Abstract: Burning agriculture residues has multiple negative effects including local air pollution, increase in black carbon and contributions to regional and global climate change. This study seeks to understand why farmers burn rice residue by analyzing the residue adoption choices of farmers in the rice-wheat cropping system of Punjab, Pakistan. Rice residue has to be burned, removed or incorporated into the soil in order to prepare fields for the next wheat crop. The most favored residue management practice in Punjab, in terms of total rice area, is complete burning of rice residue, followed by removal of rice residue. When farmers remove residue, it is pre-dominantly because they use it to feed animals. Each practice has different cost implications. Complete residue removal costs PKR 4586 (US$ 55) per acre, on average. Further, complete residue removal is, on average, 34% costlier to farmers than full burning of residue. Thus farmers would need to be subsidized to avoid residue burning practices. A number of socio-economic factors influence farmers' residue management decisions. For example, the proportion of rice area allocated to full residue removal practice increases if the farm is owner operated or if the farmer has a larger number of livestock. On the other hand, the proportion of area that is fully burned increases with farm size, reduction in turn-around time between the harvesting of rice and the sowing of wheat, and the ease with which farm machinery can be used for preparing the wheat field.The study concludes that without some technological innovations to make rice residue removal and wheat field preparation less costly, it likely that this trend in residue burning will continue.