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The National Policy Statement for Freshwater Management (NPS-FM) establishes the need to set and manage water resources within limits. This report is the first national assessment of the indirect impacts of the NPS-FM on New Zealand’s greenhouse gas emissions (GHGs). The water quality improvement aspect of New Zealand’s freshwater reforms are expected to drive significant changes in land and water management across the country. Emissions benefits through the freshwater reforms could potentially result in significant savings for New Zealand by starting the transition to low emissions in the agricultural sector and helping to achieve New Zealand’s overall climate goals. For farmers, changes in land use and management to meet water quality targets will reduce their potential future exposure to needs to reduce GHG emissions. GHG emissions reductions are a combination of reduced emissions through changes in management and de-stocking and increased carbon sequestration associated with planting riparian buffers or afforesting part of the farm. Key results are that without land use change, agricultural GHGs (primarily methane and nitrous oxide) could be reduced by 2.4% or 0.82 million metric tonnes of carbon-dioxide equivalent per annum (MtCO2e/yr) along with an additional 0.11 MtCO2e of forest carbon sequestration as a result of planting riparian buffers and pole planting for erosion control (for a net reduction of 0.92 MtCO2e/yr or 13%). If afforestation is perceived to be a feasible freshwater mitigation option, up to 800 000 ha of additional trees could be planted, thereby increasing carbon sequestration by 5.4 MtCO2-e/yr. In this case gross (net) GHGs could be reduced by 2.9 (8.2) MtCO2e/yr, primarily through reduction in stock numbers and increases in forest carbon sequestration. This option could reduce New Zealand’s net land use emissions by nearly 80%, to about 2.0 MtCO2e/yr. The majority of the emissions impact occurs in the sheep and beef sector, with a gross (net) reduction of 0.61 (0.72) MtCO2e/yr. Nitrogen targets most strongly drive on-farm GHG reductions for all the modelled scenarios that limit mitigation to on-farm changes. This is primarily because actions to mitigate N are most closely related to practices that can also mitigate GHGs (e.g. stock management).

Agricultural and forestry GHG emissions are a key feature of New Zealand’s emissions profile, and New Zealand is the only country, to date, to have indicated that agricultural and forestry emissions will be covered under their domestic climate policy – the New Zealand Emissions Trading Scheme. Coupled with climate policy development is the increasing scrutiny of agricultural impacts on water. This paper uses New Zealand Forest and Agriculture Regional Model (NZ-FARM) to assess the potential economic and environmental impacts of imposing both a climate and nutrient reduction policy on the agricultural and forestry industries in the Manawatu and Hurunui/Waiau catchments in New Zealand. We find that adding a scheme that reduces catchment-level nutrients by 20% on top of a national policy that puts a price of $25 per ton carbon dioxide equivalent on agricultural GHG emissions could result in greater environmental benefits at a relatively small cost, but the converse is not always true and could be significantly more costly for landowners.

This paper uses responses from a regional farmer survey that identify farmers’ perceptions of environmental policies to calibrate a catchment-level environmental economic model (NZ-FARM) to estimate the impacts of a nutrient reduction policy in North Canterbury, New Zealand. The model maximizes farm income across a catchment, accounting for changes in land use, farm output, nutrient leaching, and GHG emissions. Simulations estimate that reducing nutrient loads by 15–30% can be achieved with economic impacts ranging between 1 and 10%, based on how willing landowners are to change how they manage their farm. Farmers are often hesitant to implement certain mitigation options, however, which results in higher economic costs than the ‘optimal’ estimates. Farm-level impacts will likely vary through the current farm practice, the farmers’ attitude towards the regulation, and the ability of policymakers to educate and incentivise landowners to adopt a variety of land management options.

