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Environmental Compliance in U.S. Agricultural Policy: Past
Performance and Future Potential
By Roger Claassen, Vince Breneman, Shawn Bucholtz, Andrea Cattaneo,
Robert Johansson, and Mitch Morehart
Agricultural Economic Report No. (AER-832), May 2004
Farm commodity programs may have encouraged crop production
on environmentally sensitive land in the 1970s and early 1980s.
Although unintended, production incentives may have increased
environmental damage associated with agricultural production
and undercut the effectiveness of conservation programs designed
to mitigate that damage. The 1985 Farm Act introduced compliance
provisions as one way to counteract that influence. Compliance
provisions require agricultural producers to implement soil
conservation systems on highly erodible cropland and refrain
from draining wetlands in order to remain eligible for benefits
from selected Federal agricultural programs, including price
support loans and income support payments.
What Is the Issue?
Is the threat of witholding Federal agricultural program payments
enough to induce a change in farmers' conservation behavior?
Since compliance mechanisms have taken effect, soil erosion
on highly erodible cropland and wetland conversions for agricultural
production have both declined sharply. Nonetheless, questions
about the effectiveness of compliance mechanisms remain:
- What proportion of overall cropland erosion reduction is
actually due to compliance? Would farmers have reduced cropland
erosion even without the compliance incentive? Can the effect
of the compliance incentive be separated from the effect of
changing market prices, other policy incentives, and technological
change?
- Similarly, are compliance mechanisms actually constraining
wetland conversions for agricultural production? Or, does
the decline in wetland conversion for agriculture reflect
a decline in the profitability of such conversions?
- Would environmental benefits increase if compliance mechanisms
were extended to address other environmental problems such
as nutrient runoff and leaching?
What Did the Study Find?
A "before-and-after" snapshot suggests that annual
soil erosion on U.S. cropland declined by 40 percent between
1982 and 1997. About a fourth of that reduction occurred on
highly erodible cropland subject to compliance requirements.
Erosion reductions were larger (in percentage terms) on highly
erodible cropland located on farms receiving government payments
than on farms not receiving payments, suggesting that compliance
mechanisms encouraged greater conservation effort.
However, erosion was also reduced on land not subject to compliance
requirements, suggesting that other factors also played a role
in reducing soil erosion. Farmers may have chosen to adopt soil
conservation practices independent of the advent of compliance
requirements. On some farms, conservation practices may have
increased net returns to farming, so that soil erosion reductions
were coincidental. Or, adoption of conservation practices may
have been more widespread in areas where they were first shown
to be profitable by producers responding to compliance requirements.
Potential penalties associated with compliance mechanisms may
also be effective in keeping producers from expanding crop production
onto highly erodible land or wetland. The value of participating
in commodity programs on cropland already in production is greater
than the economic gains of expanding production in many cases.
Without compliance requirements, 7-14 million acres of highly
erodible land and 1.5-3.3 million acres of wetland that are
not currently being farmed could be profitably farmed under
favorable market conditions.
Just as the potential loss of farm program payments may provide
sufficient incentive for reducing soil erosion and preserving
wetlands, those payments could be leveraged (via compliance
mechanisms) to address fertilizer run-off and leaching from
cropland. Most cropland with runoff and leaching potential is
located on farms receiving farm program payments. Program payments
on those farms may be large enough to spur farmers to adopt
measures (nutrient management or buffer practices) to address
these problems.
Compliance mechanisms may provide the best bang for the buck
as a deterrent to environmentally damaging actions such as draining
wetlands or plowing up highly erodible land (HEL) for crop production.
Compliance sanctions are triggered only when a violation occurs.
In contrast, using a subsidy program to achieve these same ends
is likely to be difficult or expensive. The difficulty is in
deciding which wetlands or non-cropped HEL are vulnerable enough
to warrant protective subsidies. If that’s too difficult,
policymakers could opt to subsidize preservation of a significant
share of these environmentally sensitive lands; an expensive
alternative, indeed.
How Was the Study Conducted?
The primary sources of data used in this analysis are the National
Resources Inventory (NRI) and the Agricultural Resources Management
Survey (ARMS). Environmental indicators (e.g., erosion reduction,
potential for nutrient runoff and leaching) are based largely
on NRI data. The distribution of farms by commodity specialization
and program payments is derived from the 1997 ARMS. Environmental
indicators are linked spatially to farm-level economic data
using a Geographic Information System.
NRI data (and other data for the nutrient runoff analysis)
were used to estimate physical effects such as erosion reduction
and the potential for nutrient runoff and leaching, the type
of land on which these physical effects occurred (e.g., highly
erodible cropland), and land-use changes that would have played
a role. Linking these data to farms provided an estimate of
the extent to which physical effects occurred on farms subject
to compliance mechanisms.
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