Monday, 11 February 2008

Dirty dairying and dodgy drafting

newtechsample New Zealand's present and future prosperity is still based largely on agriculture, yet on the back of the recent report on the NZ environment by Parliamentary Commissioner of the Environment Jan Wright we're heard various fevered calls from water campaigners for a "moratorium" on agricultural development, from the Greens' Russel Norman for farmers to require resource consents for improving their productivy, and -- from this month's environment minister (the punch-drunk Trevor Mallard) -- a call for enforced "downsizing" of dairy farms and "limits on herd sizes." 

Enforced downsizing and limits on herd sizes!  Talk about shooting your prosperity right in the foot.

And following the weekend's fiasco over the alleged "deletion of a chapter critical of dairy farming"  the rhetoric has ramped up again, with the Greens' Russel Norman declaring  New Zealand's "clean green" image has been tweaked, that "industrial dairying" needs to pull its head in -- and this morning Federated Farmers president Charlie Pedersen appeared to concede the point, and National Party appeaser Nick Smith to embrace it.

Never underestimate the ability of politicians (and appeasement of them) to destroy your livelihood, while making a problem worse.

The problem they're mostly attempting to address is water -- how it's regulated, how dirty it is, and the role of agricultural intensification in the declining environmental standards.  Said Parliamentary Commissioner Jan Wright at the report's release, the report finds water quality is "declining" in areas used for farming, and "the Resource Management Act is causing fundamental problems for water management." In response, Murray Rogers of Canterbury's Water Rights Trust campaign group says "agricultural development needs to slow down while research and regulatory structures are put in place to manage water." 

Both Wright and Rogers are right, although not in the way they think they are. 

Since it looks like farmers could have their future prosperity limited on the back of what this report says about water, let's see first what it actually says.  (you can read the whole report here.) On inspection it turns out that the body of the report which contains the actual data  is less frightening than what the headlines and the deleted 'summary' chapter say about it.  (No surprise there -- it's on a par with the various summaries of the IPCC's global warming science.)  About water the body of the report says:

  • By international standards, freshwater in New Zealand is both abundant and clean.
  • Because New Zealand has a low population and high average rainfall, it has more total freshwater per person than more than 90 per cent of almost 200 other countries around the world. However, not all of this water is in the right place at the right time...
  • With land-use practices becoming more intensive, particularly in farming, there is greater demand for water now than ever before, and evidence is building that its quality is declining in many water bodies.
  • As the dominant land use in New Zealand, agriculture has the most widespread impact on water quality.
  • Rivers in catchments that have little or no farming or urban development make up about half of the total length of New Zealand’s rivers and have good water quality. Water quality is generally poorest in rivers and streams in urban and farmed catchments. This reflects the impact of non-point-sources of pollution in these catchments...  The proportion of the total river length that is in farmed catchments is more than 40 times the proportion that is in urban catchments.
  • In recent years, the impact of agricultural land use on water quality has grown as a result of increased stocking rates and use of nitrogen fertilisers. Within the agricultural sector, there has also been a move away from low-intensity to high-intensity land use (for example, converting from sheep farming to dairy or deer farming). The net effect of most intensified land use is to increase the amount of nutrients, sediment, and animal effluent dispersed into water bodies.
  • The median levels of nitrogen and phosphorus have increased in rivers within the national monitoring network over the past two decades. More specifically, over 1989–2003, there was an average annual increase in levels of total nitrogen and dissolved reactive phosphorus of 0.5 per cent to 1 per cent. While this increase may seem small, and is difficult to detect from the slope of the median (dark blue) lines in Figure 10.3, it signals a long-term trend towards nutrient-enriched conditions that are likely to trigger undesirable changes to river ecosystems.  Furthermore, New Zealand rivers with relatively high levels of nitrogen are deteriorating – becoming more enriched – more rapidly than rivers with low levels of nitrogen. This is illustrated most clearly in Figure 10.3.
  • 10.5.1Seventy-five of the 134 lakes in New Zealand for which nutrient data are available have high to very high levels of nutrients (see Figure 10.5, right). Thirteen per cent of these lakes are known as ‘hypertrophic’, meaning they are ‘saturated’ with nutrients and their water quality is extremely degraded. In such lakes, algal blooms are common and the health of aquatic animals is often at risk.
  • Levels of nutrients (nitrogen and phosphorus) and algae are between two and six times higher in lakes in pastoral catchments than in lakes that are in natural catchments (see Figure 10.6).
  • A large majority of the 3,820 lakes greater than 1 hectare in area in New Zealand are not monitored. By extrapolating the results for monitored lakes, it is estimated that the majority (about two-thirds) of all lakes are likely to have relatively low concentrations of nutrients and good to excellent water quality because they lie in natural, or only partially developed, catchments (Ministry for the Environment). The remaining third of lakes are likely to have high levels of nutrients and poor water quality.
  • Pollution from organic waste in rivers has reduced since the late 1980s. This indicates improved management of point-source discharges of organic waste, that is, pollution from a single facility at a known location, such as discharges from wastewater treatment plants, meatworks, and farm effluent ponds.
  • Two-thirds of New Zealand’s lakes are in natural or partially developed catchments, such as native bush, and are likely to have good to excellent water quality. Small, shallow lakes surrounded by farmland have the poorest water quality of all our lakes.
  • Sixty-one per cent of the groundwaters in New Zealand that are monitored have normal nitrate levels; the remainder have nitrate levels that are higher than the natural background levels, and 5 per cent have nitrate levels that make the water unsafe for infants to drink.
  • Fertilisers and stock effluent are major sources of the nitrogen and phosphorus in water bodies in agricultural catchments. The erosion of soil also contributes significant amounts of soil-bound phosphorus to waterways.

