From Dung to Dollars: Lessons for development and implementation of market based trading instruments in agriculture - the case of Lake Taupo nitrogen trading

Abstract

Market based instruments (MBI) for environmental management are often revered as a means to amalgamate economic development with positive environmental outcomes and policy makers argue that the neoliberal ideology behind MBIs promote entrepreneurial responses to complex environmental issues (Bailey, 2007). Despite the prevalence of MBI in a broader shift toward neoliberal approaches to environmental management, political ecologists argue disparity exists between the ideology of neoliberal projects and the outcomes of MBI. This thesis aimed to test political ecology exploration of MBI and their underlying neoliberal ideology. It investigates the extent to which critical political ecology literature reflects the preliminary outcomes of the implementation of a nutrient trading program, a form of MBI, to manage and remove nitrogen (N) from the catchment of New Zealand‘s largest lake, Lake Taupo. This thesis argues that despite the theoretical claims of MBI by neoliberal advocates, MBI fail to account for and manage the nature-society relationship which results in multiple failures of MBI. Analysis confirms a number of political ecology claims. For example this thesis reveals how nature and environmental issues in the Taupo catchment cannot be understood in isolation from the political, ecological and economic contexts within which they are actively produced, contested and reconstructed through discourse (Bryant and Bailey, 1997; Escobar, 1999; Castree, 2001). This study finds instances of the negative outcomes of MBI commonly critiqued by political ecologists, and confirms the proposal that contradictions in neoliberal environmental governance theory exist on two levels; firstly, through the use of market principals to guide environmental management decisions, and secondly, as an outcome MBI have the potential to create and perpetuate negative socio-economic inequalities. In addition the case study finds that MBI face challenges in modelling and managing complex ecological phenomena, and may inadvertently create unintended consequences and perverse incentives to environmental protection. This study highlights the point that in overlooking the socio-economic and environmental factors, policy makers may underestimate the true costs of MBI policy, as revealed by this study. In addition findings unique to the case study such as market incentives of the nutrient trading program under RPV5 are seen to have encouraged expansion of large scale dairy farms in the catchment and the spatial concentration of N emissions. These findings prompt further research around the use of NTPs to achieve comprehensive land use change in New Zealand‘s pastoral farming catchments.