Economic Analysis of Best Management Practices to Reduce Watershed Phosphorus Losses

In phosphorus‐limited freshwater systems, small increases in phosphorus (P) concentrations can lead to eutrophication. To reduce P inputs to these systems, various environmental and agricultural agencies provide producers with incentives to implement best management practices (BMPs). In this study, we examine both the water quality and economic consequences of systematically protecting saturated, runoff‐generating areas from active agriculture with selected BMPs. We also examine the joint water quality/economic impacts of these BMPs—specifically BMPs focusing on barnyards and buffer areas. Using the Variable Source Loading Function model (a modified Generalized Watershed Loading Function model) and net present value analysis (NPV), the results indicate that converting runoff‐prone agricultural land to buffers and installing barnyard BMPs are both highly effective in decreasing dissolved P loss from a single‐farm watershed, but are also costly for the producer. On average, including barnyard BMPs decreases the nutrient loading by about 5.5% compared with only implementing buffers. The annualized NPV for installing both buffers on only the wettest areas of the landscape and implementing barnyard BMPs becomes positive only if the BMPs lifetime exceeds 15 yr. The spatial location of the BMPs in relation to runoff producing areas, the time frame over which the BMPs are implemented, and the marginal costs of increasing buffer size were found to be the most critical considerations for water quality and profitability. The framework presented here incorporates estimations of nutrient loading reductions in the economic analysis, and is applicable to farms facing BMP adoption decisions.