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Nutrient pollution, now the leading cause of water quality impairment in the United States, has had significant impact on the nation's waterways. Excessive nutrient pollution has been linked to habitat loss, fish kills, blooms of toxic algae, and hypoxia (oxygen depleted water). The hypoxic 'dead zone' in the Gulf of Mexico is one of the most striking illustrations of what can happen when too many nutrients from inland watersheds reach coastal areas. Despite the efforts of municipal building programs, industrial wastewater requirements and agricultural programs designed to reduce sediment loads in waterways, water quality and nutrient pollution continues to be a problem. We undertook a policy analysis to assess how the agricultural community could better reduce its contribution to the 'dead zone' and also evaluate the synergistic impacts of these policies on other environmental concerns like climate change. Using a sectoral model of U.S. agriculture, we compared policies including untargeted conservation subsidies, nutrient trading, Conservation Reserve Program extension, agricultural sales of carbon and greenhouse gas credits and fertilizer reduction. This economic and environmental analysis is watershed based, primarily focusing on nitrogen in the Mississippi River basin, allowing us to assess the distribution of nitrogen reduction in streams, environmental co-benefits and impact on agricultural cash flows within the Mississippi River basin from various options. The model incorporates natural resource accounts and alternative production practices, making it possible to get a more a complete picture of the costs and co-benefits of nutrient reduction. These elements also help to identify those policy options that minimize the costs to the farmers and maximize benefits to society.


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