Baltimore Ecosystem Study Institute of Ecosystem Studies

2016 BES Annual Meeting Presentation and Poster Abstracts

Agricultural Cost Sharing and Implications for Water Quality in the Chesapeake Bay Watershed
Newburn, David
Co-Authors: Patrick Fleming, Erik Lichtenberg

Abstract: We evaluate the importance of simultaneously incorporating three farmer behavioral responses to incentive payments in the context of a cover crop cost-share program aimed at reducing nutrient and sediment loads in the Chesapeake Bay. Using farmer survey data in Maryland, we estimate a two-stage simultaneous equation model to correct for voluntary selection into cost-share enrollment. We examine the direct effect of the cover crop program on cover crop adoption, the indirect effect on conservation tillage adoption, and the slippage effect on vegetative cover. Econometric model results are integrated with the Chesapeake Bay Program watershed model to estimate the statewide pollution abatement of nitrogen, phosphorus and sediment loads delivered to the Bay. Estimated additionality is approximately 94% for enrolled farmers when only the direct treatment effect of cover crop adoption due to the cover crop program is taken into account. Indirect and slippage effects are consequential and should not be ignored. The slippage effect is particularly large among currently unenrolled farmers, indicating that loss of vegetative cover may offset pollution abatement substantially if cover crop cost sharing is extended to this group. The estimated average cost for pollution abatement is much higher for unenrolled farmers after accounting for behavioral responses. This has policy implications for evaluating cost-effective approaches to comply with water quality improvement requirements. Unenrolled farmers are often seen as a potential low-cost source of pollution abatement, but the cost-effectiveness for unenrolled farmers is less optimistic after accounting for behavioral responses.