China generates more than 3.8 billion tons of livestock and poultry manure annually, making
manure one of the most important sources of agricultural nonpoint-source pollution. Since
2017, China has implemented a county-wide manure resource utilization pilot program, supported
by substantial central fiscal transfers, to promote crop-livestock recycling, manure treatment
facilities, and water-quality improvement. Yet water quality has not improved uniformly
in key river basins, and several indicators have increased rather than declined. This paper treats
the county-wide manure utilization pilot in Sichuan Province as a quasi-natural experiment
and combines county-level panel data on lake and reservoir water quality from 2014 to 2023
with staggered difference-in-differences estimators. To separate local treatment effects from
basin-level spillovers, we construct directed hydrological spatial weights from high-resolution
digital elevation model (DEM) analysis of upstream-downstream runoff relationships. The
results show strong indicator-specific heterogeneity. The policy significantly reduces total
phosphorus (TP) and the permanganate index (PI), but increases total nitrogen (TN) and conductivity
(Cond) in both lakes and reservoirs. Mechanism tests suggest that treatment facilities
generate abatement benefits, while pilot counties also experience a substantial expansion
in livestock scale, offsetting part of the environmental gains through additional nitrogen and
dissolved-ion loads. Heterogeneity tests show larger nitrogen and ion-migration risks in areas with weaker cultivated-land carrying capacity, stronger precipitation-driven runoff, and better
irrigation conditions. DEM-based spillover estimates further show that upstream pilots improve
downstream composite water quality while increasing downstream TN, turbidity, and
conductivity, consistent with selective abatement and pollution shifting. The paper contributes
a hydrologically directed policy-evaluation framework for agricultural environmental regulation
and provides evidence for basin-scale coordination in manure management.
