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Economy and the environment

by Eric Pawson

Much of New Zealand’s economy is based on its natural environment – from agriculture to forestry, electricity generation and tourism. But using the environment’s resources has often had detrimental effects, and New Zealand’s clean, green image is not entirely justified.

An economy based on the environment

New Zealand’s economic activity is largely based on its natural environment. For example, agriculture, tourism and power generation all depend upon the environment. Despite this interdependence, in the past the environment has been viewed as a passive resource for exploitation by a boundless economy.

Early economy

New Zealand first entered the European world as a distant source of resources, including whale oil, sealskins, kauri timber and flax. Agricultural and pastoral possibilities were identified early on, as were the scenic attractions. By the late 1800s wool and meat were important export commodities, and the colony was already on an emerging international tourist circuit. The main attraction was the landscape.

Land of milk and honey

The Empire Marketing Board was set up in London in the mid-1920s to promote trade in the British Empire. It published a series of posters representing New Zealand as an idyllic pastoral land for the production of sheep, cattle, apples and honey. During the 1940s the cover of the New Zealand Journal of Agriculture sometimes represented the country as Britain’s overseas farm.

A pastoral economy

From the 1880s New Zealand’s economy was largely dependent on products derived from introduced grass. Forests and tussock were cut down and burned, and pasture was sown in the ashes.

Wool, the first significant pastoral export earner, was very important until the 1960s. In the 1880s the advent of refrigerated shipping opened up access to the British market for meat, butter and cheese, considerably extending the economy’s reliance on grass. It also encouraged the burning of forests in the North Island to sow new pasture.

By 1921, 93% of New Zealand’s export income was from grass-related products. However, converting forests into pasture caused environmental problems such as soil erosion. Institutions were set up and laws passed to deal with the issues.

A resource-based economy

The New Zealand economy diversified from the 1970s. By the 2000s the economy was no longer solely reliant on grass-related products, but much of it was still based on natural resources. In 2005 about 25% of exports (by value) were from the dairy industry (butter, cheese, milk powder and casein) and 24% were meat. Wool, which had historically been very important, only accounted for 4% of export value. Timber and wood products made up 10% of exports, and aluminium, processed using South Island hydroelectricity, accounted for 5%. Another 20% of overseas revenue earnings came from international tourism – the main attraction for visitors being New Zealand’s natural environment.

The myth of clean and green

In the 2000s New Zealand branded itself for tourism and food exports as clean and green, yet there was little evidence to suggest that New Zealanders lead particularly environmentally friendly lifestyles – in fact the opposite was true.

By the 2000s there was a growing acceptance that the environmental costs of the world economy were a global problem. The climate was warming due to the release of carbon dioxide and other gases. The interdependence between the economy and the environment had never been clearer, yet New Zealanders were living less sustainable lifestyles than ever before.

Grassland economy and other possibilities

Mediterranean visions

New Zealand’s future was not always envisaged as a grassland economy. In the 1800s many schemes imagined New Zealand following a more Mediterranean route.

Missionary Samuel Marsden and Governor George Grey saw a future based on grain, grapes and olives. Sericulture, the planting of mulberry trees for silk worms, received serious attention as a colonial industry in the 1870s and 1880s. A government-sponsored survey in the 1890s urged the development of a wine industry in places like Central Otago, a century before this came about.

There were no grapes grown in Marlborough until 1975. Twenty years later it was recognised internationally as the home of New Zealand’s signature wine, sauvignon blanc.

The area planted in crops such as grapes and olives had expanded considerably by the 2000s. However, much of the farmed landscape was still grass. Over the 2000s high commodity prices for dairy products led to an increase in dairy farms. Low-yielding sheep pastures were converted into intensively stocked, irrigated cow paddocks.

Protected areas

The conversion of bushland to grass reached its height in the 1890s and early 1900s, when remote forested areas of the North Island were tackled. But grass could not be grown everywhere, despite South Island runholder Samuel Butler’s observation that New Zealanders only thought a mountain beautiful if it had good grass on it. Around 60% of the South Island and 20% of the North Island is mountainous. Almost all of this land is protected as reserves and forms the core of the conservation estate, which makes up almost a third of New Zealand’s total land area. This is the other New Zealand – it is not productive farmland, but is economically important for tourism.

