Transcript The U.S. Experience With Land Retirement for Natural Resource Conservation Ralph E. Heimlich Deputy Director for Analysis, Resource Economics Division, Economic Research Service, U.S.

The U.S. Experience With
Land Retirement for Natural
Resource Conservation
Ralph E. Heimlich
Deputy Director for Analysis, Resource Economics Division,
Economic Research Service, U.S. Department of Agriculture.
For presentation at the "Conference on Public Payment Schemes for Environmental Services,"
Beijing, Peoples Republic of China
April 22-23, 2002
Parallels Between U.S. and
China
 Catastrophic floods
in 1927-37
 Dust Bowl in Great
Plains
 First conservation
programs in Dept. of
Interior
 Long history of
conservation
programs
 Catastrophic flood in
1998
 Sandstorms blowing
across North and
West China
 First conservation
programs in
Chinese State
Forest
Administration
U.S. Land Retirement
Programs
 Conservation Reserve Program (CRP)
 Conservation Reserve Enhancement
Program (CREP)
 Wetland Reserve Program (WRP)
 Acreage Reserve Program (ARP)
 Conservation Compliance Provisions


Conservation Compliance
Sodbuster/Swampbuster
Million acres
420
History of U.S. Land Retirement
Programs, 1933-2001
Wetland Reserve
Program
Conservation Reserve
Program
Soil Bank
400
380
Agricultural
Conservation Program
Cropland Adjustment
Program
Acreage Reduction
Programs
Conservation
Adjustment Act Program
Cropland used for crops
360
340
320
19
37
19
42
19
47
19
52
19
57
19
62
19
67
19
72
19
77
19
82
19
87
19
92
19
97
YE
AR
300
How Does U.S. Land
Retirement Work?
 Voluntary Program
 Annual Rental Payment
 Cost-share for cover establishment and
conservation practices (50-75 percent)
 10-15 year contracts.
 Eligibility

Cropland planted 2 of the last 5 years; or

Marginal pastureland enrolled in other programs.
Environmental
Requirements
 Erosion Index (EI) of 8 or higher
 Cropped wetland;
 Devoted to highly beneficial environmental
practices (filter strips, riparian buffers, grass
waterways, shelter belts, wellhead protection
areas);
 Subject to scour erosion;
 Located in a national or state CRP
conservation priority area; or
 Cropland associated with or surrounding noncropped wetlands.
Current CRP (January 2002)
 33.7 million acres enrolled in CRP (10 % of
cropland)
 1.9 million acres in partial-field enrollments
under the continuous signup or CREP
 More than 560,000 contracts
 More than 370,000 farmers (about 18 %)
 $1.5 billion annual rental cost
 Average rental cost per acre is $47
 Conservation cover



60 percent of CRP acreage is planted to grasses
16 percent to trees or woody vegetation for wildlife
5 percent to wetland restoration
Lessons Learned From U.S.
Land Retirement
 Targeting
 Getting the Rent Right
 Setting the Contract Term
 Slippage
Targeting
 1930’s-1960’s--None
 Universal Soil Loss Equation (USLE)
and Wind Erosion Equation (WEE)-Highly erodible land
 Onsite productivity v. Offsite impacts
 Environmental Benefits Index (EBI)
EBI Evaluated for Each Parcel
 Wildlife factor (0-100 points);





Wildlife cover (0-50 points)
Endangered species (0-15 points)
Proximity to water (0,5,10 points)
Adjacent protected areas (0,5,10 points)
Wildlife enhancement (0, 5 points)
 Water Quality factor (0-100 points);




