Agriculture's environmental footprint is expanding and one of its most critical impacts in China is the over-exploitation of surface water and groundwater from aquifers. This study investigated an approach for estimating the physical dimensions of the environmental externalities from a maize cropping system in oasis farming of the arid north-west of China, and the monetary valuation of these environmental externalities based on integrated process-based biophysical and economic models. The simulation results show that current farming practices cause 7854 Yuan/ha of groundwater recharge cost, 7696 Yuan/ha of water treatment cost, and 91 Yuan/ha of N 2O mitigation cost. These costs lead to a social benefit-cost ratio of only 0.55, although the farmers' benefit-cost ratio was 1.85. A combination of adoption of recommended best management practices by farmers, and an increase in the water price to 1.1 Yuan/m 3 could maintain both the social and farmers' benefit-cost ratios above 1, but the costs of recharging groundwater were large in all cases.
