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Flexible Conservation Measures On Working Land: What Challenges
Lie Ahead?
Andrea Cattaneo, Roger Claassen, Robert Johansson,
and Marca Weinberg
Economic Research Report No. (ERR-5), June 2005
Agricultural production can have damaging environmental impacts.
Although past conservation efforts—particularly land retirement—have
helped, agri-environmental problems remain. Because most agricultural
land (850 million acres) remains in production, and many agri-environmental
problems are the result of small contributions from many widely
dispersed farms, improving environmental performance on “working
lands” is an important next step.
What Is the Issue?
The 2002 Farm Security and Rural Investment Act, or the 2002
farm bill, shifted U.S. agri-environmental policy from land
retirement to conservation on working lands—land used
primarily for crop production and grazing. Spending for conservation
programs was increased by 80 percent over the previous farm
bill, with much of that going to the Environmental Quality Incentives
Program (EQIP) and the Conservation Security Program (CSP).
While actual funding of these working-land payment programs
(WLPPs) is unlikely to reach authorized levels, the scope of
working-land conservation is nevertheless expanding.
Whether this trend continues in subsequent legislation is uncertain.
However, effective design of agri-environmental programs can
help stretch the available budget, whatever it might be, in
terms of environmental gains or other program goals. But because
of the complexity of farm household decisionmaking and the nonpoint
source and site-specific nature of agri-environmental problems,
forecasting the benefits of agri-environmental conservation
programs is data- demanding and technically challenging.
What Did the Study Find?
Once a working land payment program has been designed—before
any producers are enrolled or any contracts are signed—most
of what can be done to ensure that program objectives are achieved
is locked in place. If funding is limited, program goals are
likely to be achieved only if program decision-makers can anticipate
the effect of enrolling a given producer.
Producers will apply for participation when the benefits they
receive outweigh their costs, which will depend on program details.
Program decisionmakers may apply enrollment screening criteria
to determine which applicants are enrolled. Participation patterns
then determine the environmental and economic outcomes of the
program. The trick is to (1) develop a request for proposals
that is attractive to producers who can contribute to achieving
program goals and (2) develop enrollment screening criteria
that use information provided by the applicants to select those
best suited for the job.
Policymakers and program managers may sometimes need to balance
conflicting goals of fiscal conservatism versus conservation
coverage, acknowledgment of ongoing stewardship versus reward
for all-new efforts, or even resource concerns themselves (managing
nutrient runoff, say, versus maintaining soil productivity).
Environmental cost-effectiveness. Programs
best designed to maximize environmental gain from a limited
budget will:
• Structure the application/enrollment process as a “request
for proposals,” which can then be accepted or rejected.
This allows program decision-makers to glean valuable information
before committing to a pool of program applicants.
• Rank proposals by benefit-cost criteria. Given a pool
of willing participants, information on the practices to be
adopted—soil quality in fields to be enrolled, farms’
proximity to surface water, etc.—can be used to assess
potential environmental benefits. Contract costs can be gleaned
directly from the proposal. Environmental indices, like the
Environmental Benefits Index (EBI) in the Conservation Reserve
Program, can then be used to rank proposals.
• Promote bidding on financial assistance. In a competitive
enrollment program, bidding on the level of financial assistance
(e.g., the cost-share rate) can stretch budgets by reducing
the cost of individual contracts. For a fixed budget, environmental
performance on working lands may be increased by 25 percent
with bidding provisions versus payments based on an (index-based)
estimate of potential environmental benefits.
Stewardship payments. Only policymakers can
decide the appropriate level of a good-stewardship reward. However,
rewarding past performance could mean that there will be less
program budget to encourage new conservation efforts. This tradeoff
becomes more apparent when new and old practices are eligible
for similar payments and when budgets are relatively small.
In such a program, eligible stewards will have a greater incentive
to accept a given payment for a particular practice they have
already implemented than would eligible producers who would
be newly adopting the same practice. Given that the number of
eligible stewards is the same regardless of the budget level,
the proportion of the budget allocated to stewardship payments
will increase as the size of the budget decreases. Alternatively,
program managers could decide to set aside a fixed proportion
of the budget to reward stewards and another portion to encourage
new adoption.
• Simulation results indicate that when budgets are capped
at $500 million, a program that provides equal payments for
both new and existing practices may achieve only one-fourth
as much environmental gain as a program that focuses exclusively
on new conservation activities. At lower budgets, given that
the number of eligible stewards is still the same, a greater
share of the budget goes toward stewardship payments and a smaller
share is available to encourage new conservation efforts. A
$250-million program that provides equal payments for new and
existing practices may achieve less than one-twelfth as much
environmental gain as a program that pays only for new practices.
• Payments designed to reward producers who are already
good environmental stewards will limit the cost-effectiveness
of achieving new environmental benefits, but may complement
other programs that target regions or producers with a high
potential for environmental improvement.
How Was the Study Conducted?
A conceptual framework describes the effect of program design
decisions on producer application, program enrollment, and,
ultimately environmental gain and economic outcomes (e.g., farm
income effects). We describe a range of design options available
to policymakers and discuss each in terms of environmental gain
and equity considerations. We estimate the magnitude—regarding
public spending, environmental gain, and change in farm income—for
several specific designs using the U.S. Agriculture Mathematical
Programming (USMP) model.
USMP and environmental simulation models linked to it are used
to quantify the potential environmental and economic tradeoffs
in selecting among program objectives and design features. The
report uses cost-effectiveness to measure program success and
compare alternative program designs; i.e., how much environmental
gain was achieved by each alternative design for a given level
of public expenditure?
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