the principle of nda is to regulate the leaching of nitrogen at the output level and leave some flexibility to farmers with respect to their farming practices as long as they observe pollution limits around livestock farms operating in the lake taupo catchment area are now being allocated their discharge allowances based on the measurements of the nitrogen they are leaching the ndas can be traded among farmers this underscores one important feature of pollution trading schemes such as nda they typically enable costeffective solutions for specific environmental problems but can be demanding in terms of design and administration since the mid s a series of studies in new zealand have focussed on this issue although covering different farmindustry types and done in different economic and policy situations these studies help to understand the relative importance of farming risks and to see how the farming risk environment has changed over time