Management of environmental externalities of agricultural production has become a necessity to attain sustainable and efficient use of resources. Policies to promote externality mitigation are moving away from command and control toward industry self-management guided through best-practice guidelines and incentive structures. Assessment of such policies thus entails careful examination of options at operational and strategic levels to ensure optimal compliance at least cost. An integrated modelling approach that links activities at a farm and regional scale is outlined in this paper as a tool for technology assessment and policy analysis. Models are developed to address externalities in Australian sugar cane production in a coastal environment, but may be applicable in a wider context in examining ways to enhance greater environmental compliance through best practice management.