Economic Incentives for Sustainable Development

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Economic Incentives for Sustainable Development

• Guy Salmon
• Ecologic Foundation
• 15 June 2004

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Ecologics work on incentives for sustainable
development

• NZ Business Council for Sustainable Development
  commissioned a report from us
• FRST has funded two projects
• - understanding barriers to adoption
• - comparing NZ with Nordic countries.

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Economic Incentives for Sustainable Development

• Sustainable Development is about economic growth
  that takes proper account of environmental
  effects and is socially responsible
• Economic incentives help to reconcile these
  potentially conflicting objectives by making it
  easier to achieve them simultaneously
• Price and trading mechanisms firm about
  outcomes, flexible about how to get there.

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Advantages of Incentives

• Incentives give businesses and individuals choice
  about how to comply
• This lowers the total compliance cost
• It also stimulates innovative approaches
• Can pre-empt conflict with stakeholders
• Mainly useful for environmental goals but can
  also be used where social goals are important.

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A Value Proposition for Business

• More accurate pricing discourages waste
  generation excess resource consumption
• This releases more resources for growth
• With revenue recycling, eco-efficient households
  and businesses can be better off than they were
  before.

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A Value Proposition for Business

• Creates sustainable business opportunities
• Strengthens the competitive advantage of
  sustainable business

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Tradeable Resource Recovery Certificates

• Tackle our waste mountain
• Level the playing field

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Tradeable Resource Recovery Certificates

• Certify TRRCs where sustainable resource
  recovery has occurred
• Oblige waste disposers to surrender TRRCs at the
  landfill gate
• Allow sale purchase of TRRCs
• Increase the recovery obligation with experience.

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Congestion Pricing

• Singapore 95 of cars 45kph
• Melbourne 13-19 minutes now saved on average
  trip
• London Including bus service upgrade, traffic
  reduced by 20
• 26 other cities have announced plans.

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Congestion Charges

• How it works the marginal driver faces the costs
  he/she imposes on other road users
• We should develop our own approaches for NZ
  cities
• HOT lanes to provide a trial?

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Congestion PricingEquity Issues

• Impact depends on specifics of local design, and
  use of revenues
• Existing system not equitable
• Should be able to achieve improved equity
  outcomes with better pricing.

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Tradeable Water Permits

• Potential to improve resource use and enable
  allocation to new users
• Possible now sec 136 RMA
• Only Oroua Plan and Proposed Waikato Plan have
  adopted TWPs
• Barriers to wider adoption?

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Tradeable Water Permits

• Need to consider potential for localised impacts,
  eg from intensification
• Amend RMA to separate allocation decision from
  the effects management decision
• Then trade allowances subject to consents
• Question of resource rent should be faced.

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Tradeable Water Permits

• TWPs are not appropriate in every case, but
• Nelson, Canterbury waters overcommitted new
  users cannot access water
• Waitaki River Project Aqua vs irrigation
• Water markets could address Dr Cullens concern
  that projects with nationally important benefits
  should progress
• Markets a better approach than waters of
  national importance.

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Ensuring A High National Benefit Project Can
Prevail

• Highest net national benefit should prevail in
  allocation decisions
• If such benefit exists, market will deliver
• But sec 5 requirements, eg to avoid, remedy or
  mitigate adverse effects, should apply equally to
  all projects whether national or local

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Kyoto Carbon Charge and Associated Tax Reductions

• Aim is to influence growth toward less
  emissions-intensive path
• Revenue from up to 25/t CO2 charge in 2007
• Plus revenue from sale of forest credits
• Revenue
• 380m _at_ 10/t
• 940m _at_ 25/t

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Kyoto Carbon Charge Potential Tax Reductions

• 6 reduction in company tax, or
• 2 cut in GST, or
• 3 cut in lowest tax rate, to 16.5, or
• 1.5 cut in all personal income company tax.
• Energy-efficient households and businesses
  would come out ahead.

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Cleaning Up Urban Air

• 28 dirty cities 970 deaths/year from airborne
  particulates (e.g. PM10)

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Cleaning Up Urban Air

• Emission trading for large point sources
  charges for householders could provide
  flexibility and funding
• Revenue could be used for subsidies to low
  income households to change over to clean heating
• Additional legislative powers would be required.

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Where To From Here?

• Leadership
• Legislation
• Design
• Debate