How cost-effective are land retirement auctions? Estimating the difference between payments and willingness to accept in the Conservation Reserve Program

The Conservation Reserve Program (CRP) as established by the Food Security Act of 1985 offers annual rental payments to farm operators who voluntarily retire environmentally sensitive cropland under ten- to fifteen-year contracts. According to researchers, the environmental benefits exceed the program's costs. The premiums received by CRP participants above their reservation rents are estimated. Data show that estimated premiums have generally increased over time and constitute 10-40% of the program's rental pay-outs. To address this situation effectively, alternative payment mechanisms should be sought.