2. Economic Joint Venture model: summary of progress
Graeme Doole Alvaro Romera
Technical Leaders Group DairyNZ
(presenting)

3. Economic Joint Venture

4. Waikato Economic Joint Venture Project
Commissioned a series of studies to evaluate potential impacts of setting water quality objectives and limits.
Key partners were Central Government, DairyNZ, WRC, and WRA. Focus on credibility of process and assumptions.
Background
Considered environmental, economic, social, and cultural costs and benefits across all direct market values (e.g. agriculture) and non-market values (e.g. recreation) of fresh water.
Assessing ‘impacts’
Support policy making by Central Government, Regional Council, and community.
Develop methods to support the Healthy Rivers Plan Change.
Build genuine partnerships.
Purpose

5. Work streams within Joint Venture
Non-market values
Cultural values
Farm modelling
Catchment modelling (hydrological)
Catchment modelling (economic)
Understand both benefits and cost of improved water quality

6. Aims of EJV modelling work
Primary aim:
Provide a model to allow potential economic implications of targets to be estimated
Secondary aims:
Establish early collaboration
Provide foundation for extension, if required
Generate scenarios only to test model.

7. Economic Joint Venture: Stage 1
Focus on UW catchment
Completed Sep 2013
Public release Aug 2014
Multiple work streams
Economic modelling
Central Gov. focus
Evaluate NOF approach

8. Economic Joint Venture: Stage 2
Entire catchment focus
Develop economic model
Broad data collection
Focus on N and P
Scenarios to test model

9. Model

10. Distribution of land type
Catchment consists of zones based on biophysical resources and land types
Cost curves
Farm-level information relates cost of mitigation and
resultant change in pollutant(s) in each land type
Economic modelling
Identify profit and production implications of different limits on pollutant(s)

11. Biophysical resources
Land use diversity
Farm diversity
Climate
Soils
Intensity
Subcatchments
Hydrological network

12. Land use in Waikato (~1.1 m ha)
N: 2.5 kg/ha
P: 0.4 kg/ha
N: kg/ha
P: kg/ha
N: 3.0 kg/ha
P: 0.3 kg/ha
N: 66.0 kg/ha
P: kg/ha
N: kg/ha
P: kg/ha

13. Representative enterprises
Dairy platforms
Dairy support blocks
4 Sheep & beef types
3 Horticulture farms
Forestry types
Point sources
Allocated differently to the sub-catchments
Each one modelled to access mitigation cost

14. Example: costs for UW dairy farms
Farm information is important
Profit vs N relationships
Diversity within industries
Diversity across industries

15. Goal to achieve targets at least cost on-farm
Model output
Land management
Intensity
Mitigation
Land use
Implications for production
Implications for profit

16. Reasons for adopting this framework
Approach is broadly used (policy and publication)
Integrates many sides of the conversation
Deal with multiple contaminants
Provides key outputs (e.g. cost, production)
Part of the puzzle (e.g. SIA, CGE)

17. Illustrative scenarios
Reductions in N load at catchment level:
10%
20%
30%
Land use change not in main scenario
Key outputs:
Cost
Production
Mitigations

18. Illustrative results

19. Impact of N targets on production
Limits of 10, 20, & 30%
Across whole catchment
Dairy does most
Lamb and beef robust
Point sources used for 30% limit (50% red.)
What can we attain with no land-use change?

20. Impact of N targets on dairy mitigation
Production decline observed
Stand-off used increasingly
Reductions in production intensity
Stocking rate
Supplement
N fertiliser

21. Story changes with land-use change
Without land-use change
Increased flexibility impacts production
Large movement out of sheep and beef
Large increase in timber production
Social impact
Lack of cost-effective on-farm mitigations for nitrogen
With land-use change

22. Impact of N targets on profit
Cost in dollar terms
High cost in Upper Waikato and Waipa
Mitigation ranges from 26%-34% for 30% limit
Point source cost is $37m for 30% limit
Effect of site-specific targets?
Cost in % terms

23. Caveats Assume perfect information Assume no frictions
Assume current profit relativities persist
Omission of policy mechanism to achieve targets
Omission of technology change
Omission of change in land value
Omission of flow-on costs to region

24. Existing limitations of model
Limited representation of P mitigations
No inclusion of E. coli
No inclusion of sediment
No inclusion of hydrology in Phase 2 model

25. Questions?