Grassland productivity

Historically, a great deal of government science investment was directed towards improving grassland productivity. Agricultural scientists promoted the use of good pasture seed, especially ryegrass and white clover.

As well as using the best strains, New Zealand farming benefited from technical improvements in grassland management. Experiments with fertiliser started in the 1800s, and extended with the discovery of nitrate fertilisers in the 1900s. Aerial topdressing (spreading fertiliser from low-flying aeroplanes) was widely adopted after the Second World War. In the 1950s chemicals such as 2,4,5-T became popular to keep weeds like gorse and blackberry under control.

Erosion, power generation and mining

Grass won’t hold the hills

Increasing grassland production and productivity created unanticipated environmental costs. There was a belief that a stable grass and clover cover would hold soil in place. But in the 1930s concern mounted about loss of soil as grassland pushed ever further into the hills.

The devil’s work

Soil conservator Doug Campbell described the erosion problem on Molesworth Station in 1945 with particularly vivid language:

‘[O]ver vast areas the mantle of soil has been torn or stripped off. Remnants of it are found towards the base of the slopes as though some Satanic spell had been cast on the mountains and hills and the soil had atrophied and sloughed off. Exposed skeleton rock seems to grin with malice or frown with disdain on Man’s handiwork as it creeps and flows down the mountain side in a final gesture of triumph to choke rivers.’1

Soil erosion

There was a growing international awareness of the costs of soil erosion. Much of it stemmed from the United States and its ‘dustbowl’ experience of the 1930s economic depression. There, wind blew away the topsoil. In New Zealand, following the removal of forest cover, the main problem was water run-off causing gullies and slips in hill country. Soil erosion was a New Zealand-wide problem, but was especially severe in the eastern hill country of Hawke’s Bay and Gisborne, with its underlying mudstones.

Initially, the problem was viewed as a flooding issue as eroded soil was deposited on river plains, raising river beds. The government proposed a Rivers Control Bill, which would authorise engineering works to attempt to control river channels. When the legislation was passed in 1941 it had become the Soil Conservation and Rivers Control Act.

Increased knowledge of soil erosion, and the new legislation, saw a comprehensive system of river catchment management put in place in the 1950s and 1960s. This focused on planting new forests, preventing and reducing soil erosion, and preventing flood damage.

Power generation

The first hydroelectric dams were built before 1900. Catchment-wide planning began after the Second World War in response to rising demand for electricity, as industries, towns and cities grew. From the 1950s more dams were built. Most of these were in the lower and upper Waitaki River basin in the South Island, and on the Waikato River in the North Island. In the late 1960s and early 1970s more sophisticated engineering schemes such as the Tongariro and Manapōuri developments moved water between catchments.

In 1990 nearly 80% of the country’s electricity was supplied by hydroelectric generation. The last major dam to be built was at Clyde in Central Otago, commissioned in 1992. By this time, dam building had become unpopular with many people due to a growing realisation of their environmental effects such as sediment build up behind dams, blocking fish passage and unnatural downstream river level fluctuations.

Increases in electricity demand over the 1990s and 2000s were met by thermal sources (gas, coal and geothermal). Wind power was widely promoted from the mid-2000s, due to the reliability of New Zealand’s winds. However, wind turbines were increasingly subject to public protest, mainly on aesthetic grounds.

Gold and coal

Gold was New Zealand’s major export in the 1860s and 1870s. Coal mining on the West Coast of the South Island, where there are rich reserves of high-grade anthracite coal, reached a peak in the first half of the 20th century. The lower-grade coals of the Waikato are used for power generation, which creates carbon dioxide – a greenhouse gas. Mining also had localised environmental effects such as polluting streams with sediment. The Resource Management Act 1991 has largely reduced these effects.

Both coal and gold mining underwent a renaissance in the late 1990s and 2000s. Solid Energy, the state coal company, was joined by private enterprises, such as Pike River Coal. In the early 2000s the West Coast was producing more coal, mainly for export to East and South Asia, than it had previously.

