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

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.