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Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality

  • Khanna, Madhu
  • Isik, Murat
  • Zilberman, David

This paper quantitatively analyses the cost-effectiveness of alternative green payment policies designed to achieve a targeted level of pollution control by heterogeneous micro units. These green payment policies include cost-share subsidies that share the fixed costs of adoption of a conservation technology and/or input reduction subsidies to reduce the use of a polluting input. The paper shows that unlike a pollution tax that achieves abatement through three mechanisms, a negative extensive margin effect, a negative intensive margin effect and a technology switching effect, a cost-share subsidy and an input reduction subsidy are much more restricted in the types of incentives they provide for conservation of polluting inputs and adoption of a conservation technology to control pollution. Moreover, they may lead to varying levels of expansion of land under production. Costs of abatement with alternative policies and implications for production and government payments are compared using a simulation model for controlling drainage from irrigated cotton production in California, with drip irrigation as a conservation technology. © 2002 Elsevier Science B.V. All rights reserved.

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Article provided by Blackwell in its journal Agricultural Economics.

Volume (Year): 27 (2002)
Issue (Month): 2 (August)
Pages: 157-174

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Handle: RePEc:eee:agecon:v:27:y:2002:i:2:p:157-174
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  1. James Shortle & David Abler & Richard Horan, 1998. "Research Issues in Nonpoint Pollution Control," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 571-585, April.
  2. JunJie Wu & Bruce A. Babcock, 1996. "Relative Efficiency of Voluntary Versus Mandatory Environmental Regulations, The," Center for Agricultural and Rural Development (CARD) Publications 96-wp172, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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  4. Babcock, Bruce A. & Lakshminarayan, P. G. & Wu, J. & Zilberman, David, 1997. "Targeting Tools for the Purchase of Environmental Amenities," Staff General Research Papers 5220, Iowa State University, Department of Economics.
  5. Cooper, Joseph C. & Keim, Russ, 1996. "Incentive payments to encourage farmer adoption of water quality protection practices," MPRA Paper 24779, University Library of Munich, Germany.
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  8. Wu, JunJie & Babcock, Bruce A., 1995. "Optimal Design of a Voluntary Green Payment Program Under Asymmetric Information," Staff General Research Papers 843, Iowa State University, Department of Economics.
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  15. JunJie Wu & Bruce A. Babcock, 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 935-945.
  16. Cattaneo, Andrea, 2001. "Environmental Quality Incentives Program: Why Are So Many Contracts Being Cancelled?," 2001 Annual meeting, August 5-8, Chicago, IL 20597, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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