Nitrogen Policy for Sustainable Agriculture in the US: Estimating Socially Optimal Application Rates and Economic Impacts

ABSTRACT

Nitrogen (N) application creates negative externalities via nitrate (NO ₃ ⁻ ) leaching that threatens human health and the emission of nitrous oxide (N ₂ O), a potent greenhouse gas. This study determines socially optimal nitrogen application rates (SONR) for corn and wheat by considering the social costs of both pollutants. The assessment includes welfare, markets, and environmental outcomes. The relationships between N application and nitrate leaching and N ₂ O emissions were obtained through meta‐regression analyses. A partial equilibrium model was then used to evaluate the welfare effects of adopting SONR. The estimated SONR were 20%–33% lower for corn and 25%–37% lower for wheat compared to baseline rates. Because farmers currently apply N at rates greater than the economic optimum, these reductions led to minor production losses but significant environmental benefits. The annual net social benefits of adopting SONR in the United States were up to $14 billion for corn and $2 billion for wheat.