Abstract:Abstract:There has a drastic change in structures of agricultural production and rural economy in China over the recent years. Pollution induced by agrochemical applications, livestock and poultry breeding, straw incineration in agricultural production has been increasing, and agricultural pollution has overtaken industrial pollution becoming the main water pollution source in China. However, efforts to ameliorate these pollutions are difficult to implement because of a lack of understanding of their associated costs. This is one reason why agricultural pollution control is still regulation-based rather than market-based as has been widely used in controlling industrial pollution. Shadow price of agricultural pollutant is a key to help policy-make strategies to remediate agricultural pollutants. The purpose of this paper is to address this issue by taking agricultural data measured from 1978 to 2017 at provincial scale in China as an example. We estimated the quadratic directional distance function, revenue function and the costs of pollution in agricultural production. The results showed that the shadow prices of total nitrogen (TN), total phosphorus (TP) and COD had reduced by 26.8%, 35.9% and 59.7%, respectively, from 1978 to 2017, having undergone through free development stage, reform promotion stage, market regulation stage and policy incentive stage. Because of the difference in natural and socio-economic conditions between the provinces, there was a noticeable spatial variation in shadow prices of agricultural pollutants in them. In the northwest China, the shadow price of TN was the lowest, while in the southwest China, the shadow price of TN and TP was the highest and the price of COD was the lowest. In east China the shadow price of TP was the lowest and the price of COD was the highest. The average annual costs of pollution in agricultural production was 76.06 billion Yuan per year, accounting for 10.8% of the value of the total agricultural production. In particular, the costs of pollution in Ningxia, Guizhou, Hebei, and Shandong accounted for more than 14% of the value of their total annual agricultural production. The long-term change in shadow price of agricultural pollutants and the costs of agricultural pollution in China indicated that agricultural production was complex and affected by individual and combined natural, social-economic and political factors. Agricultural policies should be made based on the requirement of the "two-oriented agriculture" development by reforming agricultural supply structure to improve quality and efficiency of the agricultural supply to avoid falling into the "profit pursuing policy" trap. Transformation of agricultural production should focus on improving land productivity and resource and labor use efficiency, along with reducing dependence on petrochemicals and remediating non-point agricultural pollutant. It also needs to consider resource conservation and environmental protection by developing circular, and ecological-friendly intensive agriculture.