Agricultural Policy Affects Land Use and the Environment
Policies that shift less
productive cropland in and out of cultivation may
have larger than anticipated environmental effects.
Ruben
N. Lubowski, Roger
Claassen, and Michael
J. Roberts
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Economic
conditions and policy changes encourage
producers to shift less productive,
or “marginal,” cropland
in and out of production. |
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Because
marginal lands are also more environmentally
sensitive than highly productive land
along several dimensions, cropland shifts
have environmental, as well as economic,
effects. |
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Thus,
agricultural and conservation programs
that affect land use likely have greater
effects on erosion and some other environmental
factors than on production.
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This
article is drawn from . . . |
Environmental
Effects of Agricultural
Land-Use Change: The Role of Economics
and Policy, by Ruben Lubowski, Shawn
Bucholtz, Roger Claassen, Michael
Roberts, Joseph Cooper, Anna
Gueorguieva, and Robert Johansson, ERR-25,
USDA, Economic Research Service, September
2006.
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may also be interested in . . . |
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While total U.S. cropland acreage
has remained roughly constant for 100 years, relatively
large amounts of less productive, or “marginal,”
cropland have shifted in and out of production over
time. Almost three-quarters of the cropland acreage
that shifted into or out of cultivation between
1982 and 1997 had soil productivity below that of
the average acre of cropland. Economic forces, such
as changing commodity prices or production costs,
are likely to induce farmers to shift marginal land
in and out of production, while farmers will tend
to keep highly productive cropland in cultivation.
ERS research shows that, in general, low-productivity
croplands are more environmentally sensitive than
high-productivity land along several dimensions,
including wind and water erosion and potential nutrient
losses to water. Therefore, land-use changes on
less productive cropland may have unanticipated
environmental consequences.
Agricultural and conservation
policies also influence land-use decisions. Land
retirement programs directly affect land use, while
other agricultural policies may change the economic
incentives to cultivate crops. Two very different
types of policies—the Conservation Reserve
Program (CRP) and the Federal Crop Insurance Program—illustrate
how policies can affect land use on lower quality
and environmentally sensitive cropland. These government
programs that affect land use may have as significant
an effect on the environment as on production, and
the specific environmental impacts will vary with
the features of each program.
The CRP Provides Environmental
Benefits by Retiring Marginal Lands
The Conservation Reserve Program
is a land retirement program that offers payments
to farmers to reduce cropland acreage for environmental
gains. The program has been an important driver
of changes in cropland since 1985. The CRP uses
a competitive bidding process with selection criteria
that target highly erodible land, among other environmental
factors. This gives farmers the incentive to offer
their less economically productive acreage, and,
by design, the retired land is more environmentally
sensitive than average cropland.
In 2005, the CRP paid farmers
$1.7 billion to keep a land area almost the size
of Iowa out of production. Thus, the CRP directly
influences cropland conversion. As long as the program
does not affect commodity prices, the land-use effects
of the CRP can be largely restricted to those lands
participating in the program. An ERS study of land
parcels enrolled in the CRP found them to be less
productive and more environmentally sensitive in
terms of erosion, but not in terms of potential
nutrient runoff and leaching, than average cultivated
cropland and than other lands shifting out of cultivation.
These patterns in environmental sensitivity for
CRP and non-CRP land held even within the same crop
reporting district (multicounty areas within States).
Federal Crop Insurance
Subsidies May Encourage Cultivation of Marginal
Lands
Although crop insurance participation
does not involve a direct land-use conversion, unintended
acreage and production impacts may occur. The Federal
Crop Insurance Program raises incentives to grow
crops. A longstanding concern is that the program
may maintain or increase crop cultivation in frequently
flooded and other risky areas containing wetlands
and other environmentally sensitive lands.
Farmers weigh three main factors
when deciding whether to purchase weather-related
crop insurance: their estimated probability that
a weather-related event will occur; the amount of
loss that will be indemnified (never 100 percent);
and the premium they must pay. They will tend to
choose to insure if their perceived loss is less
with insurance than without insurance. The Federal
Crop Insurance Program subsidizes part of the premium
for farmers, which increases their incentive to
participate.
In the early 1990s, the high cost
of insurance premiums discouraged participation
in the program. In 1994, following the devastating
floods of 1993, Congress passed the Federal Crop
Insurance and Reform Act, increasing premium subsidies
for all crop insurance products, while adding catastrophic
coverage and revenue insurance options. The premium
subsidies were increased significantly to encourage
more producers to participate.
Further subsidy increases were
enacted by Congress in 1999-2000. Crop insurance
participation increased with the growth in subsidies.
Insured acreage more than doubled from 90 million
acres to 197 million acres between 1990-94 and 1995-99,
and then rose to an average of 212 million over
2000-03. That is about 60 percent of cultivated
cropland in the 48 contiguous States.
