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Nutrient Trading and Water Quality
This programme explores how we can apply market-based instruments to the problem of non-point source water pollution from agriculture. In 2012 Motu, NIWA, and the Land and Water Forum held a public symposium to mark the conclusion of significant work under this programme.
To date the programme has considered contamination problems in Lake Taupo (with Environment Waikato) and Lake Rotorua. We have identified the key economic, natural science, and policy development process issues that must be addressed to effectively design and assess the potential value of a trading system in such a complex, contentious area.
Our research has two key components: investigating nutrient trading policies and regulation frameworks under uncertainty. As part of this effort we are developing the new, integrated model NManager (formerly NTRADER) from NIWA’s model ROTAN.
Download a short presentation describing our research program (PDF 419KB)
On this page (click to go to section):
Nutrient Trading in the Lake Rotorua Catchment
Interactions between nutrient trading and emissions trading
Lake Rotorua short films on water quality issues
Educational Water Trading Games
Nutrient Trading in the Lake Rotorua Catchment
Motu has developed a prototype nutrient trading system for the Lake Rotorua catchment, NManager. An information sheet about NManager is available for download, and Motu Working Paper 11-14, “Does Complex Hydrology Require Complex Water Quality Policy? NManager Simulations for Lake Rotorua”, presents some examples of NManager results for Lake Rotorua.
Throughout NManager design process we met with the Nutrient Trading Study Group, a small focused group of experienced stakeholders and technical experts, facilitated by CommonGround, to discuss different aspects of the system. A short article about the study group and its role is printed in Motu Research Update 15.
Each meeting of the study group focused on a different aspect of the trading system. Discussions were informed by research at Motu and elsewhere, and by drawing on group members’ expertise. From each meeting we produced a working paper, and these papers together form the design of the system.
The papers produced by this process cover the following topics:
Overview (Motu Note #10): Provides an overview of the prototype nutrient trading system and its components, updated in 2011.
Goals and trading caps (Motu Working Paper 07-08): Explores the issues involved in translating an environmental goal into allowances and a trading cap.
Reporting and modelling nutrient inputs (Motu Working Paper 08-03): Describes how models can be used by regulators and landowners to estimate nutrient losses as part of a water quality management system.
Choosing the scope of a nutrient trading system (Motu Working Paper 08-05): Discusses the tradeoffs required to decide which sources to include in a nutrient trading system.
Social, cultural, economic and environmental issues (Motu Manuscript 2008): Features of the local context relevant to a nutrient trading system for Lake Rotorua.
Modelling Read a two-page NIWA newsletter article from Water and Atmosphere (PDF 193KB): Our collaborators at NIWA introduce the Lake Rotorua nutrient trading project and the simulation model that has been developed for the catchment.
Cost sharing and allowance allocation (Motu Working Paper 09-09): Clarifies how the benefits and costs of water quality improvements in Lake Rotorua are likely to be shared in the absence of a trading system, and how costs could be shared if a trading system were in place.
Legal Issues
Overview: legal issues (Vernon Rive advice, 2012): Provides a succint and non-technical summary of all legal advice on the design, implementation, and enforcement of a nutrient trading scheme for Lake Rotorua.
Nutrient trading within the RMA (Advice from Chapman Tripp 2008): Looks at a nutrient trading programme within the context of the Resource Management Act 1991.
Introducing nutrient trading: a regional plan change (Regional Plan Change Advice from Chapman Tripp 2010): Advises on the steps necessary to introduce a nutrient trading policy for Lake Rotorua by way of Plan Change to the bay of Plenty Regional Plan.
Enforcement Issues (Vernon Rive advice, 2012): Discusses potential compliance and enforcement issues, including the possibility of tailor-made central government legislation for nutrient trading.
Reviews of the Nutrient Trading Study Group
To assess the Nutrient Trading Study Group (NTSG) process Motu commissioned two reviews of the process, one internal (by Glen Lauder) and one external (by Guy Salmon). The first review summarises the development of the Nutrient Trading Study Group, and outlines the major steps that occurred throughout the process. The second review independently assesses this process and compares it to Nordic governance systems, as well as giving some recommendations for future dialogue groups. Read more about these reviews and download them in full.
Nutrient Trading and Emissions Trading: Interactions
Motu Note #2 surveys interactions between nutrient trading and the agricultural component of the New Zealand emissions trading system. Implementing both systems could have a large impact on farmers in affected catchments. However, these costs may be lower than the sum of the costs of each individual system. Motu Notes are less technical than our working papers and are designed to appeal to a general or policy audience.
