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Report on sustainable development priorities

See… Full report: Sustainable development: Have we got our priorities right? (PDF)

Key points

Sustainable development remains high on the international agenda, even as policy makers are distracted by the political and fiscal fall-out of the global financial crisis. Its continued prominence is illustrated by various countries’ use of fiscal stimulus to fast-track the “greening” of the economy.

For New Zealand, getting its sustainability policy right is important not just because of reputation risks to its trade, but because any regulation should be cost-effective and efficient. This is particularly so in light of New Zealand’s poor economic growth performance, and the need, now more than ever, to ensure value for money from any government expenditure and to avoid undue impositions on private initiatives.

Given this context, this paper considers New Zealand’s current sustainable development policy in light of international approaches to sustainability which focus on maintaining stocks of natural, physical, institutional and human capital. It examines environmental priorities against the following criteria:

• scale of the value at risk
• immediacy of threat
• coverage
• uniqueness
• controllability.

We find that New Zealand’s environmental priorities are not well targeted at sustaining critical stocks or on effects that New Zealand policy can realistically expect to control. Their net benefit to New Zealanders is therefore open to question. This suggests a change in focus could both improve environmental and economic outcomes for the country at large.

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Of the current environmental priorities, work on urban air quality and protecting biodiversity and ecosystems would be the highest priority. This is because of the high loss of life quality and premature death from the former and the high proportion of species at risk that are unique to New Zealand.

Meeting international climate change obligations and maintaining momentum to achieve an effective international agreement also deserves a high ranking. But actually reducing greenhouse gas emissions is a low priority for New Zealand.

Water demand management and water allocation rank high because of their potential to affect availability and cost of water for production and consumption processes.

Lowest priority, apart from greenhouse gas emissions reduction, goes to waste reduction and waste management business support. This is largely because the stocks which they are addressing – landfill space and the employment pool – have high substitutability and limited externalities.

A more comprehensive review of environmental issues using the above criteria may well highlight other areas that could change the agenda and the rankings on the current list.

Using the criteria, we question the prominence of some sustainability policies of recent years. Overall, we suggest the need for some rebalancing of climate change policy away from a focus on emissions reduction towards adaptation to changes, a redirection in conservation policy, and a refocus of waste minimisation initiatives to those that can be demonstrated to produce net benefits.

The broad prioritisation of the sustainable development policy programmes is only a first step to a more efficient policy mix. Indeed, it is one thing to identify that policy should be delivering more in one area and less in another, but the real economic question is how much to deliver across the different areas. Each specific proposal would need to pass a cost benefit test as part of a regulatory impact analysis. Full quantification is a difficult and costly task (and it is not always warranted). In this paper we propose some actions that would support cost benefit assessments.

Another challenge for better allocation of resources to environmental objectives is to establish a consistent approach to identify the marginal values of environmental changes. At present, decisions on environmental changes are being determined in local government or judicial settings, and the weight given to economic evidence is variable. There is thus a high likelihood of inconsistency and inefficiencies in decisions across the country.

Commissioning non-market valuation studies of the sort currently carried out is unlikely to be a cost-effective solution to this issue. But determining environmental stocks and how changes in them affect local demands, supply scarcities and opportunities for substitution, provides a relatively tractable way to reduce that variability and achieve greater efficiency in resource use across the country at large.

See… Full report: Sustainable development: Have we got our priorities right? (PDF)

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