Alternative Policy Designs to Help Farmers Select Profitable Conservation Practices

ABSTRACT Voluntary private carbon initiatives (VPCIs) promote the implementation of agricultural conservation practices that mitigate emissions of greenhouse gases (GHGs) via financial incentives to participating farmers. Simultaneously, an array of public policies supports the adoption of conservation practices through technical and financial assistance. This article explores the potential impact of different policy designs on cover crops and no‐till adoption in the United States, under alternative limits on government program participation, when farmers voluntarily choose to adopt the practices only when it is profitable for them. The baseline is calibrated with actual adoption rate data by county and serves as benchmark for three scenarios: (1) unrestricted EQIP budget; (2) HEL‐limited EQIP payments; and (3) budget‐limited EQIP payments for HEL acres under perfect price discrimination. Incremental adoption rates and farmers' net returns are highest in Scenario 1; incremental adoption rates are lowest in Scenario 3; and farmers' net returns are lowest in Scenario 3. The required EQIP funding for Scenario 1 makes it unfeasible. Scenario 3 results in lower incremental adoption of conservation practices but also lower average EQIP payments per unit of GHG emissions reduction and higher EQIP cost‐effectiveness in mitigating GHGs against other scenarios.