Estimating values of environmental impacts of dairy farming in New Zealand

New Zealand is the world's largest exporter of dairy products, supplying about one-third of global trade. The dairy sector strives to maintain international competitiveness by continued increases in productivity and intensification in the use of inputs. Increasing intensity of dairy farming and unsustainable agricultural activities contribute to degradation of several ecosystem services such as clean air and water. The New Zealand dairy industry receives widespread public criticism of its environmental impacts. This paper provides a case study of the intensification of dairy farming in New Zealand and its detrimental environmental impacts such as nitrate leaching to streams and rivers, methane gas emissions, demands for surface and groundwater for irrigation and reduced variety in pastoral landscapes. To design efficient policies that will induce farmers to adopt more environmentally friendly practices, resource managers and decision makers need information on the relative values attached by the public to these detrimental environmental impacts. The study uses choice modelling method, in particular a mixed logit model, to evaluate these relative values (willingness to pay), incorporating sources of preference heterogeneity (both observed and unobserved heterogeneity) within a sampled population. The research provides information for policy makers that will be useful in designing policy instruments to encourage farmers to reduce the principal harmful effects of dairy farming on the environment.