ERS researchers studied the period
of increased enrollment after the 1994 Crop Insurance
Act to observe how land use responded. Insurance
program changes increased cropland in production
by an estimated 1 percent in 1997. But effects of
these changes appear to have been largest on low-quality
and certain environmentally sensitive lands. An
ERS model was used to estimate the acreage that
had been brought into or kept in cultivation due
to the increases in insurance subsidies, and, on
that acreage, soil productivity was below that of
average cropland. While 25 percent of all cultivated
cropland was classified as highly erodible in 1997,
an estimated 33 percent of acreage added to cultivation
during the period after the increased insurance
subsidies was highly erodible land.
ERS research found that lands
brought into or kept in cultivation due to changes
in the crop insurance program were slightly more
prone to frequent flooding and were more likely
to include previously cropped wetlands and environmentally
sensitive ecosystems than average cultivated cropland.
Total wetlands in cultivation as a result of the
1992-97 subsidy increase are estimated at 37,000
acres, 0.7 percent of the 5.4 million acres of wetlands
under crop cultivation. But the affected wetlands
represent about a fifth of the net loss (163,000
acres) in non-Federal wetland area between 1992
and 1997.
Impacts Are Not the Same
Across Programs
Crop insurance subsidies are also
estimated to increase cultivation in areas subject
to high levels of nutrient loss. While nutrient
loss estimates take into account land erodibility,
they may not accurately reflect differences in fertilizer
applications on less productive lands. These lands
in cultivation due to insurance subsidy changes
are estimated to have higher potential phosphorus
leaching and nitrogen loss to groundwater, surface
water, and estuaries than do average cultivated
croplands. In contrast, cropland enrolled in CRP
tends to have below-average levels of potential
nitrogen and phosphorus losses, possibly because
the program tends to attract lands from arid regions
where factors driving nutrient loss—rainfall
runoff and rainfall-based soil erosion—are
less intense. Once CRP acreage is removed from cultivation
and the approved ground cover is established, nutrient
transport from the land would be even less.
Acreage enrolled in CRP is located
in different geographic areas than croplands brought
into cultivation after the 1994 increase in crop
insurance subsidies. Lands brought into or retained
in cultivation due to the increased subsidies are
clustered in certain regions (Prairie Gateway, Mississippi
Portal, and Eastern Seaboard). The Heartland (Illinois,
Indiana, Iowa, Missouri, and Ohio) has extensive
cropland and a fair amount of land shifting in and
out of cultivated crops. This region, however, has
relatively few CRP acres (except for a cluster in
Iowa and northern Missouri), and the ERS study showed
virtually no increase in cultivated area in the
region due to higher crop insurance subsidies. (The
ERS study accounts for the fact that the level of
participation in the crop insurance program was
already high in the Heartland, with less potential
for an increase than in regions with historically
low participation levels.)
Land going into cultivation due
to higher crop insurance subsidies was estimated
to include areas with large populations of wildlife
species classified in NatureServe’s Natural
Heritage database as imperiled. In particular, the
cluster of land shifting into production in the
Plains States coincides with an area of high CRP
enrollment and high counts of imperiled bird species.
Areas of subsidy-induced cultivation along the Mississippi
River and Eastern Seaboard overlap with habitats
of fish and mollusk species that are imperiled.
ERS land-use models estimate that lands in cultivation
due to the crop insurance subsidy increases are
located in watersheds with higher counts of imperiled
wildlife than average cropland. CRP lands lie in
areas with higher counts of imperiled birds (protecting
habitat, particularly for birds, is an express CRP
objective). While ERS research suggests there are
real changes in land use due to these policies,
available data are insufficient to determine whether
observed or predicted land-use changes have an impact
(positive or negative) on imperiled wildlife populations.
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Policies Have Environmental
Consequences
Agricultural and conservation
policies may affect farmers’ land-use decisions
directly or indirectly. These decisions will likely
be associated with less economically productive
land, and these lands are also likely to be more
environmentally sensitive along several dimensions
than average cropland.
Programs such as crop insurance
can have unintended environmental consequences,
but crop insurance only affects land use on a relatively
small amount of acreage compared with land intentionally
retired by CRP. Which lands are affected also depends
on the incentive structure of each program. Further,
the environmental effects vary regionally and by
environmental medium (such as water, soil, or wildlife
habitat).
The examples provided by the CRP
and the Federal Crop Insurance Program illustrate
these effects, but many other policies also induce
land-use changes that have environmental effects.
Identifying the economic and environmental features
of the lands affected by policy incentives, and
recognizing that the economic impact of policy-induced
land-use changes could be less than previously anticipated—and
the environmental impacts could be more than anticipated—could
improve the formulation of future farm programs.
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