This dissertation consists of four chapters that explore the impacts of agricultural policies on production decisions and the adoption of conservation practices. The first chapter provides an overview and introduction to the dissertation. The second chapter investigates the effect of ethanol production on conservation practice adoption. The third chapter delves into moral hazard behavior in water use. The fourth chapter analyzes the effect of crop insurance premium subsidies on enrollment in wetland easement programs. This dissertation aims to provide empirical evidence on the interplay between production-related policies and their impacts on environmental stewardship, offering insights for policy evaluation and decision-making. The first essay (Chapter 2) examines the effect of ethanol production on the adoption of on-farm conservation practices. From 2002-2019, United States ethanol production increased ten-fold. Using Renewable Fuel Standard (RFS) mandate changes to instrument for ethanol capacity, we assess whether changes in ethanol production affect the prevalence of cover cropping in corn-soy agriculture. We find that a 100 million gallon/year increase in local ethanol capacity implies a 0.35 percentage point decline in cover cropping. Considering a counterfactual where United States ethanol capacity remained at 2005 levels, our estimates imply that United States annual cover cropped area in 2015 would be 570.5 thousand acres greater, leading to additional greenhouse gas sequestration valued at $19.0 million/year based on current estimates of the social cost of carbon.The second essay investigates the effect of crop insurance on water use. Using crop-specific water use data and unit pumping costs for groundwater extraction, we analyze moral hazard behavior in water use and the effect of pumping costs on water use responses to insurance participation. To address the potential endogeneity between water use and insurance participation, we adopt an instrumental variable approach using government-set premium subsidy levels and insurance participation from the previous year. We focus on areas overlying the High Plains Aquifer where groundwater serves as the primary source for irrigation. We find that an increase in insurance participation raises per-acre water use when pumping costs are low. When the pumping costs are high enough, we observe moral hazard behavior in water use, where per-acre water use decreases in response to insurance coverage. For average pumping costs, a one percentage point increase in insurance participation leads to a 0.4% decrease in per-acre water use. These findings provide policy implications for both crop insurance and water regulations. Moral hazard behavior in water use may lead to higher indemnity payouts, whose costs are partially born by taxpayers. In addition, programs increasing water prices may lead to over-pricing and inefficient use of resources, if the moral hazard effect is not considered.The third essay examines whether federal crop insurance premium subsidies discourage enrollment in wetland easement programs. Wetland conservation programs in the United States aim to restore environmentally critical lands that are often at risk of conversion for agricultural use. Using county-level panel data from the Mississippi River Basin between 1997 and 2020, we estimate a Poisson quasi-maximum likelihood model with a control function approach to address endogeneity. Our findings show that a 1% increase in premium subsidy reduces easement enrollment by approximately 3.2%. The economic magnitude of the effect is relatively modest where the average partial effect is estimated to correspond to a reduction of 2.7 enrolled acres. These results suggest that while crop insurance subsidies create some crowding-out effects, their practical impact on long-term wetland conservation commitments remains limited.
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