A novel spatially explicit hydro-economic modelling procedure to design cost-effective agri-environment schemes for mitigating nitrogen and phosphorus from agricultural land

Agricultural intensification is a key driver of water pollution in many parts of the world. A frequent policy response is to implement agri-environment schemes (AES) which compensate farmers for land use measures that are beneficial to the environment but costly for them. We develop a hydro-economic modelling procedure which is able to design cost-effective AES to mitigate water pollution from nitrogen and phosphorus from cropland. Our procedure goes beyond existing research as it considers spatial heterogeneity of both mitigation impacts and costs of cropland management measures and takes into account the decision of farmers to participate in an AES. We demonstrate how the procedure works by applying it to the Baishahe watershed in Shanxi Province, China.