Economic Incentives for Sustainable Development Guy Salmon Ecologic Foundation 15 June 2004

Ecologic’s 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.

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.

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.

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.

A Value Proposition for Business  Creates sustainable business opportunities  Strengthens the competitive advantage of sustainable business

Tradeable Resource Recovery Certificates  Tackle our waste mountain  Level the playing field

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.

Congestion Pricing  Singapore: 95% of cars = 45kph +  Melbourne: minutes now saved on average trip  London: Including bus service upgrade, traffic reduced by 20%  26 other cities have announced plans.

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?

Congestion Pricing: Equity 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.

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?

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.

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 Cullen’s concern that projects with nationally important benefits should progress  Markets a better approach than “waters of national importance.”

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

Kyoto Carbon Charge and Associated Tax Reductions  Aim is to influence growth toward less emissions-intensive path  Revenue from up to $25/t CO 2 charge in 2007  Plus revenue from sale of forest credits  Revenue: ~ $10/t ~ $25/t

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.

Cleaning Up Urban Air  28 dirty cities & 970 deaths/year from airborne particulates (e.g. PM 10 )

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.

Where To From Here?  Leadership  Legislation  Design  Debate