Now I don't know about you, but overall that looks like a pretty credible pass mark to me.  Says the report:  "By international standards, freshwater in New Zealand is both abundant and clean." So much for the blowhards.

But there do appear to be two main issues:

  1. increased draw-offs for irrigation and resulting 'competition' for water in Canterbury and Southland, and
  2. the effect of farming on water quality in lakes and rivers. 

You won't be surprised to hear I've got something to say about both, nor that what I've got to say involves property rights.

Competition for water is complicated by bureaucratic systems of allocation. Protection of water quality is stymied by bureaucratic systems of protection: which means there are no effective legal remedies against pollution, and no effective agent to argue on behalf of that which is being polluted.  Both problems are the direct result of what's known as the Tragedy of the Commons problem.  As long as a resource is either unowned or held in common ownership (which is the case with water in NZ), then the incentive for each resource user is to take as much now as they can, and whenever they can, no matter the consequences for the quality of that resource, and no matter the long-term effect on the quantity of that resource.  That's the tragedy: common ownership provides no incentive for genuine 'stewardship.'

The answer is clearer property rights, and greater common law protection of those rights.

As Jan Wright almost inadvertently pointed out in interviews yesterday, "the Resource Management Act is causing fundamental problems for water management."   She's right, but not in the manner she thinks she is. The fundamental problem caused by the RMA is insufficiently secure property rights. The cure for both problems is more secure property rights.  Let's me tell you how.

1. Competition for water
As water users realise every summer, competition exists for existing water resources.  Bureaucratic distribution of access to water does nothing to secure the resource, and nothing to give water users long-term security of supply.  By contrast, recognising secure property rights in water means that water users have a long-term interest in maintaining security of supply, and that rights to use water end up in the hands of those who are going to value it most. 

Instead of a bureaucratic system of allocating water use, a system of secure tradeable water rights give users of water the benefit of long-term time horizons to plan their use (discouraging the short-termism that generally stymies 'sustainable' resource use), and establishes for all users the real value of those rights.  With tradeable water rights, where and when water is in short supply price signals will communicate that information to users, indicating that more care should be taken with the valuable resource, and more attention paid to expanding the resource (by construction of greater collection capacity for example). 

