What's been decribed as a pioneering deal involving Maori interests, a power company and the Lake Taupo Protection Trust will significantly reduce the amount of nitrogen going into the lake.
Under the agreement, the trust will compensate two Ngati Tuwharetoa entities for changing their farming operations in a move that will reduce the output of nitrogen by 22,000 tonnes a year.
One of those entities, Puketapu 3A Incorporation, will convert 500 hectares of its farmland to forestry and sell the carbon credits it gains to electricity generator Mighty River Power under the Emissions Trading Scheme.
The trust, formed with government and local body funding with the aim of reducing nutrient runoff and seepage polluting Lake Taupo, aims to cut the amount of nitrogen entering the lake by 153,000kg a year by 2018.
It says the latest deal, on top of other agreements, will take it about a third of the way towards its target.