Payments for Ecosystem Services and Flood Loss Mitigation in Agriculture
Presented by:
Young Kim
Food and Resource Economics
University of Florida
Friday, October 16, 2026
12:00 pm-1:15 pm
Taylor-Hibbard Seminar Room (Rm103)
Payments for ecosystem services (PES) finance natural infrastructure to provide environmental benefits. This paper examines whether they also mitigate economic losses from extreme weather events. I begin with a self-insurance framework to show how conservation payments can counteract the disincentive that subsidized crop insurance creates for farmers to retire at-risk cropland or to establish conservation cover that protects cropland remaining in production. I then estimate the flood-loss mitigation benefits of the U.S. Conservation Reserve Enhancement Program, which pays landowners to restore conservation cover for water quality and wildlife habitat, exploiting its staggered introduction across the Mississippi River Basin. The program reduces flood-related crop insurance indemnities by 44 percent, lowering the extent and severity of insured flood losses. Avoided indemnities equal 30 percent of program expenditure, and the benefits are concentrated in major flood years. These findings highlight how PES support nature-based adaptation to climate change while pursuing their environmental objectives.