AnalysisCost-effective Land Use Planning: Optimizing Land Use and Land Management Patterns to Maximize Social Benefits

•Consideration of both environmental and economic concerns improves the cost-effectiveness of environmental policies that target management practices.•By applying a biophysical-economic model to a typical agricultural watershed, we find it is possible to improve water quality by 20% without loss of agricultural profits.•Furthermore, we find it possible to improve water quality up to 50% without economic loss when water quality improvement and carbon sequestration are valued output.•The performance of traditional “best management practices” falls well short of optimal land use and land management in achieving water quality improvements at least cost.

Improving water quality and other ecosystem services in agriculturally dominated watersheds is an important policy objective in many regions of the world. A major challenge is overcoming the associated costs to agricultural producers. We integrate spatially-explicit models of ecosystem processes with agricultural commodity production models to analyze the biophysical and economic consequences of alternative land use and land management patterns to achieve Total Maximum Daily Loads targets in a proto-typical agricultural watershed. We apply these models to find patterns that maximize water quality objectives for given levels of foregone agricultural profit. We find it is possible to reduce baseline watershed phosphorus loads by ~ 20% and sediment loads by ~ 18% without any reduction in agricultural profits. Our results indicate that meeting more stringent targets will result in substantial economic loss. However, when we add the social benefits from water quality improvement and carbon sequestration to private agricultural net returns we find that water quality improvements up to 50% can be obtained at no loss to societal returns. The cost of meeting water quality targets will vary over time as commodity and ecosystem service prices fluctuate. If crop prices drop or the value of ecosystem services increase, then achieving higher water quality goals will be less costly.