Are Grassland Conservation Programs a Cost-Effective Way to Fight Climate Change? Evidence from France

Abstract

Grassland, especially when extensively managed and when replacing cropland, stores carbon in the ground. As a result, Grassland Conservation Programs, that pay farmers for maintaining grassland cover, might be an effective way to combat climate change, if they succeed in triggering an increase in grassland cover at the expense of cropland for a reasonable amount of money. In this paper, we use a natural experiment to estimate the cost-effectiveness of the French Grassland Conservation Program, the largest of such programs in the world. We exploit a change in the eligibility requirements for the program that generated a sizable increase in the proportion of participants in the areas most affected by the reform. We find that the expansion of the program lead to a small increase in grassland area, mainly at the expense of croplands, which implies that the program expansion increased carbon storage. We also find that the elasticity of grassland provision is low, and that, as a result, the program has large windfall gains. To compute the benefit-cost ratio of the program, we combine our results with similar estimates from the liter- ature using meta-analysis tools and we introduce the resulting parameter in a model of carbon storage in grassland. We find that, for a carbon price of 24 Euros/tCO2 eq, the climate benefits of the program are equal to 7±3% of its costs. When taking into account the other benefits brought about by grassland, we find the benefits of the program to be equal to 44±15% of its costs. We estimate that the program would break even for a carbon price of 194±122 Euros/tCO2 eq.

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Reference

Sylvain Chabé-Ferret, and Anca Voia, “Are Grassland Conservation Programs a Cost-Effective Way to Fight Climate Change? Evidence from France”, TSE Working Paper, n. 21-1248, September 2021.