Inside the OECD's report on NZ's environmental performance

Even with the best clean up effort, a lag in pollution from the dairy boom reaching waterways means New Zealand's water quality may get worse. Photo: Lynn Grieveson

Eloise Gibson digs into the OECD's first review of New Zealand's environmental performance in a decade and finds it calls for action on cows’ greenhouse gases and water pollution, better public transport and warmer housing, including cosier new-builds. And it draws attention to New Zealand’s complex resource management framework, including differences in councils’ abilities to implement new water standards. The OECD also challenges the Government's plan to ramp up agricultural exports.

Water

Cows feature heavily in two parts of the report – greenhouse gas emissions and waterways. The report notes the boom in dairy prices in the decade since the last OECD review and the resulting increase in dairying intensity has put pressure on freshwater quality and quantity, with three-quarters of the freshwater we consume going to irrigate farms, mostly in dry places like Canterbury and Otago. The other major player in our water issues – as Aucklanders were reminded after the recent storm -- is ageing city storm-water pipes, which are overflowing to streams when it rains.

The good

First, a spot of bright news. The review team was happy to see the Government had come up with a National Policy Statement on freshwater management since the last review, in 2007. The policy statement means regional councils must make rules that will achieve their freshwater goals by 2030 at the latest.

Praise was heaped on a pollution-budgeting tool for farms, called OVERSEER, which helps individual farms estimate their water impacts and which, the review team said, could form a good basis for the Government to charge farms for their nitrogen pollution.

Another source of plaudits was New Zealand’s world-first introduction of Lake Taupo’s nitrogen cap. The scheme, introduced in 2002, puts a limit on the total pollution that can enter the lake, so there should be an incentive for the most efficient producers to take the lion’s share of the allocation. The OECD is keen to see it rolled out to other catchments, only more cheaply. The Taupo scheme “has come at a significant cost to the public to buy back land to retire from intensive agriculture,” it says.

Another bright point is agreements between industry and government such as the “Sustainable Dairying: Water Accord”, which have had success in improving water quality (e.g. fencing dairy cattle off from waterways) and “have been put in place more rapidly than would have occurred through new regulations”, the report says.

The bad

On the downside, the process of implementing the national policy statement on water is going slowly, with significant differences between councils’ approaches. Councils are going to need more government support if they are going to set ambitious goals and meet them more quickly, says the latest review. And actually achieving water quality goals would probably require changes in land management “given the intensive nature of the country’s agricultural sector”, it says.

Meanwhile, as new rules slowly promulgate, nitrogen leaching from farms to rivers rose 12 percent (from 1990-2012) and nitrogen leaching to soil worsened by 29 percent.

Perhaps the most depressing news was that there might a significant lag in the system, meaning pollution that has already left farms during the dairy boom will reach waterways at some point no matter how effective our efforts to clean up are. That means, even with the best clean-up effort, water quality may get worse for a while.

The review team linked groundwater contamination with New Zealand’s relatively high rates of preventable enteric or gastro-intestinal disease in comparison to England, Australia and Canada. And they pointed to deteriorating water quality as a big threat to native fish species, three quarters of which are at risk of extinction.

The review team suggests exploring resource rentals for water, as well as pollution charges, to bring economic instruments deeper into water planning. It notes this will require resolving Maori rights and interests in water. And the report questions the wisdom of government financial support for irrigation unless it comes with better accounting of the social and environmental costs.

Currently government grants “do not systematically consider the environmental and social costs of irrigation, and the benefits largely accrue to the agriculture and processing industries. There is a risk that financial support for irrigation further increases pressures on freshwater resources,” it says.

Water problems are not all pinned on farming. The report also fingers urban storm-water runoff as a growing public health concern (more on that under “cities”).

One of the OECD’s major recommendations is to pull together a coherent policy bringing together water, climate and primary industry policies. Another is to develop a whole-of-government long-term strategy to increase the added value of export products within climate and freshwater quality and quantity objectives; and “explore options to diversify the agricultural sector”.

Climate

Cows crop up again as an obstacle to meeting greenhouse gas targets. Since farming, particularly dairy, makes up half of our emissions, indefinitely leaving farming out of the Emissions Trading Scheme is listed as one of the main reasons why the ETS hasn’t been effective, along with a flood of cheap international carbon credits and moves to shrink the impact of the carbon price on people. The review recommended several ways to sharpen the ETS’ teeth, including bringing in animal burps, manure and emissions from nitrogen fertiliser sooner rather than later.