There's nothing complicated about any of that: that's how the markets for all other resources function, and the long-term effect of such markets is that for all sorts of reasons -- including greater incentives for increased efficiencies -- resources become less and and less scarce, and of better and better quality. 

The key to swiftly effecting such a scheme is to immediately secure the rights of existing users, ensuring that such rights are tradeable so that they can be transferred to others who might value them more. A heavily politicised scheme for tradeable water rights was being discussed in 2006, but like all politicised schema the feet are still being dragged.  What's needed quickly to avert moratoria and meddling is a system of clear property rights by which water can be traded.  

As the Canadian Environment Probe organisation has said for a long time, a system of clear property rights and common law protections of property rights offers the best long-term security for water and those who rely on it. My colleague Craig Milmine has a dissertation from 2000 discussing the theory in detail, and showing how a water rights regime could function in the South Island's Kakanui district.

2. Water Quality
We're told by all the usual suspects that dirty dairying is destroying our clean green reputation, and that agricultural intensification is destroying water quality.  I suggest the answer to that is not more bureaucratic intensification, which is what has produced the problem, but less.

 Property rights under a common law regime provides superior environmental protection -- that is, a system of clear property rights as a means by which water can be protected in common law.  No question about that ( I invite you to follow those three preceding links to check that claim).    When the costs of one's own actions are one's responsibility, a change of behaviour is greatly encouraged.  When producers themselves have to pay for their own pollution, a change in methodology of production has to be considered.  When water users themselves have clear rights in common law to protect the water in which they have property, then looking at it as a long-term resource that merits looking after is going to happen.  And when neighbours' actions start to destroy that resource, then with their property rights secured rights' owners have the motivation to act in protection of that resource, and under common law they have simple and effective remedies with which to take action -- remedies that simply don't exist under the bureaucratically intense RMA. 

Under common law for example, those with recreational or water rights along the Waikato or with rights to fish the lakes of Rotorua or the headwaters of the Tarawera River would have recourse against farmers or pulp and paper mills who polluted the fishery -- whereas with the RMA the polluters get a license to pollute and the affected parties find they have no particular legal standing, and no particular protection in law to protect their resource, common law grants them solutions, standing, and the means by which to protect their resource long-term. 

What common law does in other words is give effective legal power to recognised resource users to protect their resource long-term.  If we genuinely want to rehabilitate NZ's clean green credentials, then I maintain the solution is better protection of property rights and the rehabilitation of common law remedies for environmental protection.  Simple.

But there’s a problem.  In fact, there's two problems -- and it's not dirty dairying, but dirty government . 

  1. The Resource Management Act (RMA) has successfully buried almost all avenues for common law environmental protection.  Despite their proven effectiveness over eight-hundred years, common law measures to protect against pollution are buried under the statutory framework of bureaucratic control set up  by the RMA.  To bring back common law environmental protection requires the RMA to be scrapped, and replaced by a 'codification' of rational common law principles of environmental protection.
  2. Even with the codification of common law, without clear ownership there is still no protection. To work effectively, property rights-based environmental protection needs an owner to stand up for his property, yet nearly half of this beautiful country and most of the seabed, foreshore and waterways still have no property rights attached. Most of it is essentially un-owned, leaving a government department as the conservator of record of much of the country's waterways.  The Environment Report should be regarded as a report card of how well they've carried out the role.

"Chapter 13 "
Whatever the real news about the release, non-release or pseudo-release of the last chapter of the five-yearly Environment Report, the fact remains that water quality in some places is going to get worse, and that it will be "non-point sources" such as agricultural runoff (those that command and control resource management can't so easily control) that will play a large part in that diminution.

The answer is to give greater power to those who value the resources under threat, and there is no greater power in law than the protection of property rights and the legacy of common law -- if only these were allowed to function as they should.