Read and download the Motu Note about nutrient and emissions trading.
Lake Rotorua Short Films
Motu commissioned Wellington filmmaker Jess Feast to produce two short films on Rotorua water quality issues.
The films interview dairy farmer Jamie Paterson from Hamurana, north-east of Lake Rotorua, and three Maori landowners and caretakers from Te Arawa, tangata whenua in the Rotorua region. All have knowledge of the prototype system through their involvement in our stakeholder group, the Nutrient Trading Study Group, but were free to present their own views of the proposed system and its implications.
Watch the Lake Rotorua short films.
Environmental Trading Game
Motu’s environmental trading game is freely available for download. Participants act as farmers in a nutrient (or emissions) trading system, though the game can be adapted for any other environmental problem. It is suitable for use with any group interested in better understanding these issues, both in an educational or professional setting (and comes with non-technical instructions).
Find out more and download the environmental trading game
Educational Water Trading Games
In conjunction with Landcare Research and the Cawthron Institute, Motu has developed a computer-based platform for educational water trading games. These games consider difference market-based approaches to managing the use of water for irrigation, and the quality of water in agricultural catchments. An overview of the simulated platform is available below.
Educational Water Trading Games - Overview of Simulation Platform
Useful links
We have found the following links helpful for information on this topic:
Environment Bay of Plenty
- Lake Rotorua/Rotoiti webpage
- Lake Rotorua/Rotoiti propose Action Plan
- Lake Rotorua/Rotoiti fact sheets
- Lake Rotorua/Rotoiti technical reports
Parliamentary Commissioner for the Environment
- Restoring the Rotorua Lakes: The Ultimate Endurance Challenge Report
- Dairy Farming Impact on Water Quantity and Quality: Briefing to the Primary Production Committee
Ministry for the Environment and Ministry of Agriculture and Forestry
- Kerr, Suzi, with Andrew Coleman and Josh Pemberton. 2013. "Water: Commodity or Commons?" Presentation to Network Waitangi Otautahi, Christchurch, February 2013.
- Timar, Levente, and Boon-Ling Yeo. 2013. "Allocation and Predicted Cost Incidence in Environmental Markets: Heterogeneity and Policy Interactions", Australian Agricultural and Resource Economics Society Annual Conference, Sydney, Australia, 5–8 February 2013.
- Timar, Levente. 2012. “Rural Land Use and Land Tenure in New Zealand.” Paper presented at the annual conference of the European Association of Environmental and Resource Economists (EAERE) Annual Conference, Prague, Czech Republic, 28 June–2 July 2012.
- Sinner, Jim, Andrew Fenemor and Simon Anastasiadis. 2012. “Mixed Bag: Simulating Market-Based Instruments for Water Quality and Quantity in the Upper Waikato,” New Zealand Agricultural and Resource Economics Society Annual Conference, Nelson, 30–1 August 2012.
- Yeo, Boon-Ling, Oliver Browne, Simon Anastasiadis and Suzi Kerr. 2012. "Synergies between Nutrient Trading Scheme (NTS) and the New Zealand Emissions Trading Scheme (ETS) in the Lake Rotorua Catchment," New Zealand Agricultural and Resource Economics Society Annual Conference, Nelson, New Zealand, 30-31 August 2012.
- Anastasiadis, Simon. 2012. "An Inertia Model for the Adoption of New Farming Practices", New Zealand Agricultural and Resource Economics Society Annual Conference, Nelson, New Zealand, 30-31 August 2012.
- McDonald, Hugh, Suzi Kerr and Simon Anastasiadis. 2012. "How Should We Manage Diffuse Water Pollution? Insights from Recent NManager Simulations," New Zealand Association of Economists Annual Conference, Palmerston North, June 2012.
- Kerr, Suzi. 2012. "Managing Water Quality Using Markets," Motu Public Policy Seminar, Auckland, April 2012.
- Kerr, Suzi. 2012. "A Climate for Change in Water Quality?" Australian Association of Agricultural and Resource Economics Conference, Perth, February 2012.
- Kerr, Suzi, and Suzie Greenhalgh. 2011. "Non-Point Source Trading in New Zealand," Australian Agricultural and Resource Economics Conference, Melbourne, 8-11 February 2011.
