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Rod Oram: A trickle of policies for a big problem

The vast complexities of water boil down to a simple critical equation: more use + less quality = angry voters.

And they're getting angrier by the day. Businesses must start paying for the water they use, 70 percent of the respondents said in a recent New Zealand Herald poll.

No we can't pay, say farmers. We're already paying to extract, store and distribute water to our farms. We can't afford to charge for the water itself.

Labour is suggesting a water royalty of two cents per cubic metre. By comparison, irrigators' costs averaged 14 cents per cubic metre, according to Irrigation New Zealand.

Farmers account for almost 80 percent of the nation's water use (excluding hydro generators, which return almost all the water they use to the rivers.)

No we can't charge, says the National-led Government. Doing so would open up fraught water ownership issues in Treaty negotiations. Anyway, we've got lots of other policies and programmes for cleaning up water, and a working party on water allocation is considering some pricing measures.

But the wisdom of the crowd is correct. Our current water policies and practices are working badly. Pricing is a key option among many for putting them right.

The OECD offered a deeply researched and forcefully argued version of that diagnosis and remedy in March in its once-in-a-decade environmental review of New Zealand. The water chapter accounted for 48 of the report's 251 pages.

Simon Upton, head of the OECD’s environment directorate, delivered the verdict to the government, which includes some of his old colleagues from the early 1990s when as National’s Environment Minister he brought the Resource Management Act to the statue books. He returns home next month to become our next Parliamentary Commissioner for the Environment.

The slides, summary and full document are available here. The slides are a particularly succinct summary of our enormous environmental challenges, and a guide to the ways we can tackle them and the benefits we’ll derive from doing so.

The OECD starts by setting a big economic context for our environmental policies. Two measures stand out. First, pollution abatement in New Zealand only cost an estimated 0.03% of GDP a year on average 2000-2013.

“This may indicate that New Zealand’s strong growth has come partly at the expense of environmental quality, a dynamic that puts the country’s ‘green’ reputation at risk. This could be detrimental to the competitiveness and attractiveness of the economy in a global market as consumer and investor preferences shift towards sustainability and strong environmental performance,” the OECD says.

In contrast, investing in curbing pollution increased GDP in three-quarters of OECD countries. The top six countries enjoyed up to a 0.5% enhancement in GDP per year.

Second, we rank near the bottom of the OECD on environmental taxes as a percentage of tax revenues and GDP. Yet, the environment is so important to our economy, it makes sense to tax pollution as a way of improving environmental performance, while reducing tax on good things such as income and profits.

However, we are spectacular leaders in the OECD in other respects. For example our agricultural use of water grew by nearly 80% in the decade to the early 2000s, reflecting a surge in irrigation. Since then the area under irrigation has increased by a further 50%. In contrast, the Netherlands achieved a big reduction in water use across its diverse agricultural sector, which includes dairy.

In evaluating New Zealand’s irrigation, the OECD concludes: “It contributed an estimated $2.17bn to the national economy in 2011/12 and this value continues to grow. However, these estimates do not include environmental and social impacts of irrigation, or the marginal benefits of individual projects, and the benefits largely accrue to the agriculture and processing industries.”

Undeterred, the current government is offering to invest up to $400m in new irrigation projects between 2016 and 2019. Meanwhile, it has committed $400m to cleaning up waterways.

The OECD also believes we have yet to reach peak pollution:

“The full impacts of past and present agricultural land-use practices on water quality have yet to materialise; the time lag between improved land-use practices and improved water quality can be long (up to decades), particularly for groundwater resources. There are concerns that even with best mitigation practices, recent elevated inputs from continued large-scale conversion of land to dairy farming, coupled with time lag effects, will result in more freshwater degradation.”

This would exacerbate our problems with the nitrogen balance in our farming systems, as the OECD points out in its report. The gross balance (surplus or deficit) is the difference between inputs (mainly livestock effluent and fertiliser) and outputs (mainly the uptake of nitrogen for crop and pasture production).

We have the fastest growing imbalance in the OECD. This results in “the risk of pollution to soil, water and air,” the OECD says.

The impact on our water quality was abundantly clear in the government’s latest report on the health of our freshwater, published in April. For example,

Nitrogen leaching from our soils increased by 29% from 1990 to 2012

Of 175 monitored river sites in the pastoral class, nitrate-nitrogen trends were worsening at 61% and improving at 22% of sites over the period 1994–2013

Of the native aquatic species the government reports on, around three-quarters of fish, one-third of invertebrates, and one-third of plants are threatened with, or at risk of, extinction.

The National-led government has persevered over the past nine years to devise policies and programmes to turn round this massive damage. These are still works in progress. Elaborate national objective frameworks are still evolving and processes for councils and citizens to implement them across catchments still need much development.

A lack of ambition

The OECD identifies a long list of particular issues it has with the programme. Of those, the government addressed three main ones in its revision of the National Policy Statement for freshwater last month. But the OECD’s biggest criticisms are the lack of ambition or timely action.

“The large majority of New Zealand rivers already comply with the water quality bottom lines. Given growing concerns about nitrogen pollution and public health risks, this suggests that the national bottom lines are not particularly ambitious.”

It says our approach compares unfavorably with the EU’s Water Framework Directive (WFD). “The New Zealand bottom lines are set below the equivalent WFD bottom line of “Good” Ecological Status; they roughly correspond to the level of “Moderate” Ecological Status.”

Moreover, the timeframe for devising and implementing the processes is leisurely. Our councils have up to 15 years to do the job, whereas the WFD was implemented in six years.

Similarly, California passed “the Sustainable Groundwater Management Act in 2014 in response to worsening groundwater conditions. The act requires the formation of local agencies by mid-2017 and requires those agencies to adopt and implement local basin management plans in collaboration with stakeholders by 2022.”

An immoral under-investment

Even when our system is in place, it will still be 2040, the National-led government estimates, before its objectives are fully met. The cost to the country of doing so will be $2bn, equal to $90m a year, or a mere 0.034% of current GDP. That is an immoral under-investment in our environment.

The OECD offers a comprehensive package of recommendations to improve our water policies, practices and outcomes. These include a range of economic measures and pricing mechanisms:

“Rationalise and expand the use of water demand management measures, including volumetric pricing to recover costs of water management and reflect environmental impacts and opportunity costs associated with scarcity; strengthen and expand water markets where appropriate to encourage innovation and the efficient use of water, particularly in stressed and over-allocated catchments.

“Introduce pollution charges or enable water quality trading to internalise the environmental and opportunity costs of diffuse pollution from rural and urban sources, and promote innovation in pollution control; develop a strategic financing model for the remediation of historically contaminated water sites.”

But the biggest missing elements are the strategic ones, it argues.

“Foster coherence between water, climate and primary industry policies; develop a whole-of-government long-term strategy to increase the added value of export products within climate and freshwater quality and quantity objectives; explore options to diversify the agricultural sector, improve trade relations, tap into emerging markets.”

Low priorities for farmers

But we won’t achieve any of that as a country while the two key players are dictating the agenda:

The agriculture sector, which ranks ‘Implementing water costing mechanisms’ as its 37th priority, and ‘Accelerating actions to address climate change obligations’ as its 48th priority in this year’s KPMG Agribusiness Agenda.

The National-led government takes its cue from the agricultural sector on these environmental issues critical to New Zealand’s well-being.