By Lara Barbier, Oct 6

Lara Barbier

Agricultural Subsidy Removal in New Zealand

“All I’m saying is that there is a price to be paid at the sharp end…environmentally and everywhere else…for the food that is produced in a particular way.” -Prince Charles

Subsidies to agriculture are amongst the largest and merit special attention in light of the sector’s critical importance for food security and development. Those providing incentives to produce can lead to increased environmental damage, typically by stimulating agricultural intensification and/or expansion (land use change).

Intensification refers to an increase of agricultural production on a given acreage (through e.g. application of more fertilisers and other agricultural chemicals, more irrigation, more mechanisation).

Intensification has many knock-on effects for biodiversity.  Nutrient run off causes eutrophication (excessive nutrients) of freshwater and marine ecosystems while airbone nutrients, particularly ammonia from intensive live stock can cause eutrophication of terrestrial (land based) ecosystems.  In fact freshwater ecosystems are those with the highest loss in biodiversity, mainly through land use, i.e. agriculture.1  Fertiliser run-off and fossil fuel use also deprive massive areas of the ocean of any or enough oxygen, killing large swathes of sea life and causing hundreds of millions of dollars in damage.2  

Expanding coastal dead zones caused by nutrient run-off not only spell trouble for biodiversity but also threaten the commercial fisheries of many nations. Dead zones form seasonally in economically vital ecosystems worldwide, including the Gulf of Mexico and Chesapeake Bay. Agricultural run-off sparks many of these die-offs; increased use of nitrogen fertilisers has doubled the number of lifeless pockets every decade since the 1960s, resulting in 405 dead zones now dotting coastlines globally3 :

Hypoxic and Eutrophic Deadzones Graphic here Source: WRI (2009)

New Zealand was one of the first – and is still one of the few – OECD countries to have completely dismantled its system of agricultural price supports and other farm subsidies. These reforms were driven by concerns for the economic unsustainability of the subsidy programmes rather than for the environment.

The two decades prior to 1984 had seen a gradual acceleration in agricultural production grants and subsidies. In the 1960s agricultural support amounted to just 3% of farm income. By 1983 it was nearly 40% in the sheep sector alone and New Zealand’s general macroeconomic situation had also deteriorated markedly.

Increased agricultural output was generally worth less than the actual costs of production and processing. In 1984 the new Government abolished tax concessions for farmers and minimum price schemes for agricultural products. Land development loans, fertiliser and irrigation subsidies and subsidised credit were reduced and then phased out from 1987, along with assistance for flood control, soil conservation, and drainage. Subsidy removal was combined with wider reforms across the economy (including floating of the currency, phased tariff liberalisation to lower input prices etc.). Their removal was an important contributing factor to improvement in the sector’s circumstances.

Social impacts were not as great as widely predicted. Around 1% of farmers left the industry, considerably less than the projected 16%. Substantial environmental improvements were observed through decreased use of agricultural chemicals and in livestock as well as by taking marginal land out of production.4

In fact, since the eradication of subsidies the agricultural sector in New Zealand has been booming! New Zealand’s major agricultural exports include dairy products, meat and wool. In the year ending 31 March 2008, export earnings for agriculture and forestry grew by 8.4 percent to $23 billion.5 New Zealand’s dairy sector alone exports over 4 million kilograms of butter a year (2009) and over 2 million kilograms of cheese a year (2009) and its annual exports are in excess of $11 billion.6

Steps are being taken to address the massive subsidies in the agricultural sector but more is needed.  It is time we realised that growing food shouldn’t cost us the earth.

For more information you can download the full TEEB for National Policy Makers at our TEEB study website 

  1. MA 2005 Fig. 3.7 Living Planet Index []
  2. Juncosa B. (2008) Suffocating seas, Climate change may be sparking new and bigger “dead zones”. Sci Am 299(4): 20-22. []
  3. WRI – World Resources Institute (2009) World Hypoxic and Eutrophic Coastal Areas. last access 28 Oct 2009 []
  4. OECD – Organisation for Economic Co-operation and Development (2005) Environmentally Harmful Subsidies: Challenges for Reform. OECD, Paris. []
  5. Ministry of Agriculture and Finance []
  6. Business New Zealand []

About Lara Barbier

Lara hails from various parts of the world, but currently lives in Germany where she is Communications Assistant in the TEEB Bonn Office. Lara spends her free time learning to speak German badly, exploring the country on her bike and discovering that they throw an awful lot of festivals here – but she’s not complaining! Before coming to Germany Lara lived in Scotland where she discovered a passion for broadcast journalism and gained an MA Honours in English Literature and History from the University of Edinburgh.
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