Cost–Benefit Analysis of Restoration Subsidies: Economic Returns Versus Land Degradation Losses in Northern China Using Remote Sensing and Panel Data

ABSTRACT The degraded landscapes can be turned into large‐scale ecological restoration programs, but the question of their economic efficiency is the main concern of sustainability science. This paper analyzes Grain for Green Program (GFGP) on the Loess Plateau in north China as a flagship program of restoring subsidies to fight the erosion and land degradation on steep slopes. Based on multi‐temporal data of the MODIS and panel analysis of watersheds, we compared ecological and economic results during two periods of time, before and after restoration (2002–2004) and (2022–2024). We used a difference‐in‐differences (DiD) framework to compare pre‐barrier treated watersheds (slope exceeding 15) to be reforested with control basins (slope less than 15) to continue with cultivation and isolate a restoration effect. Findings demonstrate a considerable and spatially uniform vegetation enhancement in the treated territory where the average NDVI and NPP growth were 15%–20% and 60%, correspondingly. Among the 428 treated basins, about 318 (74) of them reported a positive diD NDVI effect, which validated the high biomass recovery and vegetation stabilization. Land‐cover shifts also indicated that the forest and shrub vegetation replaced cropland and grassland, which was effective in rehabilitating the slopes. The program brought about high economic returns in addition to ecological recovery. According to literature‐based estimation of valuation of ecosystem services, it is estimated that altogether ¥1.75 trillion RMB of benefits came out of the work of GFGP in 2017, and the net benefits were estimated to be ¥637 billion RMB, after subsidies and opportunity costs of the same amounts are considered as equivalent to a net gain of approximately ¥21,900 ha/yr. −1. These returns are higher than cost of conversion of croplands and subsidy payments, which indicate the high economic reasons of ecological investments.