Climate-smart agriculture and the impact of financial incentives on adoption: an econometric analysis

The adoption of climate-smart agriculture (CSA) practices is crucial for reducing greenhouse gas emissions, enhancing resilience, and improving soil health in the U.S. agricultural sector. This study investigates the drivers of CSA adoption in U.S. farming, focusing on United States Department of Agriculture (USDA) programs between 2006 and 2023. Using a probit model, we evaluate the impact of state-level incentives, including crop insurance premium discounts and carbon trading schemes, and the role of climate-smart terminology. Results show that crop insurance discounts and carbon trading programs are associated with 4.3 and 6.9 percentage-point increases in adoption probability, respectively. The ‘climate-smart’ label is associated with slower adoption growth, particularly in politically conservative regions. Adoption likelihood is higher in states dominated by row and specialty crops, while larger farms show lower adoption likelihood. These findings emphasise the importance of financial incentives, regional variability, and synergistic policy framing in promoting CSA adoption within large-scale agricultural policy such as the Farm Bill in the U.S. and the Common Agricultural Policy (CAP) in the E.U. • Assesses drivers of climate-smart agriculture adoption using USDA program data (2006–2023). • Crop insurance premium discounts are associated with a 4.3 percentage-point increase in CSA adoption probability. • State carbon trading programs are associated with a 6.9 percentage-point increase in CSA adoption probability. • Introduction of the “climate-smart” label is associated with slower adoption, particularly in conservative regions. • CSA adoption is lower in states with larger average farm sizes and higher in specialty-crop regions.