Rethinking the Economics of Farming: Paying for Ecosystem Services

For decades, American agriculture has been driven by a simple economic formula: farmers get paid for what they produce. But what if we rethought that model? What if we rewarded farmers not just for the food they grow but also for the vital environmental benefits they provide—cleaner water, healthier soil, carbon sequestration, and biodiversity? This is precisely the idea behind Tompkins County, New York's pioneering Payment for Ecosystem Services (PES) program.

Why Local Governments Invest in Sustainable Farming

Sustainable farming doesn't just benefit farmers; it benefits entire communities. Local governments have a direct stake in the health of their watersheds, resilience against climate change, and overall ecological sustainability. When farmers implement regenerative practices—like reducing tillage, planting cover crops, and maintaining tree cover—their land absorbs more water, preventing flooding.[1] Their soil retains more nutrients, reducing harmful runoff into local rivers. Their fields store more carbon, helping combat climate change at a regional level. These are benefits that directly impact local residents, yet traditional markets do not compensate farmers for providing them.

Recognizing this gap, Tompkins County launched a pilot PES program in 2022 through Cornell Cooperative Extension (CCE) Tompkins County. The initiative provides financial incentives to farmers who adopt practices that enhance ecosystem services, ensuring that local environmental benefits receive local investment.

The Tompkins County PES Pilot: A Blueprint for Sustainable Investment

Many U.S. PES programs focus on large-scale conservation efforts, often tied to federal funding and carbon markets. Tompkins County takes a different approach, recognizing that ecosystem benefits are deeply local. This model builds on lessons from other successful programs, such as Vermont's Pay for Performance Program, which compensates farmers based on phosphorus runoff reduction. By operating at the watershed level, the Tompkins County initiative ensures that the benefits—cleaner drinking water, flood mitigation, improved biodiversity—are felt by the very people funding it.[2]

Central to the Tompkins County PES program is a commitment to equity and sustainability.[3] It acknowledges that small-scale and historically marginalized farmers—often left out of traditional farm subsidy programs—should be compensated for their contributions to environmental health. Currently, the program collaborates with 12 farms, testing methods to quantify carbon sequestration in soils and in trees, in-field water holding capacity and infiltration rates, and erosion and nutrient runoff mitigation. Unlike many existing PES programs that favor large landholders, this initiative prioritizes accessibility, ensuring that small farms, beginning farmers, and farmers of color can participate.

As the program develops a payment system based on quantified ecosystem services, the pilot program compensates farmers for their participation. Farmers provide ongoing feedback, co-developing a model that is fair, equitable, and beneficial to farmers that could inform national PES policies.

Case Study Precedent: The Vermont Pay for Performance Program (VPFP)

Vermont's waterways are under threat from excessive phosphorus, a key contributor to water pollution that fuels harmful algal blooms in lakes and rivers. To tackle this problem, the state has turned to an innovative solution: paying farmers for measurable reductions in phosphorus runoff. The Vermont Pay for Performance Program (VPFP), operated by the Water Quality Division of the Vermont Agency of Agriculture, Food and Markets (VAAFM), incentivizes farmers to adopt conservation practices that keep phosphorus out of the water. VPFP directly links payments to actual environmental benefits; farmers receive financial rewards for reducing phosphorus losses in their fields, ensuring that conservation efforts translate into real improvements in water quality.[4]

VPFP Program Mechanics and Criteria

The program addresses necessary reductions under the Lake Champlain Basin Total Maximum Daily Load by targeting farms with the highest impact on phosphorus losses. VPFP prioritizes farms based on the following criteria for enrollment: [5],[6]

• Farms in high-risk areas where phosphorus runoff reductions are most needed.
• Farms already using conservation practices that help control phosphorus loss.
• Farms with a strong record of maintaining nutrient management plans and associated records.
• Farms that meet the USDA's criteria for Historically Underserved Producers.
• Farms willing to participate in FarmPREP, a data-driven tool that helps farmers refine their phosphorus reduction strategies.

VPFP rewards farmers based on proven results:

• An initial payment of $15 per acre (up to $4,000) for entering phosphorus management data into FarmPREP.
• A performance bonus of $100 per pound of phosphorus reduced beyond a 40% threshold, up to $50,000 per year.
• Additional incentives of $3 per acre for maintaining an annual phosphorus loss of one pound per acre, or $8 per acre for losses of less than half a pound per acre.

As of 2024, over 28,000 acres of farmland had been enrolled in the program.[7] The initiative is backed by $7 million in funding from the USDA's Regional Conservation Partnership Program (RCPP).[8] VPFP proves that targeted, results-driven incentives can create a win-win situation: healthier waterways for communities and financial rewards for farmers who take measurable steps to protect the environment.

Conclusion: A Call to Action for Local Governments

Tompkins County's experiment should serve as a wake-up call for local governments across the country. Investing in sustainable farming isn't just an environmental choice—it's an economic and public health imperative. Local PES programs can create stronger, more resilient food systems while ensuring that farmers are paid for the invaluable services they provide to their communities.

