How Cost‐Effective Are Land Retirement Auctions? Estimating the Difference between Payments and Willingness to Accept in the Conservation Reserve Program

offers annual rental payments to farm oper-ators who voluntarily retire environmentally sensitive cropland under ten- to fifteen-year contracts. The CRP is notable for the size of both its budget and its environmental benefits. The CRP currently pays about $1.7 billion per year to retire about 34 million acres (equal to about 8 % of U.S. cropland, or the size of Iowa). For comparison, Congressional appropriations for toxic waste cleanups under the Superfund program, one of the nation’s highest profile en-vironmental initiatives, totaled $1.3 billion in 2003. To date, the CRP has disbursed over $26 billion in direct payments. Researchers have estimated that the environmental benefits ex-ceed the program’s costs (Feather, Hellerstein, and Hansen; Ribaudo et al.). This paper measures the cost-effectiveness of the CRP’s bidding mechanism. Currently, landowners submit bids that are ranked ac-cording to a score that comprised both an environmental benefits index (EBI), which includes erodibility and other environmental factors, as well as the landowner’s proposed rental rate, subject to soil-specific maximums.1