Expert Evidence on Nitrate Emissions Trading System to Protect Lake Taupo, New Zealand

The problem

Nitrate run-off into Lake Taupo was increasing, which threatened the lake’s water quality. The increased run-off into New Zealand’s largest lake was mainly due to increased dairy farming on land around the lake. Environment Waikato (the regional authority) proposed what it called a nitrates emissions market in the Taupo catchment. However, because the proposed scheme did not actually measure nitrate run-off, but assumed that dairy farmers had a set level of nitrates emissions regardless of farming practices, it would have had the effect of preventing conversion of additional land to dairying, regardless of actual nitrates emissions, to the detriment of local land-owners and the regional economy. Land-owners in the area had appealed to the Environmental Court to have the system changed.

How we helped

Castalia showed that the proposed cap-and-trade system for nitrates emissions was not an optimal response to nitrate pollution. Our analysis demonstrated that, because it was impossible to measure actual nitrates run-off from farms, the emissions trading system did not promote environmentally-friendly farming practices such as creation of natural buffers between grazing lands and water courses. We showed that more direct regulation of farming practices would be at least as effective in limiting nitrate emissions, but have lower economic costs, and treat non-dairying land-owners more fairly.

Review by the Environment Court led to negotiations between non-dairy land-owners and Environment Waikato, which resulted in additional allowances for land-owners who were not currently using land for dairy but were planning to convert. In addition, a public trust was set up to purchase land to retire it from dairying. Overall, over 7,000 hectares have been purchased since the cap and trade scheme became operational, while there have been less than 30 emissions trades.

Impact

The Environmental Court accepted our evidence, which led to negotiations between land owners and Environment Waikato. A modified nitrate emissions cap and trade scheme was introduced, but it has seen few trades and the bulk of emissions reduction has been achieved through purchase of sensitive land for retirement.   The Lake Taupo Protection Trust, which was formed for the purpose of funding such purchases, has made a significant contribution to achieving the 20 per cent reduction in the amount of nitrates entering Lake Taupo.