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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:

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economic incentives for sustainable development

Economic Incentives for Sustainable Development

Guy Salmon

Ecologic Foundation

15 June 2004

ecologic s work on incentives for sustainable development
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 development1

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
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
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 business1
A Value Proposition for Business
  • Creates sustainable business opportunities
  • Strengthens the competitive advantage of sustainable business
tradeable resource recovery certificates
Tradeable Resource Recovery Certificates
  • Tackle our waste mountain
  • Level the playing field
tradeable resource recovery certificates1
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
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.
congestion charges
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
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
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 permits1
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 permits2
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
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
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 @ $10/t

~ $940m @ $25/t

kyoto carbon charge potential tax reductions
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
Cleaning Up Urban Air
  • 28 dirty cities & 970 deaths/year from airborne particulates (e.g. PM10)
cleaning up urban air1
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
Where To From Here?
  • Leadership
  • Legislation
  • Design
  • Debate