Modelling economic impacts of water storage in North Canterbury

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.