Dairy farming contributes substantially to Dutch environmental problems. In this paper the central issue is to quantify the consequences of four government environmental policies on labour income and losses of nitrogen on dairy farms situated on sandy soil. Two policies impose a legal regulation and two impose a financial incentive to farmers. A linear programming model is used to model some typical dairy farms. The most important decision variables affecting nitrogen use and nitrogen losses are: the animal density on the farm, the feed ratio of the cows and young stock, the method and length of storing manure, the method of applying manure to the land, whether the land is used for grassland or fodder crops and the level of nitrogen application on grassland. The results show net farm income decreases (excluding levies paid) on the intensive farm up to Dfl 13 910 (17%). N losses on this farm decrease up to 283 kg/ha (54%). Finally, it appears from the results that it is much more expensive to reduce ammonia emission than to reduce the same amount of other N losses (leaching and run-off).