Fine Tuning the Environmental Benefits Index to Achieve Cost Savings for the Conservation Reserve Program

Abstract

The Conservation Reserve Program (CRP) is the largest conservation program in the United States and was established in 1985. Over time, the conservation objectives of the program have broadened to include wildlife habitat, air quality, and water quality. Changes to the enrollment mechanism were made to improve the economic efficiency of the program by implementing the Environmental Benefits Index (EBI). One of the ways farmers can increase their likelihood of being accepted into the CRP is offering a discount to the maximum rent payment for enrollment into the CRP. This study examines how farmer bidding behavior changes when the relative weighting of offering a rental payment discount increases in importance when determining which applicants are accepted into the CRP. The findings of this study indicate that a small change to the relative weighting does have an effect on farmers’ willingness to offer a discount and thus improve the economic efficiency of the CRP.