Council guarantees funding to Lake Taupo protection project

In one of the final decisions of its term, Environment Waikato’s outgoing council has guaranteed the regional council’s share of funding for the trust set up to protect Lake Taupo’s water quality.

This means the Lake Taupo Protection Trust will be able to enter into long term tree-planting contracts with landowners, the aim being to remove more nitrogen from the Taupo catchment while also taking advantage of carbon trading opportunities under the Emissions Trading Scheme (ETS).

“The ETS has enabled the trust to dovetail its objectives with those of businesses looking to offset their carbon emissions but long term funding certainty is needed to achieve the best environmental and economic results,” said chairman Peter Buckley.

Intensification of pastoral farming around Lake Taupo has largely contributed to the increase in the amount of nitrogen entering the lake through groundwater and rivers, promoting the growth of algae in the lake.

The trust, funded by the Government, Environment Waikato and Taupo District Council through an $81.3 million public fund, was set up to reduce the amount of nitrogen leaching into the lake by 20 per cent.

Its funds are used to either pay pastoral farmers to change to low-nitrogen leaching farming operations or to buy land for conversion to forestry.

For example, early this year the trust negotiated a contract in which it paid a landowner to convert 500 ha of farmland to forestry and then sell the carbon credits to a major electricity generator. The deal removes 22,000 kilograms of nitrogen a year from entering the lake and provides the landowner with cash flow into the future.

In total the trust has permanently removed 63,000 kg of nitrogen a year from the catchment, with the aim of cutting 153,000kg a year by 2018.

“The trust has a number of opportunities on the horizon but its progress is being hampered because a clause in the trust’s funding agreement is making it difficult for the trust to borrow from banks at reasonable interest rates or for it to enter into long term contracts,” Mr Buckley said.

Under the Public Finance Act, the Government is not able to bind future governments. To that end, there is an ‘out clause’ in the trust’s funding deed, allowing any of the funders to pull out of the project if their position on the Lake Taupo project changes. This uncertainty pushes up the cost of borrowing and prevents the trust from entering into long term contracts.

The regional council today agreed to guarantee its 33 per cent share of any contracts entered into by trust, as long as the total value of the contracts is not greater than the total EW share of the cost of the 15-year project.

The Taupo District Council this week pledged its funding commitment to the trust, and the Government is expected to consider a similar recommendation.