- Anastasiadis, Simon and Suzi Kerr. 2011. "Managing Water Quality in Lake Rotorua: The Design of Regulation to Reflect Groundwater Nitrogen Lags,"15th International Water Association Conference, Diffuse Pollution Specialist Group, Rotorua, 22 September 2011.
- Kerr, Suzi. 2011. "Water Quality Trading in New Zealand," invited presentation to the Workshop on Water Quality Trading, 15th International Water Association Conference, Diffuse Pollution Specialist Group, Rotorua, 22 September 2011.
- Anastasiadis, Simon, Marie-Laure Nauleau, Suzi Kerr, Tim Cox and Kit Rutherford. 2011. "Water Quality Management in Lake Rotorua: A Comparison of Regulatory Approaches using the NManager Model," New Zealand Agricultural and Resource Economics Society Annual Conference, Nelson, NZ, 25-26 August 2011.
- McDonald, Hugh, and Suzi Kerr. 2011. "Nutrient Trading Efficiency: A Review of Trading Efficiency in Water Quality Markets," New Zealand Association of Economists Annual Conference, Wellington, 29 June-1 July 2011.
- Anastasiadis, Simon. 2011. "Water Quality Management in Lake Rotorua: A Comparison of Regulatory Approaches Using the NManager Model," New Zealand Association of Economists Annual Conference, Wellington, 29 June-1 July 2011.
- Kerr, Suzi. 2010. ‘Creating a Cost Effective Nutrient Trading System for Lake Rotorua’ Natural Capital Project, Stanford University, 21 January 2010.
- Kerr, Suzi. 2008. 'Nutrient Trading in Lake Rotorua: A Prototype System,' Motu Public Policy Seminar, September.
- Kerr, Suzi. 2011. "Teach-in on Using Games to Understand Water Quality Trading," Center for Ocean Solutions, Environmental and Natural Resources Law and Policy Programme, Stanford University, Stanford CA, 4 April 2011.
- Kerr, Suzi. 2010. "Managing Water Quality in Lake Rotorua," presentations to the Nutrient Trading Study Group, Bay of Plenty Regional Council and Ministry for the Environment, October and November 2010.
- Kerr, Suzi. 2009. "Environmental markets: how can they work for water quality and climate change?" Auckland Public Policy Seminar, April.
- Gunningham, Neil. 2007. "Innovative governance and smart regulation: institutional and regulatory regimes for a water-constrained world," Motu/Landcare Research seminar, December.
- Anastasiadis, Simon, Jim Sinner and Andrew Fenemor. 2013. "Educational Water Trading Games: Simulation Software and Future Potential", Motu Economic and Public Policy Research, Wellington.
- Anastasiadis, Simon, Suzi Kerr, Alec MacKay, Jon Roygard and Mark Shepherd. 2012. "The Mitigation of Nutrient Loss from New Zealand Agriculture: Separating the Probable from the Possible", Motu Economic and Public Policy Research, Wellington.
- Daigneault, Adam, Hugh McDonald, Sandy Elliott, Clive Howard-Williams, Suzie Greenhalgh, Maksym Guysev, Suzi Kerr, James Lennox, Linda Lilburne, Uwe Morgenstern, Ned Norton, John Quinnn, Kit Rutherford, Ton Snelder, and Bob Wilcock. 2012. Evaluation of the Impact of Different Policy Options for Managing to Water Quality Limits. Wellington: Ministry for Primary Industries. Available online at http://www.mpi.govt.nz/news-resources/publications
- Anastasiadis, Simon, Jim Sinner and Andrew Fenemor. 2012. "Market-Based Instruments for Water Management: MBI Simulation Software and Future Potential," appendix prepared for the Ministry of Primary Industries, MPI, Wellington.
- Kerr, Suzi, Hugh McDonald, and Kit Rutherford. 2012. "Nutrient Trading in Lake Rotorua: A Policy Prototype", Motu Note #10, Motu Economic and Public Policy Research, Wellington.
- Smeaton, Duncan C., Tim Cox, Suzi Kerr and Robin Dynes. 2011. "Relationships between Farm Productivity, Profitability, N Leaching and GHG Emissions: A Modelling Approach," Proceedings of the New Zealand Grassland Association 73, pp. 57–62. Available online at http://www.grassland.org.nz/publications/nzgrassland_publication_1588.pdf
- Anastasiadis, Simon. 2011. "Designing Policy to Protect New Zealand's Water Quality," Motu Research Update 21, pp. 4-5.
