Today the EU must deal with a new legal framework: the new water framework directive (WFD) (60/2000/EC). This directive sets up new criteria for water management and promotes the need for policy changes in sectors using water, such as agriculture. This paper deals with the problem of water regulation in agriculture by testing the results of innovative policy instruments, such as the joint regulation of water use and water pollution. The methodology—based on a simulation model that integrates a mathematical programming model and an optimal regulation model—makes it possible to quantify water demand and optimal regulation from the policy makers' point of view. The results show that, to meet the increasing social value attributed to water resources and pollution, major changes are needed in crop mix and policy design. However, changes in the economic role of farming and in the (cultural) attitudes of local populations towards agricultural work may have an even greater weight than water policy in the use of this resource.

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