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CARD: Center for Agricultural and Rural Development

Fall 2006, Vol. 12 No. 4

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The Costs and Benefits of Conservation Practices in Iowa

Hongli Feng
with Catherine Kling, Philip Gassman, Manoj Jha, and Joshua Parcel

Over the last two decades, conservation on cropland to improve water quality and provide other environmental benefits has been of growing interest. Federal government expenditures on conservation and environmental programs have been 80 percent higher under the current (2002) farm act than under the previous one, and several new programs, including the Conservation Security Program and the Grassland Reserve Program, were also introduced in 2002. As the expiration date for the current act draws near, it is apparent that the total expenditures and priorities of conservation programs will again be at the heart of legislative debates. The likelihood of tight fiscal budgets over the coming years suggests that competition for federal funding of conservation programs will be at least as intense as in the past. Hard questions concerning the impacts of these programs on water quality and the environment will need to be answered if such funding is to be maintained or increased. However, there are currently no easy and clear answers to these questions.

The USDA is undertaking a multi-agency national effort, the Conservation Effects Assessment Project (CEAP), to quantify the effects of conservation expenditures on the environment. With funding from this project, CARD, in conjunction with a group of interdisciplinary researchers at Iowa State University, is currently working on several detailed watershed studies in Iowa to address these questions. As a complement to these projects, we are also assessing the "state of conservation" on Iowa's cropland by collecting and analyzing the records of a variety of conservation programs and other data on the use of conservation practices in the state. We report some of the findings from this effort here, as well as some preliminary estimates on the water quality benefits that the current slate of conservation practices is likely to have provided to the state.

The Usage and Costs of Conservation Practices

Figure 1

Federal programs account for most conservation funding in Iowa, as indicated in Figure 1, which shows the 2005 funding of major conservation programs in the state. The largest conservation program is the Conservation Reserve Program (CRP), which enrolls about 2 million acres of land for retirement at a total annual payment of around $196 million. The Wetland Reserve Program offers landowners the opportunity to restore and enhance wetlands on their property. The Environmental Quality Incentives Program (EQIP) and the Conservation Security Program (CSP) are the primary programs providing financial assistance for conservation on working land. Even though the CSP was established as an entitlement program, limited funding has restricted its current implementation to a few selected watersheds. In 2005, about 2,000 contracts were approved in Iowa, covering a total of 680,000 acres.

Table 1

Figure 2

Figure 3

Two major state programs are the Iowa Financial Incentive Program (IFIP) and the Resource Enhancement and Protection program. The latter program provides funding to help address local water quality. The IFIP provides cost-share and incentive payments for conservation practices. Even though this Iowa program is much smaller than its federal counterpart, EQIP, in terms of total spending in the state, it historically provided more funding for some important practices such as grassed waterways and no-till (Table 1). For most practices, the coverage of conservation practices largely matches the environmentally vulnerable areas around the state, as shown by the similarities between the patterns in Figure 2 and Figure 3. The erodibility index in Figure 3 indicates the potential for soil to erode in particular geographical regions. Land with an index score equal to or greater than 8 is considered highly erodible. For some practices, the adopted acreage is much larger than the acres receiving payments from conservation programs. The best example is no-till. There were about 5 million acres under no-till but only 69,000 acres were under either EQIP or IFIP over the period from 1997 to 2005. The reason is that farmers choose to adopt no-till without participating in a particular program that pays them to do so.

Table 2

Using several sources of information, including the National Resource Inventory data and information from the Conservation Tillage Information Center, we estimated the total use of several major conservation practices in Iowa, which are listed in the first column of Table 2. We also calculated average costs of conservation practices from the program data. By combining these two types of data, we obtained rough estimates of the statewide coverage and costs of these practices. The results are presented in Table 2. The first two practices, terraces and grassed waterways, are structural practices whose primary costs are incurred when the structure is first installed on the field. In contrast, the estimates for the remaining practices are recurring annual costs to compensate for lost profits or increased expenses associated with the farmers' activity. If we divide the structural costs over the lifespan of the practices (25 years for terraces and 10 years for grassed waterways), then the corresponding total annual payment would be $41.29 million. Thus, the combined total costs for the practices in Table 2 amount to about $450 million per year. If lower costs were assumed for the tillage practices, then total costs would also be adjusted down.

Water Quality Impacts

Figure 4

To examine the effects of these practices on the environment, we calibrated and ran a watershed-based water quality model, the Soil and Water Assessment Tool, to answer the hypothetical question, what would water quality be if we removed all conservation practices on the land? In essence, we undertook the hypothetical experiment of removing all existing conservation practices from the landscape and compared the water quality outcomes of the landscape with and without current conservation practices. The difference between the current water quality and that predicted by the model in the absence of conservation practices provides an indication of the water quality benefits that the investment in conservation practices described in Table 2 yields. Figure 4 presents a preliminary estimate of this difference, delineated by watershed, for nitrate loading and sediment yield. According to the figure, the effects differ by watersheds and by which environmental indicators are used. Most areas reduced sediment by 20 percent and nitrate loading by about 10 percent.

Targeting Conservation Dollars

It is obvious that the next farm bill will shape conservation efforts in Iowa, since the vast majority of conservation funding in Iowa comes from federal programs. Because CRP is by far the largest conservation program in the state, whether Iowa will be competitive in getting federal conservation dollars may depend on what changes, if any, will occur in the CRP. Given the limited resources from the state government, it is probably efficient to spend state funding to leverage federal money. For example, the state can assist farmers in the enrollment process and help them become eligible or more competitive for federal programs. Alternatively, the state can set up programs that are likely to pull in more federal support. Finally, the state may want to reconsider programs that provide a pure substitute for federal funding.

The usual question of where and how to spend limited funding is still relevant. Programs are increasingly targeting watersheds, as reflected by the recent implementation of conservation programs such as the CSP. Targeting by watershed is dramatically different from site-specific targeting, which was often used in the past. Given that it can be very difficult to pin down the sources of water pollution, however, policymakers should carefully examine how to prioritize watersheds and how to allocate money within a watershed. Our preliminary simulations suggest that not all watersheds have the same potential for environmental improvements. ?

Hongli Feng is an associate scientist, Philip Gassman and Manoj Jha are assistant scientists, and Joshua Parcel is a research assistant, all in the Resource and Environmental Policy Division at CARD. Catherine Kling, professor of economics, is head of the division.