Summary Although the legislation on groundwater quality targets pollutant concentration, the effects of measures on non-point source pollution control are often evaluated in terms of their emission reduction potential at the source, not on their capacity of reducing the pollutant concentration in groundwater. This paper applies a hydro-economic modelling framework to an aquifer, El Salobral-Los Llanos aquifer (Mancha Oriental, Spain), where nitrate concentrations higher than those allowed by the EU Water Framework Directive and Groundwater Directive are locally found due to the intense fertilizer use in irrigated crops. The approach allows defining the economically optimal allocation of spatially variable fertilizer standards in agricultural basins using a hydro-economic model that links the fertilizer application with groundwater nitrate concentration at different control sites while maximizing net economic benefits. The methodology incorporates results from agronomic simulations, groundwater flow and transport into a management framework that yields the fertilizer allocation that maximizes benefits in agriculture while meeting the environmental standards. The cost of applying fertilizer standards was estimated as the difference between the private net revenues from actual application and the scenarios generated considering the application of the standards. Furthermore, the cost of applying fertilizer standards was compared with the cost of taxing nitrogen fertilizers in order to reduce the fertilizer use to a level that the nitrate concentration in groundwater was below the limit. The results show the required reduction of fertilizer application in the different crop areas depending on its location with regards to the control sites, crop types and soil–plant conditions, groundwater flow and transport processes, time horizon for meeting the standards, and the cost of implementing such a policy (as forgone benefits). According to the results, a high fertilizer price would be required to reduce nitrate concentrations in groundwater below the standard of 50 mg/l. In this particular case, it is more cost-efficient to apply standards to fertilizer use than taxes, although the instrument of fertilizer standards is more difficult to implement and control.
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