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Putting Productivity First - TPRP 08/01

Sustainable and productive use of New Zealand’s resources

The environment influences nearly every aspect of New Zealand life. It is not only fundamental to the New Zealand way of life but to New Zealand’s economic well-being. New Zealand's land and sea-based primary production and tourism sectors generate about 17 per cent of the economy's GDP.

As a resource-rich country, the management of natural resources in a sustainable way, which allows resources to flow to their most productive uses, is essential in maximising productivity. New Zealand has moved through distinct modes of primary production from the original extensive grazing, to deforestation and grassing, to the topdressing revolution and more recently irrigation and intensive stocking. New Zealand now faces a challenge in achieving environmentally smart growth.

Ensuring the supply of natural resources and managing environmental risks are important for productivity

The continuing trend to more intensive land use demonstrates the two ways in which the environment links with productivity and growth. The first is that increasing scarcity of natural resources as an input into the production process can create a drag on growth as the price of inputs rises and quantity becomes increasingly limited. The second is through the environment’s role as a sink for by-products of economic activity, e.g. greenhouse gases into the atmosphere and nitrogen and bacteria into waterways.

Environmental and economic goals can be complimentary

Some environmental and economic goals are complimentary; sound management of natural resources can help achieve some economic and environmental goals simultaneously. By maintaining high quality natural resources as an input into the production process over the long time horizon, New Zealand is well placed to service increased demand from emerging economies. New Zealand’s tourism industry is also heavily reliant on the image of New Zealand as ‘clean and green’; environmental degradation risks this perception.

Shifts in consumer tastes towards products with low environmental impact may expand opportunities for growth in existing products or development of new higher-value products. Growing international connectedness is creating stronger demand for environmentally friendly production and goods, and greater pressure on real or perceived environmentally negative impacts.

New Zealand’s Resource Management Performance

There are already some emerging threats to New Zealand’s environment

New Zealand performs well in absolute terms on a number of metrics of environmental pollution, but pressures on the environment are increasing. Some pressures are national in scope, such as greenhouse gas emissions, whereas others, such as water scarcity, vary considerably by region. Given the importance of the primary sector in New Zealand’s export mix, it is important that balanced policies are developed and implemented to achieve both economic and environmental goals together, where possible. Further, New Zealand still relies heavily on petroleum products for part of its energy supply.

Agricultural land use is a major contributing factor to greenhouse gas emissions…

New Zealand’s move to more intensive agriculture is reaching limits in key regions in terms of availability of water and impacts on environmental quality, as well as contributing significantly to our national emissions of greenhouse gases. Whilst agricultural land use is not the only cause of increased pollution, it has contributed significantly. Shifts from forestry and sheep and beef production to dairying are also significantly increasing the greenhouse gas intensity of land use. The primary sector is also facing direct competition for resources from recreation and conservation interests as well as growing concern regarding the environmental costs it creates.

…and combined with population growth, this places pressure on freshwater resources

Demand for freshwater resources is increasing due to population growth and greater intensity of land use. Several eastern regions, such as Canterbury and Otago, have surface water catchments that are highly allocated, placing pressure on water resources during times of the year with lower rainfall and creating demand for storage infrastructure to catch peak flows. Nitrogen and phosphorous levels have increased over the past two decades, and increased most rapidly in those rivers and lakes that are already nutrient rich, particularly in the Waikato and Bay of Plenty.

Policy considerations

Use limits must take into account environmental, social and economic impacts and help to create certainty

An important focus going forward is ensuring that government, business and consumers are in a position to make informed decisions about natural resource use and that they face incentives that ensure productive use of resources, while achieving environmental objectives. This would include:

  • ensuring that use limits are set taking into account environmental, social and economic impacts, as well as international commitments and consumer expectations;
  • ensuring that within those limits policy creates certainty and encourages environmental resources to flow to their most productive uses;
  • managing and facilitating adjustments to move sustainable use with minimal disruption consistent with the required pace of change;
  • innovation systems and policies that will help New Zealand maximise the potential net benefits from the transition to a low carbon, sustainable economy; and
  • identifying and capitalising on opportunities arising from a global shift towards sustainable production and consumption.
Both central and regional government have a role to play, but the relationships need to be clarified

A key policy issue in achieving these objectives mentioned above is the need to clarify the relationship between central and regional government. Central government needs to ensure that policies and priorities are clearly stated in terms that regional government can apply, especially where national and regional interests diverge, and that expectations for regional government action are clearly stated and enforced. Regional governments need to identify local priorities, set resource limits and quality targets within nationally agreed parameters, and implement the results through planning and consent processes and direct actions. Some issues, such as climate change, are sensibly led at the national level, while land-use planning benefits from local involvement, and water has primarily regional impacts which can vary widely. Maori interests also require co-operation between central and regional government.

In terms of institutional capability, there are issues at central, regional and local levels. Central government needs to continue to develop its vision of what a sustainable New Zealand would look like, what trade-offs are involved in achieving that vision, or how those trade-offs should be made. Local governments have varying capabilities for implementing sustainability policies and face varying environmental problems and options; they have most of the tools they need but currently have inadequate national guidance.

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