Beyond risk mitigation: agricultural insurance enhances crop carbon absorption and delivers environmental co-benefits

Introduction Agricultural insurance is widely recognized as an economic instrument for dispersing production risk, yet whether it yields environmental co-benefits remains underexplored. This study shifts the focus beyond risk mitigation by examining how agricultural insurance shapes crop carbon absorption. Methods Drawing on a 14-year panel of 333 prefecture-level cities in China, we combine a two-way fixed effects model augmented with province-by-year interaction effects, an instrumental variable approach, and a robust heterogeneous Difference-in-Differences approach to establish causality. Results The results show that agricultural insurance significantly enhances crop carbon absorption. Mechanism analyses trace this effect to the reshaping of farmers’ production decisions: structural adjustment toward staple crop cultivation and scale expansion through a higher multiple cropping index. Heterogeneity analyses corroborate these channels, revealing stronger effects in major grain-producing areas and regions with larger per capita arable land. The carbon benefits are also more pronounced in economically underdeveloped areas and regions where non-agricultural industries are less developed. Discussion Beyond risk mitigation, agricultural insurance thus serves as a policy lever translating micro-level farmer behavior into macro-level ecological gains, and the resulting carbon absorption co-benefit deserves greater weight in future insurance design.