The consequences of an innovative water quality policy

Abstract

This study assesses the consequences of Nitrogen Trading on the Lake Taupō catchment. It is designed to keep the agricultural sector productive as well as within environmental limits, and this makes the Lake Taupō Trading Programme unique. To date it is the only cap and trade programme in which a limit on non-point source nitrogen discharges is applied at both the watershed and the farm levels. Consequently, the Taupō case is acknowledged worldwide as an exemplar implementation of a cap and trade for water quality management. Water bodies, particularly lakes, are vulnerable to excess nutrients. The cap, in a cap and trade regime, enables an environmental goal (such as the amount of nitrate entering a lake) to be met while the trading part allows flexibility of farm management, encourages technology uptake and innovation, and allows changes that are in line with market signals. The study found that significant change has taken place since properties in the Catchment were benchmarked, and the direction of some of this change was unexpected. An important conclusion of the study is that caps on the discharge of nitrogen from farms, need to be coupled with sustained research investment into low nitrogen land uses and farm practices.