Payments for Ecosystem Services Programs and Climate Change Adaptation in Agriculture

Youngho Kim

No 1054, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Payments for ecosystem services (PES) programs can enhance resilience to extreme weather events by establishing natural infrastructure. I investigate the effectiveness of the Conservation Reserve Enhancement Program (CREP) in the United States in mitigating flooded crop losses through the restoration of riparian buffers and wetlands. By leveraging variation in the timing of the program’s introduction across counties, I find that CREP reduced the number of flooded crop acres by 39 percent and the extent of damage on those acres by 26 percent during the initial 11 years of program implementation. The flood mitigation benefits of CREP also generated financial spillover effects on the federal crop insurance program, saving $94 million in indemnity payouts that would have otherwise been paid to insured farmers. Two-thirds of these benefits resulted from reduced flood damage on cropland in production, while the remaining benefits were attributed to the removal of at-risk cropland from production. The magnitude of benefits varied spatially and temporally depending on the duration of program availability, the extent of program participation, and the adoption of alternative risk management strategies. Overall, these findings underscore the critical role of PES programs in facilitating nature-based solutions for climate change adaptation.

Date: 2024-10-27
New Economics Papers: this item is included in nep-agr
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