ABSTRACT
Environmental concerns are likely to form the kernels around which many of the debates about farm policy issues will revolve during farm legislation debates in the late 1990s. Until recen tly the m ultiple peril crop insurance (M PCI) program appeared to be an unlikely candidate for criticism by environmental activists on the grounds that the program encourages increased use of agricultural chem ical inputs. To the extent that crop insurance subsidies encourage higher levels of planted acres, they also encourage crop producers to use larger amounts of chemical fertilizers, pesticides, and herbicides. On the other hand, moral hazard effects, which encourage producers to take a ctions to increase the probability and size of losses, have been assumed to provide incentives for less intensive cultivation practices as insured farmers reduce input use and average yields.1 Many environmentalists express concerns about all aspects of agricultural chemical use, and are therefore worried about the potential extensive margin effects of the MPCI program. However, the intensity with which agricultural chem icals are applied to any given
acreage is often a greater concern because of the perceived links between intensity of agricultural chemical use and potential damage to animal and human health. In this respect, the MPCI program has generally been assumed to be beneficial to the environment.
