Reviewing Landmark Nitrogen Cap and Trade Legislation in New Zealand's Taupo Catchment: What Have We Learned after 5+ Years?

In 2007, the first cap and trade legislation for a catchment nitrogen (N) budget was enacted to protect water quality in New Zealand’s iconic Lake Taupo. The clarity of the 616 km² N-limited oligotrophic lake was declining due to human-induced increases in N losses from the 3,487 km² catchment. Focus was placed on reversing increases in N inputs from agriculture, and to a lesser degree sewerage sources. The legislation imposed a cap equal to 20% reduction in the N inputs to the lake, and enabled trading.

The landmark legislation could have failed during appeal. Sources of disagreement included the N budgeting model and grand-parenting method that benchmarked the N leaching of individual farms. The N leaching rates for key land uses were also a major battleground, with strong effects on the viability of trading and relative value of enterprises. Sufficient science was applied to resolve the substantive issues in the appeal by 2008. Crucially, the decision recognized that N inputs to the “N cascade” mattered more than leaching evidence including land-use legacies.

Other catchment cap-and-trade schemes followed. Rotorua Lakes had already capped inputs and established a ~33% N input reduction target after acceptance of a trading scheme compatible with groundwater lag times. In the Upper Manawatu catchment, a cap-and-trade scheme now governs river N loads in a more typical farming region, with an innovative allocation scheme based on the natural capital of soils.

Collectively, these schemes have succeeded in imposing a cap, and signaling the intention of reductions over time. I conclude with common themes in the successes, and examine the role of science in the success and ongoing implementation.

Central to success has been the role of science in framing N budgets at farm and catchment scales. Long-term data has been invaluable, despite the need to correct biases. Cap-and-trade policies alter future science needs toward reducing uncertainty in overall budgets, the ability to measure success or failure in innovative source reductions at a management scale, and defining quantitative measures of aquatic health. Broadly, the schemes have enabled a culture of innovation, in farming and research. For example, recent evidence suggests it may be possible to flip the Rotorua Lakes into a P limitation regime through alum dosing.