Crop insurance serves as a disincentive for farmers to adopt climate-change mitigation measures, according to a new study by researchers at North Carolina State University. If insurance will compensate for crop losses due to drought or severe weather, a farmer may not want to pay extra for climate-change adaptation efforts, said Rod Rejesus, a professor of agricultural and resource economics at North Carolina State and the study’s corresponding author.
The researchers examined the interactions of warmer temperatures, yield risk and crop-insurance participation by farmers. They developed models using historical county-level corn and soybean production data in the United States, with an eye toward understanding the production impacts of increasing temperatures.
Variation in crop yields due to warmer temperatures increased when more farmers had crop insurance. The results showed greater variability effects for corn yields than for soybean yields, according to the researchers.
“This could be an unintended consequence of providing subsidies for crop insurance,” Rejesus said.
The study models indicated that an increase of daily minimum and maximum temperatures of 1 degree Celsius would increase county-level corn yield variability by 8.6 bushels per acre if 80 percent of farmers in a county had crop insurance. The same temperature increase in a county with 10 percent crop-insurance participation would increase corn yield variability by 6.2 bushels per acre.
The researchers pose possible solutions to the quandary for policymakers such as providing more subsidies to encourage use of climate-change mitigation efforts – such as soil-health practices – and starting policy conversations about how to possibly tweak rules and guidelines that govern crop-insurance contracts to reduce disincentive effects.