 2021. "Examining intensity of conservation practice adoption: Evidence from cover crop use on U.S. Midwest farms," Food Policy, Elsevier, vol. 101(C).
    7. Kim, Youngho & Lichtenberg, Erik & Newburn, David, 2022. "Payments and Penalties in Ecosystem Services Programs," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322103, Agricultural and Applied Economics Association.
    8. Liu, Pengfei & Li, Yanggu & Zhang, Wei, 2023. "Local Economic Benefits of the Environmental Quality Incentives Program: Evidence from Rural Housing Markets," 2023 Annual Meeting, July 23-25, Washington D.C. 335843, Agricultural and Applied Economics Association.
    9. Byungyul Park & Roderick M. Rejesus & Serkan Aglasan & Yuyuan Che & Stephen C. Hagen & William Salas, 2023. "Payments from agricultural conservation programs and cover crop adoption," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 984-1007, June.
    10. Yanrong Lu & Chen Wang & Rongjin Yang & Meiying Sun & Le Zhang & Yuying Zhang & Xiuhong Li, 2023. "Research on the Progress of Agricultural Non-Point Source Pollution Management in China: A Review," Sustainability, MDPI, vol. 15(18), pages 1-14, September.
    11. Lawson Connor & Roderick M. Rejesus & Mahmut Yasar, 2022. "Crop insurance participation and cover crop use: Evidence from Indiana county‐level data," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(4), pages 2181-2208, December.
    12. Wang, Tong & Xu, Zheng & Kolady, Deepthi & Ulrich-Schad, Jessica D. & Clay, David, 2020. "Cover-Crop Usage in South Dakota: Farmer Perceived Profitability and Future Adoption Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 46(2), August.
    13. Pengfei Liu & Yu Wang & Wei Zhang, 2023. "The influence of the Environmental Quality Incentives Program on local water quality," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(1), pages 27-51, January.
    14. Robert J. Johnston & Tom Ndebele & David A. Newburn, 2023. "Modeling transaction costs in household adoption of landscape conservation practices," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(1), pages 341-367, January.
    15. Lötjönen, Sanna & Ollikainen, Markku & Kotamäki, Niina & Huttunen, Markus & Huttunen, Inese, 2021. "Nutrient load compensation as a means of maintaining the good ecological status of surface waters," Ecological Economics, Elsevier, vol. 188(C).
    16. David J. Pannell & Roger Claassen, 2020. "The Roles of Adoption and Behavior Change in Agricultural Policy," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(1), pages 31-41, March.
    17. Sawadgo, Wendiam & Plastina, Alejandro, 2021. "Do cost-share programs increase cover crop use? Empirical evidence from Iowa," ISU General Staff Papers 202101010800001084, Iowa State University, Department of Economics.
    18. Kim, Youngho, 2023. "Payments for Ecosystem Services Programs and Climate Change Adaptation in Agriculture," 2023 Annual Meeting, July 23-25, Washington D.C. 335971, Agricultural and Applied Economics Association.
    19. Nicole Karwowski, 2022. "Estimating the Effect of Easements on Agricultural Production," NBER Chapters, in: American Agriculture, Water Resources, and Climate Change, pages 53-105, National Bureau of Economic Research, Inc.
    20. Dong, Yangzi & Wong, Wing-Keung & Muda, Iskandar & Cong, Phan The & Duong Hoang, Anh & Ghardallou, Wafa & Ha, Ngo Ngan, 2023. "Do natural resources utilization and economic development reduce greenhouse gas emissions through consuming renewable and Clean Technology? A case study of China towards sustainable development goals," Resources Policy, Elsevier, vol. 85(PB).
    21. Duke, Joshua M. & Liu, Hongxing & Monteith, Tyler & McGrath, Joshua & Fiorellino, Nicole M., 2020. "A method for predicting participation in a performance-based water quality trading program," Ecological Economics, Elsevier, vol. 177(C).
    22. Lichtenberg, Erik & Wang, Haoluan & Newburn, David, 2018. "Uptake and Additionality in a Green Payment Program: A Panel Data Study of the Maryland Cover Crop Program," 2018 Annual Meeting, August 5-7, Washington, D.C. 274455, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    Nonpoint source pollution; Chesapeake Bay; Endogenous selection; Conservation practices; Slippage; Water quality; Cost sharing; Agri-environmental policy; EQIP; Payment for environmental services; C34; Q15; Q53; Q58;
    All these keywords.

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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