Assessment of Economic and Water Quality Impacts of Land Use Change Using a Simple Bioeconomic Model Gandhi Bhattarai Æ Puneet Srivastava Æ Luke Marzen Æ Diane Hite Æ Upton Hatch Received: 23 January 2007 / Accepted: 12 December 2007 / Published online: 25 March 2008 Ó Springer Science+Business Media, LLC 2008 Abstract The objective of this study is to assess the eco- nomic and water quality impact of land use change in a small watershed in the Wiregrass region of Alabama. The study compares changes in water quality and revenue from agri- cultural and timber production due to changes in land use between years 1992 and 2001. The study was completed in two stages. In the first stage, a biophysical model was used to estimate the effect of land use change on nitrogen and phosphorus runoff and sediment deposition in the main channel; in the second stage, farm enterprise budgeting tools were used to estimate the economic returns for the changes in land use condition. Both biophysical and economic results are discussed, and a case for complex optimization to develop a decision support system is presented. Keywords Water quality Á Bioeconomic modeling Á Land use change Introduction Point source pollution has been substantially reduced since the implementation of the Clean Water Act in 1972. However, nonpoint source pollution (NPP) that threatens a majority of water bodies in the United States remains a major environmental concern. NPP is caused by the movement of water, over and through the ground, generally after a precipitation event (rainfall and/or snow). Runoff picks up and carries away natural and manmade pollutants, eventually depositing them in lakes, rivers, and coastal waters. Thus the pollutants from various sources accumu- late in receiving water bodies. The U.S. Environmental Protection Agency (USEPA) has found that over one-third of streams, lakes, rivers, and estuaries surveyed nationally in 1996 did not fully support their designated uses, such as for drinking water or recreation (USEPA 1998), citing NPP as the major cause of water quality degradation. The agricultural sector is alleged to be the largest con- tributor to NPP through runoff of nutrients, sediment, pesticides, and other contaminants (USEPA 1998). Crop cultivation requires more use of chemicals and nutrients than natural vegetative cover, such as forests and grass- lands. Tillage operations affect the soil structure and often make the nutrient rich topsoil fragile and cause it to lose chemicals and soil particles during rainfall. Further, a study by the National Assessment Synthesis Team (2000) sug- gests that future climate change will require higher use of nutrients, pesticides, and other chemicals to maintain the current level of productivity for most crops. This will further accelerate the decline in water quality of receiving water bodies. In addition to agricultural land, land in residential and developed uses, such as lawns and gardens, are managed more intensively, resulting in generation of even more pollutants. Urban areas also have higher percentage of impervious surface that results in lower percolation and higher runoff. During precipitation, runoff carries nutrients and sediment from agricultural and residential land, resulting in higher chemical levels and turbidity in receiving waters. Thus, increasing urbanization coupled G. Bhattarai (&) United Health Group, INGENIX Pharmacy Analytic Strategies, 400 Capital Boulevard, Rocky Hill, CT 06067, USA e-mail: grbhattarai@gmail.com P. Srivastava Á L. Marzen Á D. Hite Auburn University, Auburn, Alabama, USA U. Hatch North Carolina State University, Raleigh, NC, USA 123 Environmental Management (2008) 42:122–131 DOI 10.1007/s00267-008-9111-9