  1. Doug Campbell, ‘Tackling high country “problem land” at Molesworth.’ Bulletin (Soil Conservation and Rivers Control Council) 2 (1945), p. 13. Back

Regulating economy and environment

‘Think Big’

Up until the 1970s public policy clearly prioritised economic gain through increased resource-based production above environmental stewardship. ‘Think Big’ was a government programme of energy-related projects designed to reduce New Zealand’s dependence on imported oil, and to broaden the basis of exports. It focused on using offshore Taranaki gas reserves for industrial development, and building the Clyde dam in Central Otago for power generation.

Damn the dams

In early 1970s there was considerable opposition to hydroelectric dams, as illustrated by this sarcastic letter to a newspaper:

‘Cromwell could become the underwater capital of New Zealand if it were protected by a large concrete dome before being inundated: the railways could provide waterproof locomotives to keep the connection to the over-world open. The town would of course have to be lit and heated by an artificial sun, and to power it, I propose a dam across the outlet of Lake Wairarapa, which would form New Zealand’s largest lake, stretching back as far as Palmerston North. An added advantage would be the flooding of Pahiatua [Prime Minister Keith Holyoake’s electorate].’

Several of these projects were hastened through the approvals process by the National Development Act 1979, which allowed the acceleration of projects believed to be in the national interest.

The Waitangi Tribunal

The price of downplaying environmental consequences was brought to public attention in the 1980s by an unexpected source – the Waitangi Tribunal. In the ‘environment reports’ in a series of findings on Māori claims against the Crown, the tribunal outlined the costs to health and the environment of careless development practices. In 1983 the first of these reports – on the Motunui reefs (used by Māori for gathering shellfish) in north Taranaki – directly challenged proposed offshore industrial waste discharge plans from Think Big projects. Subsequent reports, on the proposed disposal of treated sewage from Rotorua city into the Kaituna River (1984), and on the discharge of sewage into Manukau Harbour (1985) highlighted the legacy of years of water pollution from towns, cities and industry.

The Environment Act 1986 established the Ministry for the Environment and the Office of the Parliamentary Commissioner for the Environment. This legislation marked a move toward incorporating environmental values in the public policy process.

The Resource Management Act

The Resource Management Act 1991 was hailed as the first comprehensive piece of legislation in the world to require sustainable management of resources. It replaced about 80 earlier acts and orders. It requires all developments (except those for minerals whose use is covered by the Crown Minerals Act 1991) to avoid, mitigate or remedy adverse environmental effects. Consents for use of water, air, soil and land resources must be obtained from the relevant regional, city or district councils, with provision for public participation in the decision-making process.

The resource management process was criticised by developers as time-consuming and expensive, and by environmentalists as giving too much encouragement to developers. Nevertheless, it gradually ended many of the more conspicuous environmental problems of earlier years. An amendment introduced into Parliament in 2009 was intended to speed up the process.

Biosecurity and climate change

The Resource Management Act does not regulate all interactions between the economy and the environment. Strict border biosecurity measures to protect primary industries such as agriculture and forestry, as well as pest management strategies, were authorised under the Biosecurity Act 1993.

Another issue not foreseen by the Resource Management Act was climate change. Separate legislation and government initiatives appeared in this area as it became apparent that the threat of global warming was influencing the relationship between the economy and the environment.

  1. Otago Daily Times, 7 September 1971. Back

Environmental branding and carbon neutrality

Growing environmental awareness

In the early 2000s the government, consumers and companies put more emphasis on the environmental credentials of their activities. Many companies recognised that they could make money out of being green – or appearing to be green. Critics said this was merely ‘greenwashing’, a way of marketing products. However, for some businesses it was driven by genuine concerns about environmental sustainability and climate change.

Brand New Zealand and tourism

Tourism marketers have promoted New Zealand internationally as a ‘clean, green’ country. This phrase came into general usage in the late 1980s, but it echoes an older expression of colonial nationalism that saw New Zealand as a land of natural abundance.

The symbolism became so ingrained that it was in effect a national ‘brand’. The New Zealand Tourism Board began its ‘100% Pure’ campaign in 1999. It highlighted not only magnificent scenery, but also the country’s relative emptiness, its uncrowded vistas and clear, bright horizons. The 2007 version of this campaign, ‘Forever young’, played on the apparent youthfulness of the land and its people.

