Measuring the Impact of the Environmental Quality Incentives Program (EQIP) on Irrigation Efficiency and Water Conservation

Since the passage of the 1996 Farm Act, the Environmental Quality Incentives Program (EQIP) has provided over $10 billion in technology adoption subsidies. One of the national conservation priorities in EQIP is water conservation, but it is not known how participation in EQIP by irrigators affects water application rates and decisions to expand or reduce a farm’s irrigated acreage. Using a farm-level panel data set drawn from three national samples of irrigators taken in 1998, 2003, and 2008, this study provides the first national scale econometric estimates of the changes in water application rates and irrigated acreage that result when a farm receives EQIP payments. Due to a five-fold increase in EQIP funding following the 2002 farm bill, the change in EQIP participation between 2008 and earlier years is largely the result of an exogenous policy shock. A difference-in-differences estimator that exploits this change in EQIP funding and also controls for unobserved farm-specific variables, suggests that for the average farm participating in EQIP between 2004 and 2008, the EQIP payments may have reduced water application rates but also may have increased total water use and led to an expansion in irrigated acreage. However, since EQIP participation is voluntary, there may still be a need to correct for bias due to sample selection. A nearest neighbor matching estimator finds no evidence of any statistically significant effect of EQIP participation on technology adoption rates, water use, water application rates or acreages, which suggests that there is a high degree of self-selection into the program.