Réunion Island, situated in the Indian Ocean, presents a unique case study for modelling regional bio-economic parameters of the dairy industry. It is a good example of a closed system for several parameters of the model such as movement of animals, labour, consumption and available land. The existence of several agro-ecological zones from tropical to temperate, and various different types of terrain and vegetation presents another unique opportunity to study the impact of these features on the dairy industry. The present study models the dairy sector at a regional (island) level to study the impact of new or adapted agricultural policies in relation to changes in subsidy levels, price fluctuations and environmental policies (mainly nitrogen management). The model can be used to generate a number of scenarios to explore the effects of various policy measures, such as fixing the stocking rate according to EU norms, increasing or decreasing the milk subsidy, intensification (such as an increase in milk production to the allotted quota of 40 million litres/yr) and varying labour/price constraints (such as a reduction in labour hours or an increase or decrease in the milk price). The model is being utilized by the local dairy cooperative as a discussion support tool to study the implications at the regional scale of expanding the sector and assessing its economic, environmental and social impact.