Money (Not) to Burn

Research Seminars

Payments for Ecosystem Services to Reduce Crop Residue Burning

Particulate matter reduces life expectancy across India. We use a randomized con-trolled trial in the Indian state of Punjab to evaluate the effectiveness of conditional cash transfers (also known as payments for ecosystem services, or PES) in reducing crop residue burning, which is a major contributor to the region’s poor air quality. Credit constraints and distrust may make farmers less likely to comply with standard PES contracts, which only pay farmers after verification of compliance. We randomize paying a portion upfront and unconditionally. We observe high contract take-up for both types of contracts. Despite lower compliance incentives, farmers offered partial upfront payment are 8-11 percentage points more likely to comply with the contract, significantly more than farmers who receive the standard contract. Non-burning measures derived from satellite imagery indicate that while upfront PES payments reduced overall burning, standard PES payments were infra-marginal. We also show that, given the Indian context, conditional cash transfers to farmers that have an upfront component are a cost-effective way to improve India’s air quality.