Location (0-30 points)
Groundwater (0Surface water quality (0Wetlands (0-10 points)
 Erosion factor (0-100 points);
EBI (continued)
 Enduring Benefits factor (0-50 points);
 Air Quality factor (0-35 points);
 Wind erosion impacts (0-25 points)
 Wind erodible soils (0-5 points)
 Air quality zones (0-5 points)
 State or National Conservation Priority Area
factor (0-25 points);
 Cost factor
 Rental rate
 Cost-sharing
 Amount below MARR
Getting the Rent Right
 Economic basis for all U.S. land
retirement programs is compensating
the farm operator for the opportunity
cost of using the land in crop
production.
 Modern CRP bid/acceptance process.
 Maximum Acceptable Rental Rates
(MARRs)
 Soil Adjusted Rental Rates
Maximum Acceptable Rental Rates (MARRs)
Number of
parcels
Truncate the Distribution of CRP Bidders
Maximum Acceptable
Rental Rate (MARR)
Windfall
Excluded
Land rent
($)
Setting the Contract Term




Annual Set Aside (ARP)
10-15 year contracts (CRP, CREP)
Permanent easements (WRP)
Fee Title Purchase
CRP: Buying the Land Many
Times?
 Was the same land retired many times?


2002, 1997, 1960 State acreage correlated at .99
61 Percent of 1985-95 reenrolled in 1996-2006
 Total payments for CRP-like programs since
1933 is $33 billion in 1996 constant dollars.
 1.1 billion acre-years of conservation.
 Average real annual rental of $29.26 per
acre.
 $975-$1,463 capitalized at 2-3 percent.
 Greater than or equal to $887-$1,270 U.S.
average 1996-97 values.
2002
CA UT
AH
PE LIF
O
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NS RN
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YL
VA
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NO
million acres
Correlation of CRP Acreage by State, 1960,
1997, 2002
4.5
4
Correlation coefficient, 1997 and 1960 = .99468
3.5
Correlation coefficient, 2002 and 1997 = .999511
3
2.5
2
1.5
1
0.5
0
1997
1960
Slippage
 Increased erosion or other
environmental impacts on new cropland
that offsets reductions on retired land
 Conservation Compliance and
Sodbuster provisions act against
slippage
 Some mechanism (compliance,
regulatory, taxes or fees) is needed to
prevent slippage
Costs and Benefits of CRP
To Landowners
90
$78.0
80
70
Cost-share on
practices
Soil productivity
billion $
60
50
40
20
Timber production
$26.5
30
$12.5
Net farm income
(including rental)
10
0
-10
Young and
Young and
Osborn, 1990 Osborn, 1990
(low)
(high)
USDA, 1996
Costs and Benefits of CRP
To Government
25
20
Rental payments
15
10
Technical assistance
billion $
5
0
-5
-10
Young and
Young and USDA, 1996
Osborn, 1990 Osborn, 1990
(low)
(high)
-15
Direct CCC savings
-20
-25
-30
Cost-share on
practices
Indirect price effects
($16.0)
($6.9)
($4.9)
Costs and Benefits of CRP
To Nonfarm Consumers
30
$14.0
20
10
billion $
0
-10
-20
-30
Young
and
Osborn,
1990
(low)
Young
and
Osborn,
1990
(high)
USDA,
1996
-50
-60
Wind erosion
Surface water quality
-40
($7.4)
Claassen
et al.
2001
(partial)
Domestic consumer
price increases
Wildlife habitat
($13.6)
($24.5)
Benefits Not Estimated
 Benefits from erosion
and sediment
reduction





Picnicking, hiking, and
other recreation around
bays/estuaries
Commercial and
recreational fishing
Endangered species
protection
Recreation on coral reefs
Reduced dust for
households, industry,
viewing scenery
 Benefits from wildlife
habitat restoration





Duck hunting
Big and small game
hunting
Wildlife viewing
Endangered species
protection
Ecosystem protection for
for common wildlife
Benefits Not Estimated
 Benefits from wetland
preservation and
restoration









Waterfowl hunting
Endangered species
protection
Wetland ecosystems
existence
Wildlife viewing
Big and small game
hunting
Water quality
improvement
Flood damage control
Ground water recharge
Fishing
 Other environmental
benefits




Carbon sequestation
Preservation of
indigenous plant and
animal species
Commercial and
recreational fishing
(reduced nutrient and
pesticide loadings to
surface water)
Health impacts of lower
nutrient and pesticide
loadings to ground and
surface water