Additionality in Payment for Ecosystem Services Programs: Agricultural Conservation Subsidies in Maryland

Many payment for ecosystem services programs peg subsidy levels to the complexity of conservation projects. We investigate the additionality of conservation subsidies on project complexity using data from Maryland, which has used PES programs aggressively to reduce agricultural nutrient emissions into the Chesapeake Bay. A reduced-form linear model indicates modest overall average additionality. A structural approach using counterfactuals constructed from count data model parameters yields the same overall average but finds that additionality varies with project complexity. These results suggest that projections of agriculture’s potential to lower costs of meeting water quality goals are likely overly optimistic.