A Brief Overview of U.S. Agricultural Conservation Policy

Transcription

1 A Brief Overview of U.S. Agricultural Conservation Policy Roger Claassen Economic Research Service US Department of Agriculture The views expressed are those of the author and cannot necessarily be attributed to the Economic Research Service or the U.S. Department of Agriculture

2 Overview Agricultural Act of 2014 (the Farm Bill) Objectives Overall spending Voluntary conservation programs Conservation compliance Conservation Program Design and ERS Research How U.S. programs are structured ERS research informs program design

3 Objectives of U.S. agricultural conservation policy Maintaining soil quality Improving water quality Increasing wildlife habitat Improving air quality Increasing carbon sequestration Conserving energy and water Preserving farm and ranch lands

4 Projected outlays under the 2014 Farm Act,

5 Billion $ Annual spending in major USDA conservation programs, with projections to Farm Act 2014 Farm Act Farm Act Farm Act 4 3 Actual Projected Includes the CRP, ACEP, EQIP, CSP, RCPP, CTA and predecessor programs. Spending is adjusted to constant (2012) dollars, assuming annual inflation of 2 percent for Sources: USDA, Economic Research Service analysis of Office of Budget and Policy Analysis (OBPA) data on actual funding for ; OBPA projections for 2014, Congressional Budget office projections for for CRP and CSP, and funding specified in the 2014 Farm Act for for ACEP, EQIP, and RCPP. CTA funding assumed flat for at $714 million (nominal).

6 Five programs will account for 90% of conservation program funding, Other Programs Regional Conservation Partnership Program new Agricultural Conservation Easement Program new Conservation Reserve Program Conservation Stewardship Program Environmental Quality Incentives Program Sources: 2014 Farm Act and Congressional Budget Office estimates for ; Other programs based on recent past expenditures reported by the USDA Office of Budget and Policy Analysis.

7 Five programs will account for 90% of conservation program funding, Regional Conservation Other Programs Partnership Program new Agricultural Conservation Easement Program new Conservation Stewardship Program Conservation Reserve Program - retire cropland - partial field practices -Area cap reduced by 25% new -2 million grassland acres new Environmental Quality Incentives Program Sources: 2014 Farm Act and Congressional Budget Office estimates for ; Other programs based on past expenditures reported by the USDA Office of Budget and Policy Analysis.

8 Five programs will account for 90% of conservation program funding, Regional Conservation Other Programs Partnership Program new Agricultural Conservation Easement Program new Conservation Reserve Program Conservation Stewardship Program -working land (crop and grazing) -stewardship + improve performance -10 million new acres per year ( ) -Contracts 5-10 years Environmental Quality Incentives Program -working land (crop and grazing) -average $1.5 billion per year ( ) -5% for wildlife habitat new Sources: 2014 Farm Act and Congressional Budget Office estimates for ; Other programs based on past expenditures reported by the USDA Office of Budget and Policy Analysis.

9 Five programs will account for 90% of conservation program funding, Agricultural Conservation Easement Program new -consolidates wetland, farmland, grassland easements Other Programs Conservation Stewardship Program Regional Conservation Partnership Program new -consolidates regional programs -7% of funds from 4 other programs -leverages state, private resources Conservation Reserve Program Environmental Quality Incentives Program Sources: 2014 Farm Act and Congressional Budget Office estimates for ; Other programs based on past expenditures reported by the USDA Office of Budget and Policy Analysis.

10 Conservation Compliance As condition of eligibility for most agriculture-related programs, producers must: apply soil conservation system on highly erodible cropland refrain from draining wetlands Important changes in compliance incentives: Crop insurance premium subsidies subject to compliance (again) Eliminated direct payments an important compliance incentive in the past but created new commodity programs Sodsaver limits crop insurance during first 4 years of crop production on native sod Only applied in 6 north-central states that include parts of the Prairie Pothole Region

11 Billion $ Premium subsidies and other payments subject to conservation compliance Commodity, Conservation, and Disaster Payments Crop Insurance Premium Subsidies Sources: USDA, Economic Research Service analysis of Office of Budget and Policy Analysis data on actual expenditure for ; the 2014 Farm Act and Congressional Budget Office estimates for

12 Voluntary conservation program design Design details determine program cost-effectiveness: What practices to support How much to pay Which producers/land to enroll U.S. programs are limited by budget or area caps Enrollment is competitive acceptance rate <50% in some programs Maximizing environment gain from fixed resources: Target producers, land, and practices that can deliver large environmental benefits relative to cost Leverage competition to reduce costs through bidding (auctions)

13 Conservation program enrollment process Budget All Producers Eligible Producers Applicants Participants Government RFP: Producers decide: Government decides: Eligibility Contract acceptance and ranking criteria (e.g., EBI) Payment rate/max bid What land, practices to offer (if any) What payment is producer willing to accept? Information flow Accept or reject bids Ranking based on benefit/cost indices Budget determines cutoff Source: Claassen, R., A. Cattaneo, and R. Johansson Cost-effective design of agri-environmental payment programs: U.S. experience in theory and practice. Ecological Economics 65(4):

14 Design features of two major U.S. programs Type Eligibility Participation incentives Conservation Reserve Program (CRP) (general sign-up) Land retirement (from cropland) Highly erodible cropland Priority areas Permanent cover: grass, trees, wetland Bid-based, with cap (1991- ) Fixed rates ( ) Environmental Quality Incentives Program (EQIP) Working land (crop and grazing land) All land All conservation practices Fixed rates (2002- ) Bid-based ( ) Ranking Environmental Benefits Index (EBI) Offer Index (varies across states) Source: Claassen, R., A. Cattaneo, and R. Johansson Cost-effective design of agri-environmental payment programs: U.S. experience in theory and practice. Ecological Economics 65(4):

