Over the past two decades, major increases in production have occurred in the New Zealand dairy industry. This has required the use of externally sourced inputs, particularly fertiliser, feed supplements, and irrigation. Contemporary New Zealand dairy farming practice incurs environmental externalities: impacts that are not paid for by the dairy farmer. Hence, the public is left to deal with these externalities, both regarding the economic responsibility and environmental degradation. This study estimated that the economic cost of environmental externalities is higher than the 2012 dairy export revenue of $11.6 billion.