Economic incentives benefit business and community
18th November, 2003
New study reveals
economic incentives benefit
business and the community
A new report has highlighted economic incentives as the best way to tackle many of New Zealand’s major planning problems like road congestion and resource shortages.
The report - commissioned by the New Zealand Business Council for Sustainable Development (NZBCSD) - finds that economic incentives provide affordable solutions at minimal cost to a wide range of problems now facing the country.
The study highlights a number of economic and environment issues requiring urgent attention:
- Congestion and delays in Auckland are costing a billion dollars per annum and affect all New Zealanders because 75% of the country’s imports and 42% of its exports pass through Auckland’s ports and airport.
- Air pollution is not just a big city problem. Research suggests that in Nelson alone up to 40 premature deaths could be occurring each year due to the effects of fine particulates.
The report’s message is clear and consistent: through the use of incentive based policies and recycling revenues into reduced taxes, New Zealand can reasonably expect to reconcile its Kyoto obligations, congestion and other resource issues with its desire for employment growth and improved living standards.
Economic incentives broadly based around “user pays” initiatives are effective because they reward positive action by business and individuals towards sustainable development. Sustainable development is about economic growth that takes proper account of environmental effects and is socially responsible. Economic incentives provide an efficient method of reconciling the three objectives.
There are two main types – resource user charges and environmental markets. In both cases, businesses which reduce their impact on the environment save money.
Applications highlighted in the report are aimed at improving the health of rivers and city air, reducing traffic congestion, reducing waste and curbing greenhouse gas emissions.
The report calculates that the Government’s proposed carbon charge and Kyoto forest credits could enable up to $940 million of tax cuts that would benefit individuals and small businesses.
To take full advantage of the potential for using economic incentives, the report calls on the Government to make amendments to the Resource Management Act, Local Government Act, and Land Transport Management Act.
The report is being launched by NZBCSD guest Susan Kramer who is a Member of the London Transport Board in the UK. Since being introduced in central London this year, congestion pricing has led to a 20% reduction within the target zone and a doubling of average speeds.
Infrastructure Auckland is one of a number of NZBCSD members involved in the study. Richard Maher, CEO, says road pricing offers one effective solution. But Mr. Maher says the road pricing approach used overseas cannot simply be transferred to New Zealand:
“We support a pricing system which addresses the major congestion issues faced by all drivers on Auckland’s motorways and arterial routes rather than the ‘cordon charge’ approach adopted in cities like London,” he says.
“Transport shapes our cities. Some cities such as London were initially designed around the horse and cart. Auckland was designed around the motor car. But the amount of traffic on Auckland’s roads today means most people are faster on foot. Politicians and businesses have been talking for years about the problems; we are delighted that this report at last provides real solutions. ”
Suzanne Snively, Economist at PricewaterhouseCoopers, NZBCSD member was initially surprised by the magnitude of the net benefits to sustainable development based on the report’s conclusions.
“The project team studied how economic incentives have been implemented in other countries and in a variety of sectors. As such, the analysis demonstrated the conditions where economic incentives can work. The analysis also identified the net benefits for people, for businesses and from the standpoint of local and national government. Ultimately everyone’s goal for a sustainable New Zealand has to be less congestion, less pollution and continuous access to water and energy and this report provides an understanding about how this can be done and suggests a number of approaches that can be adapted for the benefit of New Zealand.“
Report Authors – What They Say:
Guy Salmon, Ecologic:
“Consider a river where too
many water permits have been issued by the regional council.
The river may meet the demands of irrigators and processing
factories most of the time, but during the summer it is
reduced to a trickle. The community wants to restore the
river but does not want to lose jobs in the businesses,
which draw on its water. The council decides to reduce the
summer peak water draw-off by 30% but faces the challenge of
selecting winners and losers.
One solution is to create a water market whereby all summer water allocations are reduced but the permit holders are able to trade among themselves. Some users will cut their usage and sell their surplus entitlements to those who cannot afford to cut back. The end result will be a win-win for the community and for business.”
The full report can be downloaded from www.nzbcsd.org.nz/economicincentives or hard copies are available on request – contact firstname.lastname@example.org
The NZBCSD was established in May 1999 and is a coalition of 44 leading businesses with a shared commitment to sustainable development. It is a partner organization to the World Business Council for Sustainable Development which is an alliance of 165 international companies, from more than 30 countries.
Mighty River Power
MWH New Zealand
Ports of Auckland