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Perennial ryegrass and perennial ryegrass/white clover permanent dairy pastures are compared with respect to productivity, environmental impact and financial costs in nitrate vulnerable zones (NVZ) in the UK. With appropriate management, and utilisation of recommended perennial ryegrass and white clover cultivars, white clover is likely to stabilise at around 20% of total dry matter production in a mixed pasture. Plant dry matter production and milk production from a perennial ryegrass/white clover pasture are likely to be similar to that from a perennial ryegrass pasture receiving 200 kg N ha−1 annum−1 and around 70% of that obtained with perennial ryegrass supplied with 350–400 kg N ha−1 annum−1. Nitrate, phosphorus and methane losses from the system and decreases in biodiversity relative to a grazed indigenous sward are likely to be similar for a perennial ryegrass/white clover pasture and a perennial ryegrass pasture receiving 200 kg N ha−1 annum−1: nitrate leachate from both systems is likely to comply with European legislation. Greenhouse gas emissions resulting from nitrogen (N) fertiliser production would be avoided with the perennial ryegrass/white clover pasture. Within NVZ stocking rate restrictions, white clover can provide the N required by a pasture at a lower financial cost than that incurred by the application of N fertiliser. [ABSTRACT FROM AUTHOR]