4.2  Features of sustainable development

The challenge that sustainable development poses for policy is somewhat different to many other policy problems. In part, differences derive from the multifaceted nature of sustainable development and the emphasis given to the welfare of future generations. Policy that focuses on a single issue – say transportation – has impacts that flow into other domains of policy. If we turn the problem around and consider externalities associated with transportation then instrument choice can potentially spill over into many units of government. Thus a unit of government designed to deal with transport may not be adequately set up to deal with the externalities associated with transport. Differences also follow from the emphasis given to sustainable development as a process of change in which exploitation of resources, the direction of investments, the orientation of technological development and institutional change are made consistent with the future as well as present needs.

Obviously, sustainable development policy should be based on institutions and decision-making structures that lead to sustainable outcomes. Clearly, it is not possible to design an optimal set of instruments if the end-state cannot be specified. More importantly, it is imperative that policy choice be guided by economic efficiency. If we dismiss economic efficiency as a criterion for policy analysis then we run the risk of stifling economic growth and compromising environmental quality. In Section 2 we used the efficiency framework to analyse a range of policy instruments. Where possible empirical evidence was used to establish their relative performance. Table 2 summarises the key concepts of sustainable development.

Source: Sharp, 2001

4.3  Generic framework

Virtually every discussion on sustainability concludes that existing institutions are part of the problem and reform is required. Section 2 provided evidence that traditional CAC approaches lead to unnecessary compliance costs that, in turn, result in lost economic welfare. From the point of view of sustainable development this loss should be of concern because the current generation could achieve the same environmental outcome using fewer scarce resources thereby providing a greater endowment for future generations. Using economic instruments would free up these resources for alternative uses now or in the future.

According to Dovers (2001), too often institutional and policy change does not flow from sound problem definition and consideration of alternative proposals. He extends the “adaptive management” approach that was developed by ecologists to cope with complexities and uncertainties, to include institutions. Five key principles for adaptive institutions are identified:

Persistence: where efforts are maintained over time.

Purposefulness: efforts are supported by stated principles and goals.

Information richness and sensitivity: seek best information and make widely available.

Inclusiveness: full range of stakeholders are involved in policy formulation and in management.

Flexibility: prepared to experiment.

Goodin (1996) proposes five desirable principles of institutional design:

Revisability: learn through experience, and change trajectories and practices as required.

Robustness: respond appropriately to more or less significant pressure.

Sensitivity to motivational complexity: open to a variety of motivations and values.

Publicity: publicly defensible and can gain political and community support.

Variability: learning enhanced through encouraging experiments.

It is not possible to specify an optimal institutional design. At best we can check whether the attributes of institutional structure and decision-making are consistent with the general notions of sustainable development. Table 3 links the attributes of institutions with the challenges of sustainable development shown in Table 2.

4.3.1  Locus of decision-making

The distinction between decentralisation and devolution should borne in mind when dealing with policy in New Zealand. Decentralisation involves central government making decisions through branch offices. Devolution involves transferring decision rights to regional/local government. As Guerin (2002) notes the issue of subsidiarity is most obvious when dealing with the roles of the levels of government and the mechanisms for coordinating between and within levels. Central government retains ultimate control and accountability. The ability of local government to tax at all is dictated by parliament and can only be changed by parliament. In the context of sustainable development policy in general and implementing MBIs in particular central government occupies the high ground – it delimits the rights and duties of lower levels of government.

The allocation of rules and accountabilities between levels of government is determined not by constitution but by the processes of central government policy formulation. Thus local government tends to operate, to some extent, as an agent of central government administering or interpreting the rules set centrally (Guerin, 2002). For example, the Resource Management Act:

• prescribes procedures and criteria;
• leaves actual decisions at the regional/local level but provides for central government override;
• local government activities are divided into 3 categories
  • prohibited, policy is set and implemented nationally,
  • mandatory, policy set nationally and implemented locally, and
  • discretionary, policy set and implemented locally.

Transfer of functions between levels of government should be coupled with transfer of accountability. Guerin (2002) offers the following principles for allocation and co-ordination of functions:

• The allocation of powers must be addressed from both the private (individual and firm) and public policy point of view. As noted earlier, external institutions are important to achieving consistent regimes. However, at the same time account should be taken of the diversity in preferences so that the jurisdiction of decision-making is aligned with the jurisdiction of effects.
• Minimising of transaction costs.
• How the policy rules are set for different policy areas is more difficult. For example, the public good nature of global climate change suggests centralised provision.
• Inter-and-intra government co-ordination can take the form of consultation, delegation or joint planning and/or implementation
• Accountability and participation across and between levels of government.
• The ability to “optimally” allocate responsibilities between levels of government requires clear criteria. Kerr, Claridge and Milicich (1998) suggest the following:
  • Where the relevant expertise and knowledge exists.
  • Where effective accountability arrangements exist eg, close to those affected but avoiding small group domination.
  • How best to make trade-offs between achieving the specific needs of one community group and delivering consistency between jurisdictions.
  • Assuring that inter- and intra-national commitments are met.

Bermann (1994) suggests that local governance is valued because it facilitates effective accountability of decision makers to those affected; allows self-determination and political liberty; has the flexibility to take account of local differences; and preserves identities and diversity.

Guerin (2002) concludes by saying that the notion of subsidiarity provides a broad framework but does not provide the answer. In the end, decisions should consider the availability of information; the location of costs and benefits of the decision; the accountability of decision-makers; and cost-efficiency.