Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality

Madhu Khanna, Murat Isik, David Zilberman

Research output: Contribution to journalArticle

Abstract

This paper quantitatively analyses the cost-effectiveness of alternative green payment policies designed to achieve a targeted level of pollution control by heterogeneous microunits. These green payment policies include cost-share subsidies that share the fixed costs of adoption of a conservation technology and/or input reduction subsidies to reduce the use of a polluting input. The paper shows that unlike a pollution tax that achieves abatement through three mechanisms, a negative extensive margin effect, a negative intensive margin effect and a technology switching effect, a cost-share subsidy and an input reduction subsidy are much more restricted in the types of incentives they provide for conservation of polluting inputs and adoption of a conservation technology to control pollution. Moreover, they may lead to varying levels of expansion of land under production. Costs of abatement with alternative policies and implications for production and government payments are compared using a simulation model for controlling drainage from irrigated cotton production in California, with drip irrigation as a conservation technology.

Original languageEnglish (US)
Pages (from-to)157-174
Number of pages18
JournalAgricultural Economics
Volume27
Issue number2
DOIs
StatePublished - Aug 10 2002

Keywords

  • Conservation
  • Environmental policy
  • Green payments
  • Technology adoption

ASJC Scopus subject areas

  • Agronomy and Crop Science
  • Economics and Econometrics

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