Gareth Morgan's Opportunities Party is proposing a pollution tax on farmers and other commercial water users.
The policy also calls for herd numbers to be restricted in Waikato and Canterbury - an idea that is even too much for the Greens.
Gareth Morgan says "We don't want the costs of bad practices in dairying falling onto the public or the taxpayer".
His policy has won praise from freshwater scientist Mike Joy who says it "looks pretty good to me,"
"I'm impressed. He's a bit braver than the other parties that's for sure," Mr Joy said.
Federated Farmers William Rolleston is calling the policy "outdated thinking".
"It doesn't recognise some farmers have been doing huge amount of work at catchment level to deal with environmental issues."
Mr Morgan wants to tax land-based industries that pollute waterways, essentially to reward good farmers and give the bad ones a kick in the pants.
His policy would favour those who pollute least and penalise those who pollute the most.
Mr Rolleston says the model isn't fair on farmers, "What are the benefits? Farmers feed every member of the population three times a day, that's a huge social benefit".
Mr Morgan wants rent paid for water by commercial users such as hydrodams and to charge farmers in Waikato and Canterbury if stock levels per hectare are too high.
He's also calling for commercial waters users to pay rent and for a $20 levy on all tourists. He says economic growth and environmental sustainability are not mutually exclusive - New Zealand should be selling a premium product.
"Fonterra and so on haven't been set up like that so this policy does imply quite a restructuring in the industry over time".
Greens co leader James Shaw says the Opportunities Party has followed plenty of Green Party policy, but says Mr Morgan's lacking a transition plan to help indebted farmers move towards deintesification.
Environment minister Nick Smith was not available for comment.