The objective of the paper is to investigate economic incentives associated with changes in nitrogen regulation, including the distribution between farm types and geographically.The analysis is carried out on a partial equilibrium simulation model of the Danish agricultural sector – ESMERALDA. The model is based on farm-level production and economic data for all Danish farms, which allow the analysis of spatial aspects related to the alternative regulations, in terms of environmental (in terms of nitrogen use) and economic effects. Results of the model analyses suggest that replacing the current flat-rate quota on nitrogen input on all farms with a more differentiated quota on nitrogen leaching will in particular be binding for crop and pig farms in environmentally sensitive areas.