Rabobank is taking a positive view of the increasing pressure on farmers to be more environmentally responsible, saying it boosts opportunities for innovation.
In a report on environmental regulations, New Zealand chief executive Ben Russell notes New Zealand is a world leader, but says this risks its international competitiveness.
''It is clear that environmental regulation affecting agriculture in New Zealand is at an earlier stage compared to California and the Netherlands, and therefore the costs of compliance have yet to be fully built into the cost structure of the New Zealand dairy industry,'' he said.
More research and innovation about how to retain and use nutrients within farming systems in cost-effective ways – rather than them leave the farm and reduce water quality – was essential for New Zealand to maintain its competitiveness.
''The best possible outcome for New Zealand is the development of farming systems and technologies that allow farmers to continue to increase productivity in a cost-efficient way, while meeting community standards for freshwater quality.
"This is the ''holy grail'' that is important, not only to maintain water quality, but also to protect the significant contribution that agriculture makes to the New Zealand economy,’’ he said.
Co-author Hayley Moynihan said the New Zealand approach to environmental regulation brought both challenges and opportunities for local dairy farmers.
''The effects-based model being implemented here has disadvantages in that it can create considerable uncertainty for producers, as they are unsure exactly what changes need to be made to meet standards,'' she said.
''Whereas under the more prescriptive, inputs-based approach, it is simply a case of farmers doing what the rules say they are allowed to do. The great opportunity, though, is that controlling effects rather than inputs creates incentives for innovation.''