How to Motivate Green Action Among Small Farmers: Evidence from China

Agri-environmental subsidies had been implemented to promote sustainable agriculture in regions such as the EU and the U.S. prior to the year 2000. Contract-Based Agri-Environmental Schemes (AESs) are designed to promote green, sustainable agriculture by employing environmentally friendly farming practices (EFFPs) to reduce pollution and meet other environmental goals. A central challenge, however, is the limited inclusion of small farmers, who are key to agricultural sustainability and form the backbone of production, particularly in developing countries. This study aims to investigate the preferences and participation of small farmers in AESs to enable effective policy design. Using discrete choice experiments (DCEs) and a latent class model (LCM) on survey data collected in 2017 from three key rice-producing counties in China—Fangzheng (Heilongjiang), Qingtongxia (Ningxia), and Yixing (Jiangsu)—allowed us to identify two distinct preference classes: “experienced adopters” and “potential adopters”. The results confirmed (1) a high participation rate of small farmers in AESs. Compensation can further motivate them to sign a contract. (2) There is significant heterogeneity among small farmers’ preferences on various EFFPs, so flexible and modulated schemes are needed; (3) those with experience in EFFPs are more likely to participate in AESs; and (4) the modular AES contract with progressive subsidy ties makes payments directly based on EFFP adoption, addressing the shortcomings of China’s current area-based subsidy system. The results of this paper can help policymakers fine-tune farming policies that effectively engage smallholders, thereby alleviating tensions over production–pollution cycles and fostering a more targeted and sustainable agricultural policy system.