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Water cycle, land management, and environmental sustainability are intimately linked. Sustainable land and water management practices are vital for sustaining agricultural productivity and regional development. Unsustainable land and water management practices that violate the system's carrying capacity constraint over long periods can impose significant costs in terms of lost opportunities in farm production and regional development, say by causing waterlogging and salinity. On-farm and regional salt and water balance dynamics are modeled as a sustainability or carrying capacity constraint, proxied by regional salt and water balance; on-farm land and water management practices are then adjusted to meet the constraint, such that individual actions do not lead to a net change in the ground water and salt balance. Common actions across the farms would achieve the overall environmental sustainability. An irrigated area in southern Murray-Darling Basin in Australia serves as a case study example. Integrated hydrologic, economic, agricultural, and environmental models called SWAGMAN series are used to evaluate the impacts of a range of on-farm interventions on farm income and environmental sustainability. The results show that policies such as restrictions on area under certain crops, and tradable groundwater recharge/salinity credits both offer higher total gross margin and net present value than the business as usual scenario, specifically in the long run--win-win options for the farmers and the environment. The modeling results thus confirm the widely held view that unsustainable land and water management practices that violate the system's carrying capacity can impose significant costs on regional communities. In-depth hydrological and economic analyses are needed to shape and guide society's vision for sustainable land and water management. Copyright © 2008 John Wiley & Sons, Ltd.
