Equitably slicing the pie: Water policy and allocation

•Efficiency and equity impacts of allocating nutrients in a performance-based regulatory setting differs across land uses•There is no single preferred approach to allocating nutrient discharge allowances between sources•Preferred approaches will differ between watersheds based on land use, land characteristics and regulatory stringency•Economic analysis can identify the most efficient allocation option in a given context

Non-point source pollution is deteriorating water quality throughout the world. New Zealand is addressing this issue by regulating land-based nutrient losses, with debates over how to allocate limits across a heterogeneous landscape. We develop a spatially explicit economic land use model to investigate efficiency and equity issues from seven approaches to allocate nutrient discharges across two New Zealand watersheds. We find that the preferred allocation differs across land use, land characteristics, and regulation stringency; and that there is no universal 'best' allocation option. Therefore, decision-makers should focus on, at least, efficiency and equity, and on how to compensate those most affected.