We develop the first spatially integrated economic-hydrologic model of the westernLake Erie basin explicitly linking economic models of farmers' field-level best management practice (BMP) adoption choices with the Soil and Water AssessmentTool to evaluate nutrient management policy cost-effectiveness. We quantify trade-offs among phosphorus reduction policies and find that a hybrid policy coupling a fertilizer tax with cost-share payments for subsurface placement is the most cost-effective and can achieve the policy goal of 40% reduction in nutrient loadings. We also find economic adoption models alone can overstate the potential for BMPs toreduce nutrient loadings by ignoring biophysical complexities. (JEL Q18, Q53)