UPDATE:  Professor of  pastoral agriculture at Massey University Jacqueline Rowarth shows that there are no decent voices ranged on the side of farmers in this latest attack, (and, also, that the science side of Massey University is as infected with political correctness as the humanities side of the campus), and that top-down solutions are likely to be the only ones countenanced in the latest round for the dirty dairying debates.  

In this audio excerpt from Radio New Zealand she challenges none of the conclusions of either the actual or the bootleg report, and appears to implicitly regard any possible solution to necessarily involve more of the top down central-planning solutions that have led to the problems reported.  "We" need to stop pointing the finger; instead she says "we" clearly need to be "redesigning New Zealand's agricultural systems" -- on which the country's smartest brains need to be working -- and that playing the blame game will put off the smart brains.

Note both the brazen collectivism, the refusal to countenance evidence and -- instead of any suggestion of bottom-up solutions -- the overt reliance on central planning to solve the reported ills. 


  1. There's a bit much there to take in all at once.. but a couple of comments.

    When the RMA was first developed the overriding principle was to be based on consequences. That is, you could do what you liked with your stretch of the river provided you didn't adversely affect your neighbours downstream.

    However, we immediately saw the way the Act would be run in the Central North Island. One large council increased it's number of planners from under 5.. to over 20.

    My second comment relates to the consent process for building an enormous sawmill in the US. Long story short, the process cost NZ$900 and was approved in 10 working days.

    What happens is that when you decide to build something like that you go to a state office and pick up an easily readable book on the requirements of the state. You then simply incorporate these requirements into your general planning process.

    Once you seek formal approval of your plans, the state has ten working days to approve.. by state law. Objectors have to pay a hefty sum to lodge an objection, if they stall the process and their objection is lost, they most pay for every day of expected profit from the mill that was lost due to their failed objection.

    There are some good principles involved here..

    1. Business and productivity matter, and the rules reflect that.

    2. The environment matters, and you can put down in a book the things that must be done to protect the environment. You don't need to make policy on the hoof as each application comes in.

    3. Objectors have a place, but they are not exempt from the consequences of their actions.

    4. The state, the legislators and the planners have clearly defined responsibilities and timelines to meet as well. They can't form an "investigatory committee" or pursue some activist policy.. and they can't guess as to consequences.. they have to put their plans, responsibilities and knowledge of the environment in a book, and stick to it.


  2. Firstly, those romantic rural idyll TV shows like "Jamie's Farm" in particular and "River Cottage" give a distorted view of farming.
    They give the impression that a "living" can be made off small areas of non-intensive farm land.
    The inference could be that if Jamie Docherty and his pigs can be profitable then anyone with 20+acres is Mr.Darcy.

    Further skewing the field are the plague of "lifestyle" mags that would have you believe you can potter around your beehives, lavender garden, veges, worms, and llamas without sweating the $800k you spent on 1.5 acres.

    It's important to appreciate that even though we excel at agriculture, farming is still a marginal business giving return on assets of 0.5-2%.

    Of the various agricultural endeavours, dairy is currently the only type that can get close to servicing a mortgage from farming operations alone.

    Farming is peasant's work with just enough economic activity to keep provincial service towns and all the attendant businesses ticking over. Arguably farming is something to do while waiting for enough capital appreciation to sell out.
    Look around a sale-day if you ever have the chance and note how few young farmers there are, indeed it's notable that none of the contestants in 07 Young Farmer of the Year owned a farm.
    The heart of the matter that 2013, the deadline for inclusion of farming to Kyoto, is only five years away.

    If Labour or Greens require submission of resource consents to farm, to accumulate carbon by cutting hay or require the purchase of credits then marginal farming (i.e. most) will become untenable.

    Then what? We can't all become real-estate agents, teachers, import sales-reps, or baristas can we?
    Somebody has to produce something desirable to wangle us back into the top of OECD and further burdening farming won't help.

    By the way, what happened to the "knowledge wave"?

  3. excellent analysis. now edit it down to no more than 6 bullet points and send both off to the newspapers.

  4. Great post PC, and good comments Greg B.


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