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

Patrick Fleming

American Journal of Agricultural Economics, 2017, vol. 99, issue 5, 1208-1227

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%.

Keywords: Abatement; cost sharing; Environmental Quality Incentives Program; EQIP; environmental subsidies; multiple simultaneous equation models; nonpoint source pollution; water quality (search for similar items in EconPapers)
JEL-codes: C31 C34 Q53 Q58 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:99:y:2017:i:5:p:1208-1227.

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