Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality
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This paper quantitatively analyses the cost-effectiveness of alternative green payment policies designed to achieve a targeted
level of pollution control by heterogeneous micro units. 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.
© 2002 Elsevier Science B.V. All rights reserved.