“Given the significance of agricultural biological emissions, continuing to shield them from mitigation obligations would make meeting these objectives harder, place a disproportionate burden on other sectors and slow the pace of adjustment in the agriculture sector,” the report says. “Changes to the ETS are needed if it is to provide a sufficiently high and stable price signal to influence investment decisions and unlock emission mitigation options.”

Major recommendations include starting a whole-of-government process to develop a long-term plan for moving to a low-carbon, green economy “taking into account the opportunities to diversify the economy and reduce its reliance on agriculture and the use of natural resources”; and “reforming the ETS at the earliest opportunity to ensure a price of carbon that is consistent with New Zealand’s transition to a low-carbon economy”.

Export growth?

Having highlighted the costs of intensifying farming, the review team, unsurprisingly, had some thoughts on the government’s plan to increase exports. The Business Growth Agenda sets the target of making exports account for 40 percent of GDP by 2025, up from about 30 percent in 2015. The plan is to improve the productivity of, and the value generated by, export sectors including livestock farming while reducing their environmental impact.

So far, so good.

But the OECD report says the agenda "is far from providing a long-term vision for the transition of New Zealand to a low-carbon, greener economy….in particular, reducing greenhouse gas emissions and improving water quality would be difficult to achieve by relying only on productivity gains and without reducing agricultural output.”

Instead, New Zealand should speed-up its work exploring higher value export products and reduce its reliance on using natural resources.

“This will help the country defend its “green” reputation, which will be increasingly essential for its competitiveness and attractiveness in the global market as consumer and investor preferences shift towards sustainability and strong environmental performance,” says the report.

Cars

Transport, our second-biggest source of emissions (creating 17 percent of greenhouse gases), also came in for scrutiny. Our love of cars, especially in Auckland, was put under the spotlight – especially because our cars tend to be old and inefficient. Differences in taxes favouring diesel over petrol, and policies favouring company cars and carparks, should be scrapped, the reviewers suggest.

They also highlighted the small proportion of funding directed to public transport relative to roads, and suggested congestion charges and tolls might be employed to take the pressure off Auckland’s road network. Apparently, our motor vehicle and car ownership rates are the highest in the OECD and the number of vehicles has increased by 65 percent since 2000, with a rising share of diesel vehicles. Since we have so much renewable electricity, people should be nudged more strongly to buy electric vehicles, says the report.

Laws

The RMA earns praise as a “remarkably comprehensive piece of environmental legislation.” On the other hand, a constant stream of amendments has made it a unwieldy, and it still has big gaps, says the report. In many areas, councils are operating without national guidance; in others, they have guidance but not the resources to do the job properly.

“Resulting inconsistencies in the application of the RMA have generated an uneven playing field for economic entities and uncertainty in achieving desired environmental outcomes. New Zealand needs to conduct a comprehensive evaluation of implementation of the RMA by local authorities, establish nationally standardised requirements in several domains and provide better guidance to local authorities on how to carry out their permitting, compliance monitoring and enforcement responsibilities,” says the report.

And: “The much-welcomed national freshwater policy reform needs to be swiftly and effectively implemented.”

Cities

The Auckland Supercity gets a plug here as a much-needed step towards coordinating New Zealand’s urban planning regime. Air quality and waste management in cities are getting better, and need to continue to do so, says the report. “Cities are relatively green, with large gardens and easy access to natural areas,” even in Auckland, it notes.

The dark spot is urban stormwater, which hasn’t kept up with the population and is frequently spilling water from sewerage pipes into waterways when it rains.

“More than half of Auckland’s freshwater streams and a third of marine waters are in a degraded or poor state,” says the report.

Then there is housing. Houses are not only expensive, but often cold and damp, especially rentals.

Again, there is a bright spot: the Warm Up New Zealand scheme, which retrofitted an impressive 15 percent of houses. But we still need to tackle the remaining uninsulated 30 percent, the report says (while noting in-coming new requirements for rentals will help).

And even our standards for brand new houses could use a lift: “To avoid retrofitting needs for new housing, the government should consider modernising national building standards, which are below standards required in many other OECD member countries.”

Finally, cities without household water charges (Christchurch and Wellington) should be empowered to bring them in, says the report, so they can benefit from cuts in consumption seen in Auckland, Tauranga and Nelson.