In this study, we estimate empirically the multiple benefits of a subsidy policy that would offer payments to farmers in return for the adoption of conservation tillage and compare the outcomes of alternative targeting designs for such a policy. Using data for roughly 12,000 National Resource Inventory (NRI) points, we simulate for the state of Iowa the least-cost policy schemes for offering payment incentives. We use an economic model of conservation tillage adoption to evaluate the costs of adoption, and we use a model that simulates physical processes (Environmental Policy Integrated Climate, or EPIC) to estimate the environmental benefits of adoption at each of the NRI points.

We assess the costs and environmental consequences of two targeting options. The first is a practice-based policy instrument that maximizes the acres of land in conservation tillage, regardless of the level of environmental benefits achieved. The second is a performance-based instrument that yields the highest amount of environmental benefits per dollar spent. We consider four performance-based benefits: carbon sequestration in agricultural soils, reduction in nitrogen runoff, reduction of erosion of soil by wind, and reduction of erosion of soil by water. We find that the practice-based instrument provides high proportions of the four benefits relative to the performance-based instrument, especially at higher budget levels. Similarly, we estimate that targeting one of the four benefits provides high percentages of the other benefits compared to the amounts obtainable if they were targeted directly.