Historically, cost-share has been awarded to farmers on a first come first serve basis, regardless of the environmental outcomes of the conservation practices. But what if the USDA didn’t base payments on the cost of the practice? What if the incentive payment was based on the performance of the practice instead? By paying for performance versus installation costs, farmers (as well as taxpayers) would have a more accurate way to measure their return on investment.
Conservation program funds are in high demand in the United States, with the number of applications far exceeding the total publicly available funds. To achieve the best outcome for all, conservation agencies must invest public funds in the most cost effective way, while allowing farmers to make their own decisions. In other words, the public should expect to get the biggest bang for their buck and farmers should be able to choose the conservation practices they want to implement. This is not a new idea. It’s been around a long time. I have been mulling over this idea for decades, too.
Back in the ‘80s, a colleague (Roger Wolf) and I even schemed a new method to distribute federal and/or state financial incentive payments for soil conservation. Instead of paying the typical 50% cost-share for soil conservation practice, we wanted to find a way to maximize the conservation dollar. We proposed an incentive program that would pay farmers a flat rate for conserving a ton of topsoil. It didn’t matter whether the farmer installed terraces, adopted no-till, or planted on the contour; a ton of soil was a ton of soil. We thought it genius. Maybe we were right.
The process we devised was simple.
- Determine a reasonable incentive payment for conserving 1 ton of topsoil.
- Calculate the tons of soil erosion reduced/year by implementing the conservation practice.
- Determine the number of acres protected with the practice.
- Determine the lifespan of the conservation practice. For example, terraces may last 10 – 20 years and no-till could be calculated as an annual practice, or as a 5 or 10 year contract.
Let’s look at some pay for performance calculations based on the assumption terraces have a 20 year lifespan. If the incentive payment is $2/ton and the terrace reduces soil erosion by 5 tons/acre/year on 25 acres, the farmer’s payment would be $5,000.
Let’s compare this scenario to a 5-year contract to implement no-till with a cover crop on 100 acres. With the same incentive payment of $2/ton and reducing soil erosion by 10 tons/acre/year on 100 acres, the farmer’s payment would be $10,000.
When we, as taxpayers/farmers/agencies, can realize the measurable result of a conservation practice on soil erosion, cost-share programs become more important and more valuable. Imagine how much more accountable USDA programs would be, if we tied cost-share to outcome measures.
I am quite sure my friend Roger Wolf and I were not the first to imagine a pay for performance system, but at the time it seemed like it. I am disappointed that after all these years, pay for performance has not become the measure by which we dole out cost-share. I think we should begin the transition to pay for performance with a pilot and refine the process for large scale implementation. And I’m sure the public would agree; allocating program funds to get the biggest conservation gain, is most important.
Let’s turn in our old tired system of distributing public incentive payments and work towards a system that encourages efficiency. For more on this topic click here.
(Roger Wolf is now the Director of Environmental Programs at the Iowa Soybean Association.)