How Much Green for the Buck? Estimating Additional and Windfall Effects of French Agro-Environmental Schemes by DID-Matching

Agro-environmental schemes (AES), which pay farmers to adopt greener practices, are increasingly important components of environmental and agricultural policies both in the US and the EU. Here we study the French implementation of the EU AES program. We estimate additional and windfall effects of five AESs for a representative sample of individual farmers using Difference-In-Difference (DID) matching. We derive the statistical assumptions underlying DID-matching from a structural household model and we argue that the economics of the program make it likely that these assumptions hold in our data. We test the implications of the identifying assumptions, provide a lower bound using triple-difference matching, test for crossover effects and insert our estimates of both additionality and windfall effects into a cost-benefit framework. We find that the AESs promoting crop diversity have inserted one new crop into the rotation but on a small part of the cropped area. We also find that the AES subsidizing the planting of cover crops has increased cover crops by 10 hectares on the average recipient farm at the expense of almost 7 hectares of windfall effect. This AES does not appear to be cost effective. In contrast, we find that the AES subsidizing grass buffer strips could be socially efficient despite large windfall effects. We finally estimate that the AES subsidizing conversion to organic farming has low windfall effects and high additionality.