Conservation Spending Seeks To Improve Environmental Performance in Agriculture
Some farming practices can degrade natural resources and the environment. Sediment, nutrient, and pesticide runoff and leaching, for example, can impair water quality. Other practices can preserve and enhance our natural heritage and provide substantial benefits through careful management of agricultural land. Enhancing wildlife habitat on agricultural land—for example, by providing nesting material for migratory birds—can help increase wildlife populations. USDA's conservation programs help agricultural producers improve their environmental performance with respect to soil health, water quality, air quality, wildlife habitat, and greenhouse gas emissions.
A Portfolio of Incentive Programs
- The Conservation Reserve Program (CRP) generally provides 10-15 year contracts to remove land from agricultural production. Most of the land enrolled in the CRP was in crop production prior to CRP enrollment and is now planted to grass or trees. A large majority of CRP contracts enrolled whole fields or whole farms. Increasingly, however, CRP contracts fund high-priority, partial-field practices such as filter strips and grass waterways, rather than whole-field or whole-farm enrollments. Up to 2 million acres of grassland can also be enrolled in CRP if the landowner agrees to keep the land in grazing use rather than tilling it for crop production or converting it to any other use.
- The Agricultural Conservation Easement Program (ACEP) provides long term or permanent easements for preservation of wetlands and the protection of agricultural land (cropland, grazing land, etc.) from commercial or residential development. ACEP works through partnerships with American Indian tribes, state and local governments, and non-governmental organizations.
- The Environmental Quality Incentives Program (EQIP) provides financial assistance to farmers who adopt or install conservation practices on land in agricultural production. Common practices include nutrient management, conservation tillage, cover crops, field-edge filter strips, and fences to exclude livestock from streams.
- The Conservation Stewardship Program (CSP) supports ongoing and new conservation efforts for producers who meet stewardship farm-wide requirements on working agricultural and forest lands. Farmers and ranchers must demonstrate a high level of stewardship to be eligible for the program and must agree to further improve environment performance over the life of the CSP contract (up to 5 years). Participants receive financial assistance for adopting new conservation practices and for stewardship, based on previously adopted practices and the ongoing maintenance of those practices. The entire farm must be enrolled and conservation requirements must be met throughout the farm.
- The Regional Conservation Partnership Program (RCPP) provides assistance to partners to solve problems on a regional or watershed scale. RCPP can fund a wide range of activities (similar to those funded by other USDA programs) including land retirement, easements, partial-field practices (e.g., filter strips and grass waterways), and conservation practices on working land (e.g., cover crops and nutrient management).
- Through Conservation Technical Assistance (CTA), USDA provides ongoing technical assistance to agricultural producers who seek to improve the environmental performance of their farms.
Programs that provide financial assistance to farmers who adopt, install, or maintain conservation practices on land in production, particularly EQIP and CSP, are often collectively referred to as "working land programs." Other programs can also support working lands. ACEP can help preserve working agricultural land that would otherwise be developed. Some CRP continuous signup practices (e.g., filter strips) may also complement agricultural production. RCPP can fund a wide range of practices, including land retirement, easements, and conservation practices on working lands. In the discussion that follows, we define working lands programs to include EQIP and CSP only.)
Conservation Spending is Level in the 2018 Farm Act
ERS tracks conservation program levels and analyzes trends in support for the different types of conservation assistance programs. Between 1996 and 2011, real (inflation-adjusted) conservation spending grew by roughly 50 percent. Since 2011, annual spending on the 6 largest programs combined has remained between $6.0 and $6.5 billion (except in 2015) and is projected to continue within that range during 2019-2023. Under the Agriculture Improvement Act of 2018 (2018 Farm Act), the Congressional Budget office (CBO) estimates mandatory conservation spending of $29.5 billion over 5 years, about $560 million more than CBO’s projection of 2019-23 spending if the programs and provisions of the 2014 Farm Act had been extended. Although most conservation programs receive "mandatory" funding, the funding levels are not guaranteed and could be revised in future years.
Changes in major conservation program funding under the 2018 Farm Act will effectively halt the shift toward increasing the share of conservation funding for working land programs that began with the 2002 Act and continued under the 2008 and 2014 Farm Acts. While the proportion of funding devoted to working land programs has increased under every farm bill since 2002, the size of the shift has declined in each subsequent farm act. Under the 2014 Farm Act, working land program funding accounted for a majority (53 percent) of major conservation program funding for the first time. Under the 2018 Farm Act, spending for working land programs will again account for about 53 percent of the five largest programs.
While overall conservation funding is roughly equal to baseline levels for FY2019-FY2023, the 2018 Act shifts funding among programs. The acreage enrollment cap in the Conservation Stewardship Program (CSP) is replaced with a funding cap that implies lower spending in the future. Contracts signed under the acreage-limited CSP will continue; contracts that expire before December 31, 2019 can be renewed. Going forward, the 2018 Act sets spending limits of $700 million for FY2019, increasing to $1 billion by FY2023. CSP funding was $1.32 billion in FY2018 (estimated) and was projected to be roughly $1.75 billion per year, on average, for FY2019-FY2023 according to the CBO. EQIP funding is increased from $1.75 billion in FY2019 to $2.025 billion in FY2023, compared to an average baseline of $1.75 billion over FY2019-FY2023.
