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Economic Joint Venture model: summary of progress

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

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Economic Joint Venture model: summary of progress

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

  2. Economic Joint Venture

  3. 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 credibilityof 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

  4. 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

  5. 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.

  6. 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

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

  8. Model

  9. 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 Identify profit and production implications of different limits on pollutant(s) Economic modelling

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

  11. Land use in Waikato (~1.1 m ha) N: 2.5 kg/ha P: 0.4 kg/ha N: 34.0 kg/ha P: 1.3 kg/ha N: 3.0 kg/ha P: 0.3 kg/ha N: 66.0 kg/ha P: 1.2 kg/ha N: 11.0 kg/ha P: 0.8 kg/ha

  12. Representative enterprises 26 Dairy platforms 10 Dairy support blocks 4 Sheep & beef types 3 Horticulture farms 66 Forestry types 20 Point sources

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

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

  15. 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)

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

  17. Illustrative results

  18. 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?

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

  20. 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

  21. 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

  22. 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

  23. 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

  24. Questions?

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