15 ERS research on conservation and the environment is broad Conservation program and policy design Effect of targeting (ranking) in the CRP Effect of Conservation Compliance on soil erosion Additionality in conservation payment programs Design of environmental markets Potential effectiveness of behavioral nudges Auction design Climate change Potential adaptation strategies Conservation programs and greenhouse gas emissions Environmental effects of non-conservation programs on the environment Crop insurance and agricultural land use

16 $million Targeting (ranking) increases environmental benefits Significantly improved environmental gain in the Conservation Reserve Program Reduce some benefits to obtain higher-value benefits Benefits gained through targeting in the conservation reserve program 36 Not targeted Targeted Freshwater recreation Wildlife viewing Pheasant hunting Source: Economic Valuation of Environmental Benefits and the Targeting of the Conservation Reserve Program, AER-778, Economic Research Service, USDA, 1999

17 Effect of Compliance on soil erosion Applies only to highly erodible land (HEL) Land use change not required (land could continue in crops) Soil conservation systems implemented between 1985 and 1995 Rate of soil erosion on U.S. cropland was reduced by 40 percent between 1982 and 1997 How much of the reduction was due to conservation compliance? Has erosion reduction been maintained?

18 Million tons per year 1400 Erosion reduction, that could be attributed to conservation compliance Erosion reduction on non-highly erodible land: 442 million tons 732 Erosion reduction due to land use change and CRP: 365 million tons 367 Reduction in non-excess erosion: 36 million tons Erosion reduction on farms not subject to compliance: 36 million tons Total erosion reduction Erosion reduction on HEL Erosion reduction on land remaining in crops Reduction in excess erosion Erosion reduction on land subject to compliance Source: Environmental Compliance in U.S. Agricultural Conservation Policy, AER-832, Economic Research Service, USDA, 2004

19 Billion tons per year Soil erosion on U.S. cropland, Compliance implemented Sheet and Rill Wind Source: 2010 National Resources Inventory Summary Report, Natural Resources Conservation Service, USDA, 2012

20 Additionality in voluntary conservation programs A conservation practice, supported by a payment, is additional if the conservation payment was necessary for adoption Non-additionality reduces the cost-effectiveness of programs because funds for non-additional practices produce no environmental gain Some farmers do adopt practices without payments Questions: What proportion of practices adopted with payments are additional? How can these estimates be used to improve programs?

21 Additionality in voluntary conservation programs Considered four practice groups Soil conservation structures (terraces, grade stabilization) Buffer practices (grass waterways, filter strips, riparian buffers) Conservation tillage Nutrient management Field and farm-level data is from the Agricultural Resources Management Survey (ARMS) for 2009, 2010, and 2011 Propensity Score Matching Model

22 Probability of additional practice 1 Estimated probability of additionality in conservation payment programs Soil conservation structures Buffer practices Conservation tillage Written nutrient management Source: Additionality in U.S. Agricultural Conservation and Regulatory Offset Programs, ERR-170, Economic Research Service, USDA, 2014

23 For more information Highlights and implications of the 2014 Farm Act Charts of note Amber Waves magazine ERS App for tablet or mobile device Research Reports

24 Million Acres U.S. land moving into and out of crop production From cropland To cropland Net to cropland CRP Pasture Range Forest other Source: 2010 National Resources Inventory Summary Report, Natural Resources Conservation Service, USDA, 2012

25 Conservation Programs and Drought Resilience How does drought risk affect conservation program participation? Are farmers in areas with high production risk more likely to offer land for enrollment in the Conservation Reserve Program? Are farmers in high risk areas more likely to use EQIP contracts for irrigation practices or conservation tillage that can reduce drought risk?

26 Relaxing eligibility increases CRP acres offered in high risk areas

27 Irrigation-related EQIP participation rates,

28 Estimated additionality for specific nitrogen management practices Nitrogen management practice Unit Estimate with payment Estimate without payments Estimated additionality (standard error) Application rate Pounds per acre (24.8) Fall application Percent * (5.9) Post-plant application Percent (14.0) *=Significantly different from zero with probably of 0.95 or higher Source: Additionality in U.S. Agricultural Conservation and Regulatory Offset Programs, ERR-170, Economic Research Service, USDA, 2014

29 Share of conservation spending by major programs and predecessors in the 2014 and previous farm acts 100% 75% 50% Conservation Reserve Program Environmental Quality Incentives Program* Conservation Stewardship Program** 25% Agricultural Conservation Easement Program*** Regional Conservation Partners Program**** 0% Actual Actual Actual Projected *Includes EQIP and the Wildlife Habitat Incentive Program (WHIP) for **Includes the Conservation Security Program for ***Includes the Wetland Reserve Program, Farmland Protection Program, and Grassland Reserve Program (easement portion) for ****Includes the Agricultural Water Enhancement Program, Chesapeake Bay Watershed Program, Cooperative Conservation Partnership Initiative, and Great Lakes Basin Program for Sources: ERS analysis of Office of Budget and Policy Analysis on actual expenditures for ; spending levels provided in the 2014 Farm Act and Congressional Budget Office

30 USDA-NRCS Conservation Effects Assessment Project (CEAP) What has been accomplished through conservation practices? Cropland assessment for Upper Mississippi River Basin Corn and Soybeans are primary crops; Production is intense Sediment, nutrient and pesticide loss; Surface and ground water problems

31 USDA-NRCS Conservation Effects Assessment Project (CEAP) In-stream Flow (Grafton, IL) Loss from Field Pesticides Phosphorous Nitrogen Sediment Percent Source: Assessment of the Effects of Conservation Practices on Cultivated Cropland in the Upper Mississippi River Basin. USDA Natural Resources Conservation Service, June 2010