High Level Policy Design : Nutrient Management

1. High Level Policy Design : Nutrient Management For the Land and Water Partnership Governance Group 11 March2014 John Scott john@walrus.net.nz

2. Introduction • General lessons around resource allocation are relevant • Overall welfare and the distribution of that welfare are both critical • In moving to any new regime, careful and fair management of legacy issues will be important • Particular challenges associated with nutrient management can make utilising traditional resource management tools challenging • Measurement, verification and compliance • Scientific uncertainty and reliance on modelling • Varying states of awareness / buy-in to issues • Limit-setting, and then allocating within limits, are both important. • Perfect information is never available; making decisions transparently is critical

3. Voluntary Measures / Self Regulation • There are a wide range of forms voluntary measures can take (includes audited self-management options) • The common theme is that individual users have flexibility over how, when, and ultimately whether, to comply with desired standards, targets or practices.

4. Regulatory Measures • Again, there are a wide range of forms regulatory measures can take to influence outcomes. Can focus on: • inputs (quantities of fertiliser used) • practices (use of stand-off pads) • environmental impacts (run-off levels) • The common theme is compliance is mandatory, with penalties for non-compliance. These require understanding of the regulatory measure, and at least, a good level of buy-in

5. Price-based Measures • Most common options include: • Charges (i.e. N fertiliser tax) • Subsidies (i.e. uptake inhibitor production subsidy) • Cap and trade systems (i.e. Lake Taupo Trust / ‘One-Plan’)

6. Quality has different levels of response B A Sig Quality Problems Primary Reliance on Regulatory Measures Primary Reliance on Price Based Measures Regulatory Measures AND Voluntary Measures AND Target Setting and Data Collection / Reporting Few Quality Problems

7. Policy response will be continuum of effort • Key choice is how far up policy ‘ladder’ to go • As you go up the policy ladder, more importance is placed on measurement & verification etc. Moving up the ladder can occur over time • All policy tools create a macro effect (will they meet the environmental goal?), but they also create very important distributional effects (wealth transfers can occur) • The tighter the allocations are to individual parties, the greater the rationale to allow some form of transfer of rights. This does not have to be particularly sophisticated – the work involved is in defining the rights and monitoring etc.

8. Severe problems imply more serious response • Cap and trade – or tougher regulatory measures – can be very effective but difficulties implicit • Can voluntary measures and use of best practice meet desired goals? Do any regulatory interventions / price-based measures cut across ASM approaches used elsewhere? • If there is to be a heavy reliance on voluntary measures, assessing performance against targets – and early signalling of the potential to ramp up the policy response – useful • Changes in modelling outputs do not necessarily have to be sheeted home to land users. If gradual rather than rapid change is an underpinning principle, land users can be sheltered from model output changes through policy design

9. Distributional Effects are Key • Meeting environmental goals will involve change, and all policy tools have some form of allocation – which implies a distributional effect. • No “right” way of determining this; there is no magic formula. Key influencers are both equity and efficiency goals. Policies that fail the fairness test are often unsustainable. • Many arguments are advanced and all have some validity • Allocate proportionally to existing use • Allocate on some theoretical potential (eg, land capability) • Allocate based on some efficiency measure • It is very often the case that some sort of grandparenting is utilised, but often there is less than 100% grandparenting • Simple and transparent is often best

10. Concluding Remarks • Setting limits, and making decisions on policies that will move toward those limits, is important – even if the information available is imperfect • Some sort of principle around gradual change implies moving up the policy ladder over time - especially if the environmental pressures are not so acute • Trying to find the perfect allocation approach is an endless task; but finding an approach that is broadly fair and workable should be able to be done. • Getting the building blocks in place around monitoring and verification is critical, as is building understanding of the options and choices

11. High Level Policy Design : Nutrient Management For the Land and Water Partnership Governance Group 11 March2014 John Scott john@walrus.net.nz