Environmental policy measures aimed at reducing nitrogen leaching from the root zone are analysed using farm-level models representing typical Danish crop farms and livestock holdings, the objective being to indicate the cost-effectiveness of the measures compared to a baseline scenario (1995). The cost-effectiveness of the measures is expressed as costs (i.e. changes in producers surplus) per kg reduction in N leaching, and the reductions in nitrogen leaching levels from the measures are compared with the official targets of 49% reductions. The modelled effects of levies are presented, and the results indicate that the imposition of levies on commercial nitrogen fertilizer will provide incentives for reduced fertilization and for substitution of commercial nitrogen fertilizer with livestock manure. Levies will also entail the risk of unintended and adverse effects, however, as crop selection can be influenced. These negative effects can be reduced by supplementing levies with a requirement to undersow catch crops in spring-sown cereals and legumes.
