American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning
American Economic Review: Insights
vol. 7,
no. 1, March 2025
(pp. 39–55)
Abstract
We test whether payments for ecosystem services (PES) can curb the highly polluting practice of crop residue burning in India. Standard PES contracts pay participants after verification that they met a proenvironment condition (clearing fields without burning). We randomize paying a portion of the money up front and unconditionally to address liquidity constraints and farmer distrust, which may undermine the standard contract's effectiveness. Incorporating partial up-front payment into the contract increases compliance by 10 percentage points, which is corroborated by satellite-based burning measurements. The cost per life saved is $3,600–$5,400. The standard PES contract has no effect on burning.Citation
Jack, B. Kelsey, Seema Jayachandran, Namrata Kala, and Rohini Pande. 2025. "Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning." American Economic Review: Insights 7 (1): 39–55. DOI: 10.1257/aeri.20230431Additional Materials
JEL Classification
- D86 Economics of Contract: Theory
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q15 Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
- Q18 Agricultural Policy; Food Policy; Animal Welfare Policy
- Q53 Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- Q58 Environmental Economics: Government Policy