Carbon neutrality

In 2007 Prime Minister Helen Clark committed the New Zealand public service to the goal of ‘carbon neutrality’. This meant that the operations of central government should not be net contributors of carbon to the atmosphere.

Six lead ministries and departments were to be carbon-neutral by 2012, with all others being well on the way by then. Each was required to post a carbon emissions inventory as the basis for emissions reduction. The balance of emissions needed to be offset with the purchase of carbon credits in accredited New Zealand schemes – the regeneration of native bush was a popular choice. Such schemes were verified through the ‘carboNZero’ programme run by Landcare Research, a Crown research institute.

The government went further, declaring that all of New Zealand should aspire to being carbon-neutral by an unspecified date, making it one of the first countries to aim for this. To be successful, all activities in the economy would have to be subject to a carbon inventory, with follow-up programmes of reduction and offsetting. The underlying intention was to protect New Zealand’s trade in a world where environmentally focused trade barriers were becoming more common.

Corporate environmental responsibility

Food and carbon miles

As New Zealand is so far from markets in Europe and North America, its food exports are vulnerable to consumer movements that encourage more food to be locally produced. This is driven by concern about climate change, with ‘food miles’ being a popular measure of the carbon expended in producing particular products for their market.

New Zealand researchers have contested this assumption, arguing that people should consider the amount of carbon emitted in the entire production process – not just in transporting the final product to market. Using this method, many New Zealand farm products have a relatively low carbon ‘cost’ compared to European and American products (for example farm stock in Europe and America are often fed grain, while New Zealand stock mainly eat grass). This more than offsets the greater distance involved in getting these products to northern-hemisphere markets.

The food miles debate raises the question of how much environmental responsibility companies are willing to assume. As in other countries, New Zealand companies have shown increased interest in making money from being carbon-neutral, or marketing their products using environmental branding and imagery.

Carbon certification

By 2007, 20 organisations and events were certified by carboNZero (a programme run by Landcare Research), and about 100 more were being audited to establish where carbon emissions could be reduced, and how much offsetting was required for the balance.

Two of the big contributions to carbon emissions internationally were power generation and travel. Industries in these sectors were amongst the early corporate adopters of schemes to reduce or offset carbon emissions. Meridian Energy, which supplies much of the South Island with power generated by hydro dams, was one of the first to publicise its carbon neutrality in newspaper advertisements. Yet, its wind farm developments and hydroelectric dams do not come without their environmental costs or visual effects on the landscape.

When Christchurch International Airport received carboNZero certification, it was only the second airport in the world to do so. However, it was the operations of the airport company that were certified. It did not include that of the airlines and planes that use the airport’s facilities.

The national airline, Air New Zealand, has joined a number of other companies in the tourism sector by offering long-haul passengers the chance to buy credits to offset their carbon emissions. However, the rate of uptake has been very low. Some have criticised them as the equivalent of medieval indulgences, with wealthy patrons able to buy their way out of the ‘sin’ of flying without the need to moderate the extent to which they fly.

Environmentally friendly products

The negative impacts of intensive farming and use of chemicals has led to a growing organic food sector. While consumer interest is high, so are the prices for many products. It is only in some cases, such as apples, that this interest has translated into export success. Organic apples accounted for 14% of New Zealand’s apple exports in 2007.

Some products, such as wine and Merino clothing, are marketed as having environment-friendly values. They offer high-end alternatives to New Zealand’s traditional low-cost, low-value outputs (sheep carcases, wool, dairy products), which are increasingly under threat from trade barriers or cheap-labour goods from overseas.


Expensive foods and beverages, whose qualities are designed to appeal to wealthy export markets, are sometimes marketed as being environmentally-friendly. An example is New Zealand wines. The winemaker’s traditional concern with terroir (the characteristics of wine that are determined by place, such as soils and climate) shows how a product can be marketed as being unique and tied to a locality. Wine is frequently labelled and advertised as embodying its district of origin. Some New Zealand wines also advertise their carboNZero rating on their labels.


Buyers of Icebreaker Merino outdoor clothing can enter a code from their clothing tag on the Icebreaker website, allowing them to watch videos of the sheep station where the wool came from. Environmental and social ethics of companies, and traceability of a product from source to shop, are becoming increasingly important in marketing to environmentally-aware consumers.

