2. Economic model for the Healthy Rivers process
Graeme Doole
Technical Leaders Group

3. Context

4. Development of limits and targets
Develop a number of land use scenarios, with a range of associated limits and targets
Limits define the loads allowed to be placed on water quality from inputs, like nutrients and sediment
Targets define the time frames associated with reaching a given limit
Economic model will help link:
Land use → limits
Limits → land use

5. “The solutions to our water quality problems lie on the land, with the people.”
Tony Petch

6. Bounds on development Large catchment (1.1m ha) Diverse sources
Biophysical uncertainty
Economic uncertainty
Divergent opinions
Four contaminants
Resource constraints

7. Overall model structure

8. To achieve targets at least cost, what has to change?
Land management
Land use
Intensity
Mitigation
Implications for:
Production
Profit

9. What are the implications of changing land use?
Define land management:
Land use
Intensity
Mitigation
Implications for:
Targets
Production
Profit

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
Hydrological model
Converts land use losses into sub-catchment and/or catchment water quality outcomes
Economic modelling
Identify profit and production implications of different limits on pollutant(s)

11. Reasons for adopting this framework
Integrate diverse processes
Deal with multiple contaminants
Simple structure aids interpretation
Provides key outputs (e.g. cost of targets)
Broad understanding of limitations
Part of the puzzle (e.g. SIA, REG)

12. How does the model work?

13. An imaginary catchment
Assume a 2 ha catchment
1 ha dairy currently
1 ha sheep currently
Dairy
$2000/ha, 30 kg N/ha
$1000/ha, 20 kg N/ha
Sheep
$500/ha, 15 kg N/ha
$250/ha, 10 kg N/ha
Dairy
Sheep

14. Without a limit, what happens?
Assume a 2 ha catchment
Dairy
$2000/ha, 30 kg N/ha
$1000/ha, 20 kg N/ha
Sheep
$500/ha, 15 kg N/ha
$250/ha, 10 kg N/ha
Dairy
Dairy
Option 1
Sheep
Sheep
Option 1
Profit in baseline: $2000+$500=$2500
Leaching in baseline: 30 kg + 15 kg = 45 kg

15. With limit of 40 kg, what happens?
Assume a 2 ha catchment
Dairy
$2000/ha, 30 kg N/ha
$1000/ha, 20 kg N/ha
Sheep
$500/ha, 15 kg N/ha
$250/ha, 10 kg N/ha
Dairy
Dairy
Option 1
Sheep
Option 2
Sheep
Profit in baseline: $2000+$250=$2250
Leaching in baseline: 30 kg + 10 kg = 40 kg

16. With limit of 30 kg N, what happens?
Assume a 2 ha catchment
Dairy
$2000/ha, 30 kg N/ha
$1000/ha, 20 kg N/ha
Sheep
$500/ha, 15 kg N/ha
$250/ha, 10 kg N/ha
Dairy
Dairy
Option 2
Sheep
Sheep
Option 2
Profit in baseline: $1000+$250=$1250
Leaching in baseline: 20 kg + 10 kg = 30 kg

17. Mitigation options

18. What does this show? Identify current state and alternative options
Importance of mitigation options!
Importance of current yields of contaminants
How far do we have to go?
Importance of mitigation efficacy
What will it take to reach limits?
Cost of mitigation options
Cost of meeting limits?

19. Cost and reduction of contaminant
Cost ↑ with level of mitigation
Curves vary:
Land use
Soil
Climate
Intensity
Abs. versus Rel.
Win-win solutions (?)
Level of abatement
Cost
Abatement cost curve
Area 2
Area 1
Area 3
Area 4
Area 5

20. Examples of mitigation options
A1: Effluent mgmt.
A2: Autumn N
A3: De-intensification
A4: Capital structures
A5: Land-use change
Level of abatement
Cost
Abatement cost curve
Area 2
Area 1
Area 3
Area 4
Area 5

21. Ongoing work

22. Baseline loads Baseline loads determined for N
OVERSEER
Baseline loads determined for P → augment
OVERSEER and expert opinion
Baseline loads for sediment
SedNet
NIWA regression model
Baseline loads for E. coli
SPARROW

23. Mitigations Mitigation protocol for N (DairyNZ)
Mitigation analysis for N (WRC and B & L)
Mitigation analysis for horticulture (HortNZ)
Point sources
Forestry
Mitigation workshop P
Sediment
E. coli

24. Questions?