Exploring Trade-Offs Between Profit, Yield, and the Environmental Footprint of Potential Nitrogen Fertilizer Regulations in the US Midwest

Multiple strategies are available that could reduce nitrogen (N) fertilizer use in agricultural systems, ranging from voluntary adoption of new N management practices by farmers to government regulations. However, these strategies have different economic and political costs, and their relative effectiveness in decreasing N leaching has not been evaluated at scale, particularly concerning potential trade-offs in crop yield and profitability. To inform policy efforts in the US Midwest, we quantified the effects of four policy scenarios designed to reduce fertilizer N inputs without sacrificing maize yields below 95%. A simulated dataset for economically optimum N rates and corresponding leaching losses was developed using a process-based crop model across 4,030 fields over 30 years. Policy scenarios were (1) higher N prices, (2) N leaching fee, (3) N balance fee, and (4) voluntary reduction of N use by farmers, each implemented under a range of sub-levels (low to high severity). Aggregated results show that all policies decreased N rates and N leaching, but this was associated with an exponential increase in economic costs. Achieving an N leaching reduction target of 20% has an estimated pollution control cost of 30-37 US$/ha, representing 147 million US$/year when scaled up to the state level, which is in the range of current government payments for existing conservation programs. Notably, such control of N losses would reduce the environmental impact of agriculture on water quality (externalities) by an estimated 524 million US$/year, representing an increase in society welfare of 377 million US$/year. Among the four policies, directly charging a fee on N leaching helped mitigate economic losses while improving the point source reduction effect (i.e., targeting fields that were leaching hotspots) and better internalization effect (i.e., targeting fields with higher environmental impact costs). This study provides actionable data to inform the development of cost-effective N fertilizer regulations by integrating changes in crop productivity and N losses in economic terms at the field level.