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Institutions and Decision Making for Sustainable Development - WP 02/20

Publication Details

  • Institutions and Decision Making for Sustainable Development
  • Published: Sep 2002
  • Status: Current
  • Author: Ellis, Richard
  • JEL Classification: P28; Q01
  • Hard copy: Available in HTML and PDF formats only.

Institutions and Decision Making for Sustainable Development

New Zealand Treasury Working Paper 02/20

Published September 2002

Author: Basil Sharp


Economic theory provides a coherent framework for analysing the elements of growth and sustainable development. Robust policies and appropriate institutional structures are essential to achieving sustainable development. Environmental problems are rooted in failed markets and their resolution requires government taking some kind of action – to establish property rights, set standards of liability, apply polluter pays taxes, or regulate. There is ample evidence showing that market based instruments can achieve the same environmental outcome at considerably less cost relative to command and control. Rational policy must seriously consider the use of market-based instruments.

A framework for considering the quality of institutional structures vis-à-vis achieving sustainable development is presented. The framework is applied to aspects of the Resource Management Act 1991. Although the Act aims to promote sustainable management it is the primary legal foundation for sustainable development policy. One result of the Act was to devolve a great deal of environmental management and policy to local government. To a limited extent the Act is permissive and creates opportunities for local and regional government to find effective and efficient ways of achieving environmental outcomes that suit their communities. There is a clear preference for command and control in situations where statute provides a legal framework for market based instruments. But the options for using market-based instruments are limited. There are instances where attempts by regional administrators to implement market-based instruments are thwarted either by statute or by coordination difficulties at higher levels of government. Barriers to using market-based instruments are identified along with suggestions for institutional reform.


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Table of Contents

List of Tables

List of Figures

1 Introduction

2 Policies to enhance sustainable development

3 Institutions and sustainable development

4 Framework for assessment

5 Applications to New Zealand

6 Conclusions and recommendations


twp02-20.pdf (528 KB) pp. 1–68

List of Tables

List of Figures


The study was commissioned by the Environment Cluster within the Treasury. I am particularly grateful for the guidance and advice offered by Linda Cameron, David Wood, Sharron Came, Richard Lynch, Mark Sowden, Catherine Adams and Mary-Ellen Fogarty. Assistance with the literature survey was provided by Eithne Barry and peer review by Veronica Jacobsen. I would also like to thank staff of the Auckland Regional Council, Environment Canterbury and Otago Regional Council for their comments.


The views expressed in this Working Paper are those of the author(s) and do not necessarily reflect the views of the New Zealand Treasury. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

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