This study empirically estimates the multiple benefits of a subsidy policy that would offer payments to farmers in return for the adoption of conservation tillage, and compares the outcomes of alternative targeting designs for such a policy. The least-cost incentive payment policy schemes are simulated for the State of Iowa by using the data for roughly 12,000 National Resource Inventory (NRI) points. We use an economic conservation tillage adoption model to evaluate the costs of adoption and a physical process simulation model (EPIC) to estimate the environmental benefits due to adoption at each of the NRI points.Two targeting options are considered. We assess the costs and environmental consequences of a practice-based policy instrument (which maximizes the acres of land in conservation tillage, regardless of its level of environmental benefits) and contrast it to a performance based instrument (which yields the highest amount of environmental benefits per dollar spent). Carbon sequestration in agricultural soils, reduction of soil erosion by wind and water, and the reduction in nitrogen runoff are considered as possible targets for the performance-based instruments. We find that the practice-based instrument provides high proportions of the four benefits relative to the policies that target the benefits directly, especially at the higher policy budget levels. Similarly, we estimate that targeting one of the four benefits individually provides high percentages of the other benefits as compared with the amounts of the benefits obtainable if they were targeted directly.
