Economic Impacts of GHG and Nutrient Reduction Policies in New Zealand: A Tale of Two Catchments

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.