Economic Impacts of Climate-Smart Agricultural and Forestry Practices: Evidence from the USDA Environmental Quality Incentives Program

Agricultural conservation on working agricultural lands is increasingly recognized as a critical strategy for addressing environmental challenges and enhancing the resilience of food systems in the face of climate change. Despite the growing funding for Climate-SmartAgricultural and Forestry (CSAF) practices,we lack comprehensive assessment of their economic impacts. Focusing on the impacts of CSAF practices under the Environmental Quality Incentives Program (EQIP) on agricultural productivity and resilience in the United States, we estimate the effects of EQIP payments for CSAF on county-level yields, loss acres, and insurance loss cost ratios for corn, soybean, and winter wheat, while controlling for the confounding effects of land-retirement payments through the Conservation Reserve Program (CRP). Our findings suggest that EQIP payments for CSAF practices significantly reduce corn loss acres and loss cost ratios. A one standard deviation increase in EQIP payments for CSAF practices is estimated to reduce county-level corn loss acres by 1.17%, highlighting their potential to mitigate climate risks. Conversely, payments for non-CSAF practices are associated with increased corn loss acres and higher loss cost ratios for corn and soybean, suggesting the need for more targeted conservation strategies. This study contributes to the growing literature on agricultural conservation by quantifying the economic benefits of CSAF practices and offering insights for improving conservation program design to enhance agricultural productivity and climate resilience.