Evaluation of the Impact of Different Policy Options for Managing to Water Quality Limits

Produced for the Ministry for Primary Industries, Wellington.

New Zealand has a diverse range of aquatic environments from mountain springs to coastal estuaries, connected by an intricate network of rivers, lakes, wetlands, estuaries andgroundwater systems. Its freshwater bodies are of good quality by global standards and are apivotal resource for agriculture, recreation, tourism, energy and industry. It is a source of life and food, and it is a central part of everyday life. Water has a strong cultural and spiritual presence in New Zealand, and Maori value water highly because it is central to their identity.Despite being relatively clean and abundant at the national scale, deteriorating water qualityis a pressing issue for a number of catchments around New Zealand. Diffuse discharges,including nutrient discharges, are a significant factor in this deterioration (Ministry for theEnvironment 2007; Land and Water Forum 2010). The Land and Water Forum wasestablished to develop a common direction for freshwater management in New Zealand, andprovided its first set of recommendations to the Government in early 2011. In response, theGovernment announced a package of initiatives, including the National Policy Statement(NPS) for Freshwater Management that sets out objectives and policies that direct localgovernment to manage water in an integrated and sustainable way, while providing foreconomic growth within set water quantity and quality limits. The Land and Water Forumwas subsequently asked by the Government to develop further recommendations on how tomanage within quality limits, and is due to report in September 2012. The Ministry forPrimary Industries commissioned this research to support the Forum process and to assist inthe evaluation of cost-effective policy options for managing to targets.This report focuses primarily on the costs and benefits of policies designed to managenutrients from rural diffuse or non-point sources, specifically total nitrogen (N) and totalphosphorus (P). The bulk of the report is dedicated to estimating the impacts on rurallandowners of various policy approaches to reducing nutrient discharges in three importantNew Zealand catchments: the Hurunui and Waiau Rivers, the Manawatu River, and LakeRotorua. The policy impacts are assessed using a combination of quantitative analysis andqualitative discussion. A majority of the costs and benefits are estimated using twocatchment-level, agri-environmental, partial equilibrium economic models - the NewZealand Forest and Agricultural Regional Model (NZFARM) and NManager. These modelsallow for detailed representation of practices, economics and environmental impacts for twokey primary industries, agriculture and forestry. Each model has a unique structure andparameterisation and thus its own set of strengths and weaknesses.