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Roger Claassen s global demand for food and fuel grows, the potential tradeoff between agricultural production and environmental quality has renewed urgency. While grain and soybean prices have retreated from previous peaks, demand for food and fuel remains strong and prices continue at levels well above their 2004 to 2006 averages. These market signals are encouraging the use of additional land, water, and other inputs in crop production. If pursued without caution, however, increasingly intensive agricultural production can damage land, deplete water resources, and degrade the environment.

Environmental protection often requires government intervention. Agricultural producers generally do not receive a financial benefit from using production methods that could protect or improve the environment downstream or downwind. Unless these methods are also the most profitable way to farm, producers have no tangible incentive to adopt them. Because nonpoint source pollution processes such as nutrient runoff cannot be directly observed, farmers and ranchers may not even realize the environmental effect of their actions. Federal agricultural conservation policy seeks to provide incentives for environmental protection where markets have failed to do so. Agricultural conservation policy is implemented largely through voluntary programs that offer economic incentives for the adoption and use of environmentally sound practices. Between 2008 and 2012, an estimated $25 billion will be spent on USDA conservation programs. Perhaps the most basic questions in the design and implementation of voluntary programs are how much will be …