Evaluation of agri-environmental policies for reducing nitrate pollution from New Zealand dairy farms accounting for firm heterogeneity

Abstract

Policy makers worldwide are interested in the identification of cost-effective policy instruments to reduce diffuse pollution. A large economic model representing heterogeneous farms is used to evaluate a broad set of policies for reducing nitrate regulation within a large catchment dominated by dairy production. A policy instrument that allows the level of abatement to vary among producers according to differences in abatement cost is most cost-effective. The primary goal of 26kgNha -1 can be achieved at a cost of $15ha -1 under this cap and trade policy, while a uniform cap on emissions for all farmers would be more than three times as expensive ($49ha -1). In contrast, requiring u..