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Nitrogen Trading in Lake Taupo: An Analysis and Evaluation of an Innovative Water Management Policy

Author

Listed:
  • Madeline Duhon

    (Motu Economic and Public Policy Research)

  • Suzi Kerr

    (Motu Economic and Public Policy Research)

Abstract

This paper provides an overview and early evaluation of the Lake Taupo nitrogen cap and trade programme, established as part of Waikato Regional Council’s 2011 Regional Plan Variation Five. The policy establishes a catchment-wide cap on nitrogen losses by allocating farmers individual nitrogen discharge allowances and allowing those farmers flexibility to trade allowances amongst themselves and to sell allowances to a public fund while remaining within the overall catchment cap. The Taupo trading scheme is the world’s first agricultural non-point-source water-quality cap and trade scheme. This paper explains the structure and evolution of the nitrogen trading market, and analyses its impact thus far. Research drawn from written material and descriptive quantitative data provides the basis for analysing the policy, while interviews with relevant stakeholders provide insight into the successful, surprising and contentious issues that arose throughout its development and implementation.

Suggested Citation

  • Madeline Duhon & Suzi Kerr, 2015. "Nitrogen Trading in Lake Taupo: An Analysis and Evaluation of an Innovative Water Management Policy," Working Papers 15_07, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:15_07
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    File URL: https://motu-www.motu.org.nz/wpapers/15_07.pdf
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    References listed on IDEAS

    as
    1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    2. Hugh McDonald & Suzi Kerr, 2011. "Trading Efficiency in Water Quality Trading Markets: An Assessment of Trade-Offs," Working Papers 11_15, Motu Economic and Public Policy Research.
    3. Anastasiadis, Simon & Kerr, Suzi, 2012. "Mitigation and Heterogeneity in Management Practices on New Zealand Dairy Farms," 2012 Conference, August 31, 2012, Nelson, New Zealand 136039, New Zealand Agricultural and Resource Economics Society.
    4. Richard T. Woodward, 2003. "Lessons about Effluent Trading from a Single Trade," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(1), pages 235-245.
    5. King, Dennis M., 2005. "Crunch Time for Water Quality Trading," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 20(01), pages 1-5.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Spicer, E. Anne & Swaffield, Simon & Moore, Kevin, 2021. "Agricultural land use management responses to a cap and trade regime for water quality in Lake Taupo catchment, New Zealand," Land Use Policy, Elsevier, vol. 102(C).
    2. Daigneault, Adam & Greenhalgh, Suzie & Samarasinghe, Oshadhi, 2017. "Equitably slicing the pie: Water policy and allocation," Ecological Economics, Elsevier, vol. 131(C), pages 449-459.
    3. Karen Bayne & Alan Renwick, 2021. "Beyond Sustainable Intensification: Transitioning Primary Sectors through Reconfiguring Land-Use," Sustainability, MDPI, vol. 13(6), pages 1-22, March.
    4. Gebiaw T. Ayele & Bofu Yu & David P. Hamilton, 2023. "Land Use and Climate Change Effects on Streamflow and Nutrient Loads in a Temperate Catchment: A Simulation Study," Land, MDPI, vol. 12(7), pages 1-22, June.
    5. Hansen, Line Block & Termansen, Mette & Hasler, Berit, 2017. "Effectiveness Of Markets In Nitrogen Abatement: A Danish Case Study," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 260887, European Association of Agricultural Economists.
    6. Suzi Kerr, 2016. "Agricultural Emissions Mitigation in New Zealand: Answers to Questions from the Parliamentary Commisioner for the Environment," Working Papers 16_16, Motu Economic and Public Policy Research.
    7. Syezlin Hasan & Line Block Hansen & James C. R. Smart & Berit Hasler & Mette Termansen, 2022. "Tradeable Nitrogen Abatement Practices for Diffuse Agricultural Emissions: A ‘Smart Market’ Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 29-63, May.

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    More about this item

    Keywords

    Water quality; water trading; water management; policy;
    All these keywords.

    JEL classification:

    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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