The loss of reactive nitrogen from agriculture into the environment is a major threat to the global environment and a challenge for agri-environmental policy. We therefore investigate the problem of reducing nitrogen losses from agriculture into the environment from an economic perspective. Based on a recursive-dynamic linear programming model, our study reveals that the above difficulty is primarily due to the rigidities associated with the nutrientforage cycle and existing production structures. Moreover, we assess the cost and effectiveness of different nitrogen taxes for the case of Switzerland. Our results show that a tax on fertilizers only exhibits the best performance in terms of cost-effectiveness.