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Originally published Vol. 5,
Issue 1 (February 2007)
Green Payments: Can Income and Conservation
Payments Be Combined?
Roger
Claassen
“Green payments,” if enacted,
would merge farm income support and conservation
payments. Achieving both objectives with a single
payment, however, assumes that farms targeted for
income support also face pressing environmental
concerns. If income support and conservation payments
would otherwise go to different farms, policymakers
will face tradeoffs between the two objectives when
designing a green payments program.
Of the roughly 40 percent of farms
that received some type of government payment in
2004, 17 percent—or about 6 percent of all
farms—received both types of payments, partly
because less money is spent on conservation. In
2004, income support to farmers was nearly $8 billion,
while conservation payments totaled about $2 billion.
Conservation funding is rising, however, so the
number of farms receiving both types of payments
also is likely to rise. Nonetheless, about half
of conservation payments made in 2004 went to farmers
who also received income support, suggesting that
a significant share of additional conservation payments
will also flow to producers who do not receive income
support.
Why is the overlap between income
and conservation payments so small? At least part
of the answer is that income support and conservation
payments are triggered by different actions or conditions
and tend to attract different producers. Income
support goes mainly to farmers who produce major
field crops, including corn, wheat, soybeans, and
cotton. Farms receiving commodity payments account
for 64 percent of crop production and 45 percent
of livestock production. These producers are also
likely to be engaged full-time in farming
and have relatively large farms.
Since 1986, a large majority of
conservation payments have been for land retirement,
largely though the Conservation Reserve Program
(CRP). A majority of CRP payments go to retired
and part-time farmers who, on average, receive modest
commodity payments. Since 2002, funding for “working
land” (which remains in agricultural production)
programs, such as the Environmental Quality Incentives
Program (EQIP), has increased sharply. While evidence
suggests that these payments are more likely to
go to full-time farmers with larger farms, 60 percent
of EQIP funding is set aside for livestock producers
who may or may not also grow crops that qualify
for commodity payments. So, the shift in funding
to working land programs may or may not increase
the overlap between commodity and conservation payments.
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