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Agricultural Cost Sharing and Water Quality in the Chesapeake Bay: Estimating Indirect Effects of Environmental Payments

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  • Patrick Fleming

Abstract

This article analyzes the effect of agricultural cost sharing for cover crops on the acres of three conservation practices. A survey of farmers from Maryland is used to estimate the direct effect of cover crop cost sharing on the acres of cover crops, and the indirect effect of cover crop cost sharing on the acres of two other practices: conservation tillage and contour/strip cropping. A two-stage simultaneous equation approach is used to correct for voluntary self-selection into cost-sharing programs, and to account for substitution effects among conservation practices. Using model parameters from the U.S. Environmental Protection Agency’s Chesapeake Bay Program, the estimated effects of cost sharing are then translated to pollution reduction in order to quantify water quality benefits. The results indicate that the large cover crop cost sharing effort in Maryland had considerable effects on cover crop acreage, substantially reducing nitrogen and phosphorus runoff. Moreover, after accounting for the indirect effects on conservation tillage, the cost per pound of phosphorus abatement in the Chesapeake Bay decreased by between 60–67%.

Suggested Citation

  • Patrick Fleming, 2017. "Agricultural Cost Sharing and Water Quality in the Chesapeake Bay: Estimating Indirect Effects of Environmental Payments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(5), pages 1208-1227.
    • Handle: RePEc:oup:ajagec:v:99:y:2017:i:5:p:1208-1227.
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    File URL: http://hdl.handle.net/10.1093/ajae/aax040
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    1. repec:ags:aaea22:335819 is not listed on IDEAS
    2. Fleming, Patrick & Lichtenberg, Erik & Newburn, David A., 2018. "Evaluating impacts of agricultural cost sharing on water quality: Additionality, crowding In, and slippage," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 1-19.
    3. Li, Yanggu & Zhang, Wei, 2024. "The Impact of Conservation Practices on Agricultural Production and Land Value," 2024 Annual Meeting, July 28-30, New Orleans, LA 343598, Agricultural and Applied Economics Association.
    4. Fleming, Patrick & Lichtenberg, Erik & Newburn, David, 2018. "Water Quality Trading Program Design with Heterogeneous Behavioral Responses," 2018 Annual Meeting, August 5-7, Washington, D.C. 274429, Agricultural and Applied Economics Association.
    5. Joshua M. Duke & Robert J. Johnston & Amy L. Shober & Zhongyuan Liu, 2023. "Improving targeting of farmers for enrollment in agri‐environmental programs," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 1072-1096, June.
    6. Lichtenberg, Erik, "undated". "Additionality of Conservation Cost Sharing," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259939, Agricultural and Applied Economics Association.
    7. Thompson, Nathanael M. & Reeling, Carson J. & Fleckenstein, Michelle R. & Prokopy, Linda S. & Armstrong, Shalamar D., 2021. "Examining intensity of conservation practice adoption: Evidence from cover crop use on U.S. Midwest farms," Food Policy, Elsevier, vol. 101(C).
    8. Kim, Youngho & Lichtenberg, Erik & Newburn, David, 2022. "Payments and Penalties in Ecosystem Services Programs," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322103, Agricultural and Applied Economics Association.
    9. Sanat, Lyazzat & Rejesus, Roderick M., 2024. "Understanding the Impact of State Cost Share Programs on Cover Crop Adoption Rates," 2024 Annual Meeting, July 28-30, New Orleans, LA 344077, Agricultural and Applied Economics Association.
    10. Youngho Kim, 2023. "Payments for Ecosystem Services Programs and Climate Change Adaptation in Agriculture," Economics Series Working Papers 1054, University of Oxford, Department of Economics.
    11. Rosenberg, Andrew B. & Wallander, Steven, 2020. "Conservation Practice Adoption and On-field Resource Concerns," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304563, Agricultural and Applied Economics Association.
    12. Elizabeth Canales & Jason S. Bergtold & Jeffery R. Williams, 2024. "Conservation intensification under risk: An assessment of adoption, additionality, and farmer preferences," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(1), pages 45-75, January.
    13. Byungyul Park & Roderick M. Rejesus & Serkan Aglasan & Yuyuan Che & Stephen C. Hagen & William Salas, 2023. "Payments from agricultural conservation programs and cover crop adoption," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 984-1007, June.
    14. Lawson Connor & Roderick M. Rejesus & Mahmut Yasar, 2022. "Crop insurance participation and cover crop use: Evidence from Indiana county‐level data," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(4), pages 2181-2208, December.
    15. Cui, Yi & Du, Xiaodong & Ma, Jiujie, 2020. "Agricultural Water right reforms and Irrigation Water Demand: A Quasi-Natural Experiment in China," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304364, Agricultural and Applied Economics Association.
    16. Elizabeth Canales & Jason S. Bergtold & Jeffery R. Williams, 2020. "Conservation practice complementarity and timing of on‐farm adoption," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 777-792, September.
    17. Wang, Tong & Jin, Hailong, 2024. "Impact of cost share programs on conservation practice adoption: A new perspective," 2024 Annual Meeting, July 28-30, New Orleans, LA 343974, Agricultural and Applied Economics Association.
    18. Sawadgo, Wendiam & Plastina, Alejandro, 2021. "Do cost-share programs increase cover crop use? Empirical evidence from Iowa," ISU General Staff Papers 202101010800001084, Iowa State University, Department of Economics.
    19. repec:ags:aaea22:335971 is not listed on IDEAS
    20. Duke, Joshua M. & Liu, Hongxing & Monteith, Tyler & McGrath, Joshua & Fiorellino, Nicole M., 2020. "A method for predicting participation in a performance-based water quality trading program," Ecological Economics, Elsevier, vol. 177(C).
    21. Lichtenberg, Erik & Wang, Haoluan & Newburn, David, 2018. "Uptake and Additionality in a Green Payment Program: A Panel Data Study of the Maryland Cover Crop Program," 2018 Annual Meeting, August 5-7, Washington, D.C. 274455, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Abatement; cost sharing; Environmental Quality Incentives Program; EQIP; environmental subsidies; multiple simultaneous equation models; nonpoint source pollution; water quality;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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