Evaluating the tradeoff between cost effectiveness and participation in agricultural conservation programs

Abstract

Using a survey of 430 farmer respondents in the Boone and North Raccoon River watersheds in Iowa, we examine the impacts of three program innovations—reverse auctions, spatially targeted payments, and higher offered payments—on agricultural conservation program cost effectiveness and participation by farmers. We combine farmer responses to a discrete choice experiment offering voluntary conservation contracts with township-level estimates of per-acre nitrogen reductions from each practice derived from the process-based ecohydrological Soil and Water Assessment Tool model. Using a random-parameters logit model, we show that both cost-reducing and benefit-boosting interventions reduce budgetary costs per projected pound of nitrogen removed from the watershed for each practice and thus are more cost effective than the prevailing current cost-share programs. However, we find that these interventions can reduce participation by 30%–70%. Our policy simulations show that even with large budgets, the watershed-level nitrogen reduction from all policy interventions remains far below the policy targets set by the Iowa Nutrient Reduction Strategy. Furthermore, we find cover crop contracts are far more cost effective than no-till/strip-till split nitrogen application contracts.