Agricultural and forestry GHG emissions are a key feature of New Zealand’s emissions profile, and New Zealand is the only country, to date, to have indicated that agricultural and forestry emissions will be covered under their domestic climate policy – the New Zealand Emissions Trading Scheme. Coupled with climate policy development is the increasing scrutiny of agricultural impacts on water. This paper uses New Zealand Forest and Agriculture Regional Model (NZ-FARM) to assess the potential economic and environmental impacts of imposing both a climate and nutrient reduction policy on the agricultural and forestry industries in the Manawatu and Hurunui/Waiau catchments in New Zealand. We find that adding a scheme that reduces catchment-level nutrients by 20% on top of a national policy that puts a price of $25 per ton carbon dioxide equivalent on agricultural GHG emissions could result in greater environmental benefits at a relatively small cost, but the converse is not always true and could be significantly more costly for landowners.

This paper uses an economic catchment model to assess changes in land use, enterprise distribution, greenhouse gas emissions and nutrient loading levels from a series of policies that introduce carbon prices or nutrient reduction caps on land-based production in the Hurunui Catchment in Canterbury, New Zealand. At $20/tCO2e, net revenue for the catchment is reduced by 7% from baseline levels while GHGs are reduced by 3%. At $40/ tCO2e, net revenue is reduced by 15% while GHGs are reduced by 21%. Nitrogen and phosphorous loading levels within the catchment were also reduced when landowners face a carbon price, thus providing other benefits to the environment. Additional scenarios in this paper assess the impacts from developing a large-scale irrigation project within the catchment. Results show that while adding irrigation can improve farm output and revenue, it also results in dramatically higher GHG emissions and nutrient loads. Placing a carbon price on land-based activities diminishes some of these pollutants, but not at the same rate as when the policy what enacted on the baseline irrigation levels. Finally, we investigate the impacts of imposing a nutrient loading cap on farm activities instead of a carbon price and find that if landowners had greater access to irrigation but were constrained to hold the nutrient loads at baseline levels, revenue could increase by 6% over the baseline while GHG emissions could be reduced by 5%. Our findings suggest that while there is a potentially a strong trade-off between water quantity and water quality in the Hurunui Catchment, imposing the right policy levers could reduce some of the environmental impacts from an increase in land-use intensity without placing a large economic or regulatory burden on its landowners.

Despite the importance of the agricultural and downstream processing sectors in the New Zealand economy, there is no tradition of using partial or general equilibrium models to evaluate policies or other measures directed at the agricultural sector. Policy-makers have instead relied on the development of ad hoc scenarios of land use change, farm budget models, and simple multiplier analysis of flow-on effects. To redress this situation, we have developed a catchment-scale partial equilibrium framework based on the US REAP model, which we have thus far calibrated for two different catchments. In this paper, we present an application of the model to the Hurunui Catchment in North Canterbury in which we assess several scenarios for the development of irrigated area under several water storage options. This application is timely, given that there are increasing pressures on water resources in the catchment, and frequent conflicts between abstractive users (mainly pastoral), recreational users (e.g. kayaking, fishing) users, and environmental needs. Currently, a private consortium are pursuing storage options similar to those that we have modelled, while a newly constituted Water Management Zone Committee is tasked with developing a strategic approach to managing water in the Hurunui and adjacent Waiau catchments. In addition, water quality limits are also being developed in the Hurunui catchment. Our modelling approach includes pastoral (dairy, sheep, beef and deer), arable, horticultural and forestry enterprises along with an array of management including various irrigation and fertiliser regimes. The model allows us to test policy scenarios for addressing environmental issues such as mitigating climate change and improving water quality, and changes in resource constraints such as water availability. Using a profit maximizing objective function we compare the impact of the proposed irrigation scenarios in the Hurunui catchment on total catchment profits and a variety of environmental parameters like greenhouse gas emissions and nutrient losses.

Water quality trading is continually being explored and implemented to improve water quality in many parts of the world. They are being used to cost-effectively reduce point and/or non-point source obligations to meet water quality goals such as nutrient discharge limits. A comparison between evolving trading programs in New Zealand and some in North America illustrate a number of differences as well as similarities in terms of the successes and hurdles. These can be used to better design more effective programs.