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Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning

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  • B. Kelsey Jack
  • Seema Jayachandran
  • Namrata Kala
  • Rohini Pande

Abstract

We test whether payments for ecosystem services (PES) can curb the highly polluting practice of crop residue burning in India. Standard PES contracts pay participants after verification that they met a proenvironment condition (clearing fields without burning). We randomize paying a portion of the money up front and unconditionally to address liquidity constraints and farmer distrust, which may undermine the standard contract's effectiveness. Incorporating partial up-front payment into the contract increases compliance by 10 percentage points, which is corroborated by satellite-based burning measurements. The cost per life saved is $3,600–$5,400. The standard PES contract has no effect on burning.

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  • B. Kelsey Jack & Seema Jayachandran & Namrata Kala & Rohini Pande, 2025. "Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning," American Economic Review: Insights, American Economic Association, vol. 7(1), pages 39-55, March.
    • Handle: RePEc:aea:aerins:v:7:y:2025:i:1:p:39-55
    DOI: 10.1257/aeri.20230431
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    Cited by:

    1. Shefali Khanna & Kanika Mahajan & Sudarshan RSA, 2024. "Are Crop Residue Burning Bans Effective? Evidence from India," Working Papers 136, Ashoka University, Department of Economics.
    2. Meghna Agarwala & Shampa Bhattacharjee & Aparajita Dasgupta, 2024. "Political Cycles in Crop Residue Burning: Evidence from India," Working Papers 117, Ashoka University, Department of Economics, revised 01 Aug 2024.
    3. Digvijay S. Negi, 2024. "State Mediated Trade, Distortions and Air Pollution," Working Papers 129, Ashoka University, Department of Economics.
    4. Cao, Jing & Ma, Rong, 2023. "Mitigating agricultural fires with carrot or stick? Evidence from China," Journal of Development Economics, Elsevier, vol. 165(C).
    5. Behrer,Arnold Patrick, 2023. "Man or Machine ? Environmental Consequences of Wage Driven Mechanization in Indian Agriculture," Policy Research Working Paper Series 10376, The World Bank.
    6. Andrew L. Dabalen & Aparajita Goyal & Ruozi Song, 2024. "Regenerative Agriculture in Practice : A Review," Policy Research Working Paper Series 10919, The World Bank.

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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • 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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