Let (G, P ) be an abelian, lattice ordered group and let X be a compactly aligned product system over P with coefficients in A. We show that the C*-envelope of the Nica tensor algebra N T + X coincides with both Sehnem's covariance algebra A ×X P and the co-universal C * -algebra N O r X for injective, gauge-compatible, Nica-covariant representations of Carlsen, Larsen, Sims and Vittadello. We give several applications of this result on both the selfadjoint and non-selfadjoint operator algebra theory. First we guarantee the existence of N O r X , thus settling a problem of Carlsen, Larsen, Sims and Vittadello which was open even for abelian, lattice ordered groups. As a second application, we resolve a problem posed by Skalski and Zacharias on dilating isometric representations of product systems to unitary representations. As a third application we characterize the C * -envelope of the tensor algebra of a finitely aligned higher-rank graph which also holds for topological higher-rank graphs. As a final application we prove reduced Hao-Ng isomorphisms for generalized gauge actions of discrete groups on C *algebras of product systems. This generalizes recent results that were obtained by various authors in the case where (G, P ) = (Z, N).2010 Mathematics Subject Classification. Primary: 46L08, 46L55, 47B49, 47L40, 47L65, 46L05.