- McDonald, Hugh, and Suzi Kerr. 2011. "Trading Efficiency in Water Quality Trading Markets: An Assessment of Trade-Offs," Motu Working Paper 11-15, Motu Economic and Public Policy Research, Wellington.
- Anastasiadis, Simon, Marie-Laure Nauleau, Suzi Kerr, Tim Cox, and Kit Rutherford. 2011. "Does Complex Hydrology Require Complex Water Policy? NManager Simulations for Lake Rotorua," Motu Working Paper 11-14, Motu Economic and Public Policy Research, Wellington.
- Kerr, Suzi, and Hugh McDonald. 2011. "Nutrient Trading in Lake Rotorua: Overview of a Prototype System," draft paper.
- Tímár, Levente. 2011. "Rural Land Use and Land Tenure in New Zealand," Motu Working Paper 11-13, Motu Economic and Public Policy Research, Wellington.
- Kerr, Suzi, and Hugh McDonald. 2010. "Maximising the Benefits of Flexible Water Quality Regulation," Motu Research Update 20, pp. 4-5.
- Todd, Maribeth and Suzi Kerr. 2009. "How Does Changing Land Cover and Land Use in New Zealand relate to Land Use Capability and Slope?" Motu Working Paper 09-17.
- Kerr, Suzi and Kelly Lock. 2009. "Nutrient Trading in Lake Rotorua: Cost Sharing and Allowance Allocation," Motu Working Paper 09-09.
- Kerr, Suzi and Marianna Kennedy. 2009. 'Greenhouse Gases and Water Pollutants: Interactions Between Concurrent New Zealand Trading Systems,' Motu Note #2.
- Lock, Kelly; Suzi Kerr, Tim Cox and Kit Rutherford. 2008. "Assessing design options for a Nutrient Trading System using an integrated model," paper presented at the ESAM/NZAE Conference 2008, Wellington, June.
- Kerr, Suzi and Kit Rutherford. 2008. "Nutrient Trading in Lake Rotorua: Determining Net Nutrient Inputs," Motu Working Paper 08-03.
- Lock, Kelly and Suzi Kerr. 2008. "Nutrient Trading in Lake Rotorua: Choosing the Scope of a Nutrient Trading System," Motu Working Paper 08-05.
- Lock, Kelly and Suzi Kerr. 2008. "Nutrient Trading in Lake Rotorua: Overview of a Prototype System," Motu Working Paper 08-02.
- Kerr, Suzi; Kit Rutherford and Kelly Lock. 2007. "Nutrient Trading in Lake Rotorua: Goals and Trading Caps," Motu Working Paper 07-08.
- Lock, Kelly and Suzi Kerr. 2007. "Nutrient Trading in Lake Rotorua: Where Are We Now?" Motu Working Paper 07-06.
- Kerr, Suzi; Glen Lauder and David Fairman. 2007. "Towards a Design For a Nutrient Trading Programme To Improve Water Quality in Lake Rotorua," Motu Working Paper 07-03.
- Kerr, Suzi; Kit Rutherford and Elena Irwin. 2006. "Proposed Research Programme on Water Quality for Lake Rotorua," proposal submitted to the Foundation for Research, Science and Technology.
- Rive, Vernon. 2012. "Nutrient Trading in Lake Rotorua: Design, Implementation and Enforcement - Legal Issues," Advice to Motu Research, Vernon Rive Environmental Law, Auckland.
- Rive, Vernon. 2012. "Nutrient Trading Programme: Enforcement Issues," Advice to Motu Research, Vernon Rive Environmental Law, Auckland.
- Salmon, Guy. 2010. "At the Interface of Research and Implementation: An Assessment of the Work of the Nutrient Trading Study Group (NTSG," Report to Motu Economic and Public Policy Research, Motu Economic and Public Policy Research, Wellington.
- Law, Cameron. August 2010. "Nutrient trading programme: Incorporation into Environment Bay of Plenty regional plan," advice from Chappman Tripp.
- Lauder, Glen. 2009. "The Rotorua Nutrient Trading Study Group (NTSG), 2007-2008," Report for Motu Economic and Public Policy Research, Motu Economic and Public Policy Research, Wellington.
- Rutherford, Kit and Tim Cox. 2009. "Nutrient trading to improve and preserve water quality," Water & Atmosphere, 17:1, pp. 12-13.
- Rive, Vernon; Barclay Rogers and Cameron Law. 2008. "Nutrient Trading in Lake Rotorua: Legal Mechanisms," Advice from Chapman Tripp - Website version.