Mitigation and Heterogeneity in Management Practices on New Zealand Dairy Farms
Motu Economic and Public Policy Research, Motu Working Paper 13-11
44 Pages Posted: 16 Oct 2013 Last revised: 18 Nov 2013
Date Written: October 13, 2013
Pastoral farming can result in adverse environmental effects such as nitrogen leaching and greenhouse gas emissions. However, the cost of mitigation and hence the socially appropriate level of tolerance for environmental effects is still unclear. Research to date within New Zealand has either estimated the costs of specific mitigation technologies or used simulation modelling at a farm scale. This is limited for two key reasons: neither approach uses data from actual implementation of technologies and practices on real farms and hence costs are speculative; and both largely treat farms as homogenous when in reality they vary greatly. We use data on 264 farms to estimate a distribution of “farm management” residuals in how efficiently nitrogen leaching and greenhouse gas are used to generate production. We interpret this distribution as a measure of the potential for feasible, relatively low-cost mitigation to take place as less efficient farmers move toward existing best practice.
We can explain only 48% percent of the OVERSEER-modelled variation in New Zealand dairy farms’ nitrogen use efficiency based on geophysical factors, specific mitigation technologies and practices that move emissions across farms such as wintering off animals. This suggests a potentially large role for management factors and farmer skill. In contrast, OVERSEER-modelled variation in greenhouse gas use efficiency is more easily explained by the observable factors (73%) but the potential for mitigation through management changes is still not insignificant. Using management practices that are already in commercial use, this first study using this approach suggests that improvements in nitrogen use efficiency may be able to reduce leaching by more than 30 percent, while improvements in greenhouse gas use efficiency may be able to reduce emissions by more than 15 percent; the potential varies considerably across farms.
Keywords: Marginal abatement cost curves, climate change, agriculture, greenhouse gas, heterogeneity, leaching, mitigation, nitrogen, use efficiency
JEL Classification: Q53, Q57
Suggested Citation: Suggested Citation