Ecological Economics 37 (2001) 183 – 197 ANALYSIS Least-cost management of nonpoint source pollution: source reduction versus interception strategies for controlling nitrogen loss in the Mississippi Basin  Marc O. Ribaudo *, Ralph Heimlich, Roger Claassen, Mark Peters Economic Research Serice, 1800 M Street NW, Washington, DC 20036 -5831, USA Received 30 June 2000; received in revised form 6 November 2000; accepted 8 November 2000 Abstract Nutrient pollution is one of the major sources of water quality impairments in the U.S. Agriculture is a major source of nutrients. Two alternative strategies for reducing nutrient loads from cropland are to reduce fertilizer application rates and to filter nutrients coming off cropland with restored wetlands. These two approaches are evaluated in the Mississippi Basin, where nutrient loadings to the Gulf of Mexico have caused a large zone of hypoxic waters. Because of the easement and restoration costs of wetlands, a fertilizer standard was found to be more cost effective than restoring wetlands for achieving a water quality goal up to a particular level of total nitrogen loss reduction. Beyond this point, wetland restorations are more cost-effective. Published by Elsevier Science B.V. Keywords: Economic model; Economic welfare; Fertilizer; Hypoxia; Nutrients; Wetlands www.elsevier.com/locate/ecolecon Nutrients are a major source of water quality impairments in the US. EPA reports that nutrient pollution is the leading cause of water quality impairment in lakes and estuaries, and is the second leading cause in rivers (US Environmental Protection Agency, 1998). Nitrogen and phospho- rus can accelerate algal production in receiving surface water, resulting in a variety of problems  This paper is based on the research conducted for the Gulf of Mexico Hypoxia Assessment managed by the White House Committee on Environment and Natural Resources. The effort included a series of six interrelated reports examining different aspects of the hypoxia issue. The authors were part of the research team, led by Otto Doering of Purdue University, that evaluated the social and economic costs and benefits of methods for reducing nutrient loads to the Gulf. The full report is available from the National Oceanographic and Atmospheric Administration (NOAA). The views expressed in this paper are those of the authors and do not necessarily reflect those of the US Department of Agriculture or the Economic Research Service. * Corresponding author. Fax: +1-202-6945776. E-mail address: mribaudo@ers.usda.gov (M.O. Ribaudo). 0921-8009/01/$ - see front matter Published by Elsevier Science B.V. PII: S0921-8009(00)00273-1