Informing environmental policy
Senior economist, Adam Daigneault creating the NZFARM model
New Zealand’s economic prosperity is very dependent on land-based industries at a time when environmental limits are under pressure. For central and regional government and industry, making decisions about water and nutrient use for example, the stakes are high.
Landcare Research is helping to inform effective decision making with a new model that assesses the economic and physical impacts of environmental policy.
The New Zealand Forest and Agriculture Regional Model (NZFARM) can determine the likely trade-offs between potentially competing ecosystem services (e.g., food and fibre provision versus freshwater provision) and land uses (e.g., intensive dairy versus arable or forestry).
NZFARM can systematically assess the key impacts of environmental policy, including limits, allocation options, taxes and resource constraints such as water availability.
The model optimises potential farm income across a catchment against the environmental impacts of land use (pastoral, arable, horticultural, forestry, scrub or conservation) and changes to land management and use. The model also includes soil and weather variability across the catchment.
NZFARM can be used to analyse the impacts of a single environmental policy or to simultaneously assess the impact of several policies at once. For example, how meeting a regional water quality limit together with the implementation of the NZ Emissions Trading Scheme (NZ-ETS) can impact catchment-level farm income relative to just one of the policies being imposed on landowners.
The model was originally developed for the Hurunui and Waiau River catchments in Canterbury and the Manawatu River catchment. It has recently been used for the Hinds-Ashburton and Selwyn-Waihora catchments in Canterbury.
Recently we have worked with MPI, MfE, and ECan to apply NZFARM to assess the benefits and impacts of:
- Increases in water storage from capital improvement projects such as water storage infrastructure;
- Proposed water quality improvement policies such as limiting nitrogen and phosphorus loads, and the allocation of these limits within a catchment;
- Implementation of NZ-ETS on the forestry and agricultural sectors;
- Application of new farm technology and good management practices, and increases in farm input costs.
The NZFARM model has influenced central government and regional councils’ thinking about how to implement environmental policies, particularly those related to reducing nutrient losses from diffuse sources.
NZFARM’s ability to present economic and environmental impacts across a wide range of land uses and farm management options has enhanced the discussion around what market-based instruments may be most appropriate for a given catchment and policy, and whether particular policy options may have an adverse impact on a particular group of stakeholders.