Research on climate change and agriculture has largely focused on production, food prices, and producer incomes. However, societal interest in agriculture is much broader than these issues. The objective of this paper is to analyze the potential impacts of climate change on an important negative externality from agriculture, water quality. We construct a simulation model of maize production in twelve watersheds within the U. S. Chesapeake Bay Region that has economic and watershed components linking climate to productivity, production decisions by maize farmers, and nitrogen loadings delivered to the Chesapeake Bay. Maize is an important crop to study because of its importance to the region's agriculture and because it is a major source of nutrient pollution. The model is run under alternative scenarios regarding the future climate, future baseline (without any climate change), whether farmers respond to climate change, whether there are carbon dioxide (CO2) enrichment effects on maize production, and whether agricultural prices facing the region change due to climate change impacts on global agricultural commodity markets. The simulation results differ from one scenario to another on the magnitude and direction of change in nitrogen deliveries to the Chesapeake Bay. The results are highly sensitive to the choice of future baseline scenario and to whether there are CO2 enrichment effects. The results are also highly sensitive to assumptions about the impact of climate change on commodity prices facing farmers in the Chesapeake Bay region. The results indicate that economic responses by farmers to climate change definitely matter. Assuming that farmers do not respond to changes in temperature, precipitation, and atmospheric CO2 levels could lead to mistaken conclusions about the magnitude and direction of environmental impacts.