Merino clothing

Designer clothing made from South Island high-country Merino wool commands premium prices. The fibre has valuable characteristics such as fineness, the ability to repel moisture, and resistance to the build up of dirt. Icebreaker’s outdoor exercise and fashion garments are openly traced back to the sheep stations from which the wool comes – a unique product tied to a locality – and animal welfare is guaranteed.

New Zealand’s ecological impact

Despite initiatives that encourage carbon neutrality, and the popularity of products giving the impression that the environmental impact of New Zealand’s economy is low, the opposite is true. The vast bulk of the country’s economic and consumer activities are not focused on trying to be sustainable.

Critical voices

Questions have been raised about New Zealand’s clean, green image for as long as it has been popular.

In 1993 government and exporters reacted strongly against an article in the British magazine New Scientist entitled ‘New Zealand’s poisoned paradise’. The article drew attention to the country’s poor record, since rectified, in disposal of toxic chemicals used in timber treatment and agriculture. In the same year New Zealand’s Parliamentary commissioner for the environment, Helen Hughes, questioned whether ‘clean and green’ was fact or fiction. New Zealand’s environmental quality is mainly due to its low population and not its citizens being clean and green.

Ecological footprint

An ‘ecological footprint’ is a measure of the area of land and sea area required to support the lifestyle of a country’s population, including the absorption of its carbon dioxide emissions. In 2008 New Zealand’s footprint was 7.7 hectares per person, the sixth highest in the world. The global average was 2.7 hectares, the United States’ was 9.4 hectares and China’s was 2.1 hectares.

This figure is high for three main reasons. First, New Zealand’s economy is based on intensive agricultural industries. Second, neither industry nor domestic consumers are efficient users of energy. The amount of energy used to produce a unit of gross national product is high by OECD standards. This reflects earlier years of cheap energy, which limited the incentive to invest in energy-efficient power systems or housing. Third, New Zealanders have a high rate of ownership and usage of motor vehicles. New Zealanders also have high rates of plane travel.

Externalities of the carbon economy


Economists often talk of externalities – costs or benefits generated by markets for which no one pays. For example a car’s exhaust fumes impose a cost on the global environment, yet the driver of the car does not pay for this. In order to pay the true cost economists say that the cost of emitting the carbon dioxide would have to be offset – by planting some trees, for example. This cost would have to be added to the price of the petrol.


Greenhouse gas emissions

New Zealand’s high ecological footprint is reflected in its high per capita ranking for greenhouse gas emissions – 12th in the world in 2008.

The country had an unusual emissions profile. About half of total emissions were of methane and nitrous oxide from the agricultural sector. Methane comes from sheep and cattle belching, and nitrous oxide is produced through the breakdown of animal excreta and the nitrogenous fertilisers applied to farmlands. Most of the rest is carbon dioxide from transport and power generation. Carbon dioxide emissions have been increasing rapidly since 1990. By 2005 they had risen 62% for transport, and 54% in the energy industries (primarily electricity generation). Although New Zealand’s total greenhouse gas emissions are a fraction of 1% of global emissions, recent upward trends are at odds with the country’s clean, green image.

New ways of integrating economy and environment

New Zealand is a signatory to the Kyoto Protocol, which came into force in 2005 and set voluntary targets for greenhouse gas emissions for developed countries to achieve by 2008–12. The overall aim was for a reduction of 5% less than 1990 emissions levels. New Zealand’s agreed target was slightly less ambitious: to reduce emissions to 1990 levels. This takes into account the increased value of ‘carbon sinks’ over that period due to the planting of trees and regeneration of native bush that absorbs carbon.

Since 1990 New Zealand’s greenhouse gas emissions have risen 25%. The penalty for this excess will be the purchase of credits, the cost of which will depend on the traded price of carbon. The government has a number of policies in place to reduce this liability, including an emissions trading scheme to encourage companies that cut emissions and make it more expensive for those that do not. In addition, there are goals to increase power generation from renewable sources, increase the extent of forests that absorb carbon, and research ways of reducing agricultural emissions.

External links and sources

More suggestions and sources

How to cite this page: Eric Pawson, 'Economy and the environment', Te Ara - the Encyclopedia of New Zealand, (accessed 28 May 2024)

Story by Eric Pawson, published 11 March 2010