To spend $20 billion, USDA needs to swing for the fences on environmental outcomes
By Harry Huntley
Note: This blog is the first in a series that address the questions USDA asked in its Request for Information about implementation of the Inflation Reduction Act’s conservation provisions. Stay tuned for more.
One week ago, the US Department of Agriculture’s Natural Resources Conservation Service (NRCS) made a BIG ask of the American public: "Give us input about spending the $19,450,000,000 in conservation program funds allocated to us through the Inflation Reduction Act (IRA)?" This question is monumental because it's not about what the money should be spent on; the IRA allocated cash to existing programs. Nor should it be about why we ought to spend on conservation; scientists have made it abundantly clear that humans are causing climate change and that agriculture has a big opportunity to contribute to the solution. Rather, the question is how USDA will get such a massive amount of money to farmers while delivering environmental results. The answer I’m most excited about is a new approach: outcomes purchasing.
It almost seems counterintuitive to say that USDA should try something new when it’s all hands on deck, but–like the fallacy of a forester too busy felling trees to sharpen her axe–this is exactly when the Department most needs bold, new solutions. Right now, such a dramatic ramp up in funding is at real risk of simply being returned to the federal Treasury. This would be tragic because the money is truly needed. To give just one example, in the 2020 fiscal year, the Environmental Quality Incentives Program (EQIP) was only able to fund 27% of eligible applications. There is broad agreement from Senator Mitt Romney to Representative Alexandria Ocasio Cortez that farmers must be a part of the climate solution, but agriculture is a low-margin business, so government conservation money must get out the door for that to happen.
And yet, the Congressional Budget Office estimates that USDA will not be able to spend all the money.
Where is the bottleneck? One answer is in what USDA calls “Implementation Technical Assistance.” This is the engineering and crop consulting work of figuring out where and how to plant a forest buffer or which seeds to use in a cover crop mix that NRCS requires to happen before producers can get a cost-share contract. While the IRA includes a record $1 billion for technical assistance, utilizing that money is a challenge on its own. Expeditious hiring is not typically seen as a strength of the federal government. Moreover, the tight labor market will make staffing up even more challenging than usual. Perhaps the most well-known example of the federal government’s hiring challenges is located with USDA: the US Forest Service.
Outcomes purchasing is when an agency buys environmental outcomes (carbon sequestered, nitrogen prevented from entering a waterway, a drop in river temperatures) from farmers just like it purchases other goods like computers or trucks – and just like farmers sell crops. In contrast, current cost-share programs treat conservation like a service, prescribing exactly how farmers must implement their conservation measures on their land, that “implementation technical assistance”. One major benefit of outcomes purchasing programs is in situations where a farmer finds a more cost-effective way to achieve the result the government wants to buy. Outcomes purchasing programs mean farmers can actually profit from ecosystem services in those situations, instead of just using cost-share to minimize the amount of money they lose. Crucially—while farmers could still take advantage of their local conservationist’s knowledge—there is a path for them to bypass the bottleneck of waiting for the USDA to provide implementation technical assistance. As long as their projects are completed to NRCS specifications, farmers can design the projects themselves or work with consultants as they do for crop production. And the producers have every incentive to make sure specifications are met because they’re only paid once that’s verified.
Outcomes purchasing should not entirely replace cost-share approaches. Rather, we’re simply suggesting that farmers should have the opportunity to choose based on which approach works best for their needs. It makes more sense to deploy outcome payments for either very common activities where farmers and their consultants have a lot of know-how or for highly experimental activities before USDA is willing to cost-share them. Shaking up well-established practices and developing new, risky ones are the ways most likely to deliver new, cost-effective “recipes” for creating environmental outcomes.
States have already begun to purchase conservation outcomes directly, but this approach represents a fraction of a percent of total agriculture conservation dollars. Vermont has run a quasi-outcomes-purchasing program for years using a Regional Conservation Partnership Program grant and non-federal funds. Iowa is buying water quality outcomes from the Soil and Water Outcomes Fund, an aggregator. This year, Maryland successfully set up a state program to buy nitrogen reduction outcomes from farmers and received applications for more than double the funds earmarked for agriculture. And crucially, this Maryland program has received federal RCPP funds just to match what the state is already doing. What if we scaled these programs up?
What if, to spend the tremendous amount of IRA funds USDA has available, it dedicated a portion to just match states willing to try this emerging lower-effort, higher-impact approach? An Outcomes Matching Program could simply double up non-federal money any state commits to buying outcomes in a way that meets some basic criteria. A state could draft a plan or pass legislation, then work with USDA to ensure the plan satisfies all those basic requirements as it’s developed into an application and solicitation. After approval, the state would receive a flexible grant to pay twice as many farmers for modeled or measured environmental outcomes. Such an idea has already been supported by dozens of clean water organizations and unanimously by state secretaries of agriculture.
As USDA sees states’ success, it could even potentially design its own outcomes purchasing program. This could live within RCPP or more likely be a subset of the Department’s greatest conservation workhorse, the Environmental Quality Incentives Program. Some farmers will always want to get cost share for practices, but there’s no reason not to provide an additional option for more risk-tolerant farmers who want to make money from providing additional benefits to the environment.
Crucially, any progress will need to support states in creating true outcomes purchasing programs, unlike USDA’s previous attempts that–while sometimes an improvement–failed to shrug off the worst parts of practice-based approaches. The payment amount needs to be connected to the outcome, not the typical payment schedule for the practice. And since NRCS is paying for the outcome, rather than the practice, there should be no requirement for farmers to itemize costs. This needless paperwork wastes the time of already busy people and drives up the cost of conservation.
This IRA money is supposed to transform our agricultural system to address the realities of climate change, but to realize that vision, USDA will need to transform how it spends the money. A dedicated grant program to match state outcomes purchasing programs is the simplest, fastest, and most impactful way to do that.