Conservation Reserve Program (CRP) funding is projected to decline slightly (a total of -$189 million) over FY2019-FY2023. Funding will increase for the Agricultural Conservation Easements Program (from $250 million to $450 million annually) and the Regional Conservation Partnership Program ($100 million to $300 million annually). Although RCPP funding rises, the 2018 Farm Act eliminates the requirement that 7 percent of funds from "covered programs" (e.g., EQIP, CSP, and ACEP) be transferred to and allocated through RCPP. Under the new act, RCPP will function as a standalone program, rather than through covered programs.
Compliance Links Conservation to Eligibility for Farm Support
Conservation Compliance makes soil and wetland conservation conditions of eligibility for most USDA farm program benefits. Compliance, which explicitly links environmental and farm income objectives, can leverage farm program payments for environmental gain, but may not reach every producer (not all farmers receive income support or other payments).
Under highly erodible land conservation provisions (often referred to as "sodbuster"), farmers who crop highly erodible land must apply an approved soil conservation system or risk becoming ineligible for nearly all agriculture-related farm program benefits, including farm commodity programs, crop insurance premium subsidies, conservation programs, disaster assistance, farm loan programs, and other benefits. Under wetland conservation provisions (often referred to as "swampbuster"), producers must refrain from draining wetlands or face the loss of farm program benefits.
For producers who choose to till native sod that has not been previously tilled (whether or not it is highly erodible land), the "sodsaver" provision reduces crop insurance premium subsidies and limits the yield or revenue guarantee available during the first 4 years of crop production. These sodsaver provision apply only to native sod in Minnesota, Iowa, North Dakota, South Dakota, Montana, and Nebraska. There are also imitations that apply to noninsured crop disaster assistance. Unlike sodbuster or sodsaver, these limitations apply only on the land that has been converted from native sod to crop production
As farm programs evolve over time, the nature and size of the compliance incentive may also change, possibly affecting compliance incentives. See, for example, Conservation Compliance: How Farmer Incentives Are Changing in the Crop Insurance Era (ERR-234, July 2017).
Conservation Policy and Program Design
ERS research examines the cost-effectiveness of conservation policies and programs, with an emphasis on identifying conservation program design features that increase environmental gain per program dollar. ERS also investigates the environmental impact of broader agricultural policies and programs on land use, input use, and conservation practice adoption. Research findings address many issues in program design:
- Incentives: Paying farmers to adopt specific conservation practices and paying for the level of environmental performance are two different approaches with distinct benefits. Paying for performance is more cost effective than paying for practices because program incentives are directly linked to environmental outcomes. See, for example, Rewarding Farm Practices versus Environmental Performance (EB-5, March 2006). These outcomes, however, are not easy to observe, making performance-based payments difficult and costly to implement. Benefit-cost targeting, where cost-based payments are directed to farms, fields, and practices with high expected benefits may be a practical compromise.
- Targeting: In voluntary conservation programs, eligibility requirements, participation incentives, and ranking of program applications can be used to direct payments to fields, practices, or specific resource concerns that are likely to generate large environmental gains relative to cost (see Better Targeting, Better Outcomes (EB-3, March 2006)). ERS research has explored the design of ranking mechanisms for multiple objectives (e.g., Balancing the Multiple Objectives of Conservation Programs (ERR-19, May 2006)), targeting wetland restoration efforts ( Targeting Investments To Cost Effectively Restore and Protect Wetland Ecosystems: Some Economic Insights (ERR-183, February 2015)), and cost reductions that could be achieved through spatial targeting in addressing specific environmental problems like water quality in the Chesapeake Bay ( An Economic Assessment of Policy Options To Reduce Agricultural Pollutants in the Chesapeake Bay ERR-166, June 2014)) and the Gulf of Mexico ( Reducing Nutrient Losses From Cropland in the Mississippi/Atchafalaya River Basin: Cost Efficiency and Regional Distribution (ERR-258, September 2018)). Also see Economic Experiments for Policy Analysis and Program Design: A Guide for Agricultural Decisionmakers (ERR-236, August 2017).
- Auctions: Bidding—a process in which farmers compete in an auction for conservation payment contracts—integrates market-like features into conservation programs. Under some conditions bidding can encourage farmers to accept lower payments or install practices that have greater environmental benefits but are also more expensive or more difficult to use. For more detail on auction design and the conditions that make auctions an effective approach to implementing conservation programs, see Options for Improving Conservation Programs: Insights from Auction Theory and Economic Experiments (ERR-181, January 2015). Also see Economic Experiments for Policy Analysis and Program Design: A Guide for Agricultural Decisionmakers (ERR-236, August 2017).
- Additionality: A conservation practice that is adopted by a farmer who receives financial assistance is "additional" only if the practice would not have been adopted without the payment. That is, to satisfy the requirements of "additionality," the payment must be critical to securing adoption—and any associated environmental gain. Payments for practices that would have been adopted even without financial assistance are not additional. While these payments help defray farmer adoption costs, they do not yield any additional environmental gain. ERS research shows that USDA conservation programs are effective in encouraging conservation practice adoption, although additionality varies across conservation practices, see Additionality in U.S. Agricultural Conservation and Regulatory Offset Programs (ERR-170, July 2014).
- Contract design: All USDA conservation programs contract with farmers to specify the application of conservation practices and related payments. Most contracted practices are completed as scheduled. Sometimes, though, contracts are modified or entirely terminated, and agreed-on practices are either replaced with other practices or dropped entirely. For more information on what practices are most often dropped and some possible reasons for dropped practices, see Working Lands Conservation Contract Modifications: Patterns in Dropped Practices (ERR-262, March 2019). Also see Economic Experiments for Policy Analysis and Program Design: A Guide for Agricultural Decisionmakers (ERR-236, August 2017).