Handling practicalities in agricultural policy optimization for water quality improvements

Bilevel and multi-objective optimization methods are often useful to spatially target agri-environmental policy throughout a watershed. This type of problem is complex and is comprised of a number of practicalities: (i) a large number of decision variables, (ii) at least two inter-dependent levels of optimization between policy makers and policy followers, and (iii) uncertainty in decision variables and problem parameters. Given agricultural and economic data from the Raccoon watershed in central Iowa, we formulate a bilevel multi-objective optimization problem that accommodates objectives of both policy makers and farmers. The solution procedure then explicitly accounts for the nested nature offarm-level management decisions in response to agri-environmental policy incentives constructed by policy makers. We specifically examine the spatial targeting of a fertilizer-reduction incentive policy while seeking to maximize farm-level productivity while generating mandated water quality improvements using this framework. We test three different evolutionary optimization algorithms - m-BLEAQ, NSGA-II, and SPEA2 - and show that m-BLEAQ is well suited for handling the bilevel optimization problems and the considered practicalities.