Perverse Incentives with Pay for Performance: Cover Crops in the Chesapeake Bay Watershed

Darrell Bosch, James W. Pease, Robert Wieland and Doug Parker

Agricultural and Resource Economics Review, 2013, vol. 42, issue 3, 17

Abstract: Policymakers are concerned about nitrogen and phosphorus export to water bodies. Exports may be reduced by paying farmers to adopt practices to reduce runoff or by paying performance incentives tied to estimated run-off reductions. We evaluate the cost-effectiveness of practice and performance incentives for reducing nitrogen exports. Performance incentives potentially improve farm-level and allocative efficiencies relative to practice incentives. However, the efficiency improvements can be undermined by baseline shifts when growers adopt crops that enhance the performance payments but cause more pollution. Policymakers must carefully specify rules for performance-incentive programs and payments to avoid such baseline shifting.

Keywords: Environmental Economics and Policy; Farm Management (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Journal Article: Perverse Incentives with Pay for Performance: Cover Crops in the Chesapeake Bay Watershed (2013)
Journal Article: Perverse Incentives with Pay for Performance: Cover Crops in the Chesapeake Bay Watershed (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:arerjl:161386

DOI: 10.22004/ag.econ.161386

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