We test how urban pressures moderate the level of additionality associated with BMP adoption in Pennsylvania, with a specific focus on the adoption of riparian buffers.
Housing development and crop fields; Image created using AI (Copilot)
What Is the Issue?
Governments invest billions of dollars in conservation practices to reduce nonpoint source water pollution and enhance environmental quality. Federal spending on all conservation programs has increased from $3 billion per year between 1996 and 2002 to $6 billion per year after 2008. In Pennsylvania, the estimate to meet the requirements of the Chesapeake Bay Total Maximum Daily Load (TMDL) is around $375 million per year.
These largely voluntary programs provide financial and technical assistance to incentivize the adoption of agricultural best management practices (BMPs). Policy efficiency, however, depends on the extent to which the payments associated with the BMPs are additional, where additionality increases as the payments go to fund adoptions that would not have occurred otherwise, i.e., additionality represents the share of each dollar spent on BMPs that induces adoption that would not have occurred without it.
Despite the low private benefits of most BMPs the literature has highlighted significant heterogeneity in additionality levels ranging from 20% for conservation tillage to 95% for more low-private-benefit practices such as riparian buffers. Given this range and the fact that most programs have limited funds, it is important to understand the factors driving these outcomes.
We consider a new pathway moderating the additionality effect – urbanization. As urban areas expand, farms increasingly encounter urban development. We consider how urban growth around a farm impacts the private incentive farmers possess to adopt BMPs. We hypothesize that urban density is likely to reduce BMP additionality for two reasons:
- Urban pressures increase the chance that farmers encounter non-farm populations, which increases public scrutiny and environmental peer pressure and the incentive to adopt to signal environmental stewardship
- Alternatively, investments in BMPs may capitalize into land values and raise the future development value of agricultural land
We test how urban pressures moderate the level of additionality associated with BMP adoption in Pennsylvania with a specific focus on the adoption of riparian buffers.
What Did We Find?
We provide evidence in support of our hypothesis – that urbanization reduces the additionality associated with BMP cost-share payments. Using results from our empirical models, Figure 1 shows predictions of the relationship between the additionality of riparian buffers on farms in Pennsylvania and the number of residential houses in a 1500-meter buffer around each farm. Using our preferred model, we find that farms at the 10th percentile of development (around 13 houses or 1 house per 113 acres) have additionality rates of 88%, which falls to 73% for farms at the 90th percentile (around 310 houses or 1 house per 5 acres). Further, using our results in a series of policy simulations we find that targeting conservation funds to more rural areas could save as much as $13 million annually across farms in the Pennsylvania portion of the Chesapeake Bay Watershed.
Figure 1: Moderation of Riparian Buffer Additionality by Housing Density
What Did We Do?
To implement our models, we combine data on the location of 3,743 farms across 38 counties in the state of Pennsylvania with parcel-level data on the location of single-family residential housing. Figure 2 shows the location of all farms in our sample broken out by their buffer status (red: buffer with government funding; blue: buffer without government funding; and grey: no buffer). We measure urban density around each farm by drawing a 1,500-meter buffer around the centroid of each operation and counting the number of single-family houses. Since the buffer size stays fixed, house counts are proportionate to density. We produce our measure of urban moderation by implementing an empirical model of additionality. Prediction results from the various models are shown in Figure 1.
Figure 2: Location of Farms in Pennsylvania by Buffer Status
Note: This figure shows the location (centroid) of all 3,743 farms in our sample. Red farms are those with buffers and cost share funds; blue farms are those with buffers and no cost share; and grey farms are those without buffers.
Publication completed for this work
Hua, J., Klaiber, A., & Wrenn, D. (2024). Urbanizing agriculture, additionality, and the adoption of agricultural conservation practices. Land Economics. Advance online publication. https://doi.org/10.3368/le.101.2.082624-0074
Contact: Douglas Wrenn, dhw121@psu.edu