For municipalities looking to strengthen their climate resilience and protect their natural resources, the Tompkins County model offers a clear roadmap: recognize the value of local farms, invest in their sustainability, and reap the benefits of a healthier, more resilient community.

KEY LEGAL INSTRUMENT: Statutory Text (Original Form)

Tompkins County Food System Plan

Promote farmer participation in programs that provide payments for ecosystem services. Payment for ecosystem service (PES) programs provide incentives that support the financial viability of farms, mitigate climate change by reducing carbon, nitrous oxide and methane emissions, retain water and reduce runoff and promote soil health. Practices can include cover cropping, no-till or reduced tillage or larger investments in systems such as management-intensive grazing, alley cropping and silvopasture. These practices also have the potential to increase crop yield and quality. CCE Tompkins has convened a work team to identify needs and secure funding with the intent of developing a regionally focused PES program that will specifically center the experiences of BIPOC and beginning farmers in the design and piloting of the program.

Collaborating to help identify and secure funding sources, whereby available revenue streams for specific ecosystem services are combined, will be crucial to realizing the climate and equity benefits of a PES program.[9]

New York State Climate Action Council Final Scoping Plan (2022)

AF 15. Establish a Payment for Ecosystem Services Program

Currently, farmers and forest landowners do not capture direct financial benefits from generating ecosystem services through their existing land management techniques. Agricultural and forested lands implementing conservation BMPs provide countless environmental benefits for surrounding communities including improved water quality, climate mitigation, carbon sequestration, increased biodiversity, and pollinator services. Establishing a payment for ecosystem services mechanism to provide a new structure for establishing and maintaining practice systems that reduce GHG emissions and sequester carbon in addition to providing other environmental benefits would provide additional incentives to farmers and forest landowners. A payment for ecosystem services program can be designed through existing programs and frameworks to address multiple services and evolve with changing needs and priorities of the State. This strategy supports the implementation of other strategies in this sector that rely on increased adoption of regenerative agricultural practices.[10]

References

[1] "Payment for Ecosystem Services," Agriculture, Cornell Cooperative Extension Tompkins County, last modified February 19, 2025, https://ccetompkins.org/agriculture/payment-for-ecosystem-services

[2] Cornell Cooperative Extension PES Work Team, "CCE-TC/Finger Lakes PES CLCPA Comments," Accessed February 19, 2025 https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.nyserda.ny.gov/-/media/Project/Climate/Files/2022-Comments/CCE-TC-Finger-Lakes-PES-CLCPA-Comments.pdf

[3] "Payment for Ecosystem Services," Agriculture, Cornell Cooperative Extension Tompkins County, last modified February 19, 2025, https://ccetompkins.org/agriculture/payment-for-ecosystem-services

[4] "Vermont Pay for Performance Program", Agency of Agriculture and Food Markets, State of Vermont, accessed February 19, 2025, https://www.google.com/search?q=https://agriculture.vermont.gov/VPFP%23:~:text%3D%25244.9%2520million%2520are%2520available%2520for.to%2520a%2520cap%2520of%2520%25244%252C000.

[5] "Vermont Pay for Performance Program", Agency of Agriculture and Food Markets, State of Vermont, accessed February 19, 2025, https://www.google.com/search?q=https://agriculture.vermont.gov/VPFP%23:~:text%3D%25244.9%2520million%2520are%2520available%2520for.to%2520a%2520cap%2520of%2520%25244%252C000.

[6] Harry Huntley, "Case Studies of Performance-based RCPP Projects," Environmental Policy Innovation Center, 2024, https://static1.squarespace.com/static/611cc20b78b5f677dad664ab/t/6671b3b2ef1eec51390620b8/1718727602489/RCPP+Case+Studies.pdf

[7] Harry Huntley, "Case Studies of Performance-based RCPP Projects," Environmental Policy Innovation Center, 2024, https://static1.squarespace.com/static/611cc20b78b5f677dad664ab/t/6671b3b2ef1eec51390620b8/1718727602489/RCPP+Case+Studies.pdf

[8] Harry Huntley, "Case Studies of Performance-based RCPP Projects," Environmental Policy Innovation Center, 2024, https://static1.squarespace.com/static/611cc20b78b5f677dad664ab/t/6671b3b2ef1eec51390620b8/1718727602489/RCPP+Case+Studies.pdf

[9] "Tompkins County Food Systems Plan" (2022). Tompkins Food Future. Pg. 23. https://www.tompkinsfoodfuture.org/_files/ugd/bfff24_7b3467fa1c1344e9a12045a6ecf1aab2.pdf

[10] "Final Scoping Plan" (2022). NYS Climate Action Council. Pg. 302. file:///C:/Users/dahill/Downloads/NYS-Climate-Action-Council-Final-Scoping-Plan-2022.pdf