5.3.3 Air pollution
Controlling discharges to air is unambiguously assigned to regional councils. To an economist at least, the intent of section 32 is that regional councils should use a cost-benefit framework to consider alternative instruments. The total cost of the health effects of motor vehicle air pollution in New Zealand has been estimated to be around $700 m per annum (Fisher, 2000).
Site specific discharge permits regulate point sources of air pollution. Section 137 of the Act prohibits the transfer of a discharge permit or the interest in such a permit, except where the transfer is to the owner or occupier of the site. If a firm has a permit to discharge into the atmosphere and the firm is sold then the permit accompanies the firm. Legislation prevents the permit from moving independently of the firm. In contrast to setting minimum water flows and water quality standards, there is no mechanism for setting minimum air quality levels or maximum air pollution loadings.
There is no provision in legislation for setting quotas, allocating quotas or requiring firms to participate in a tradable permit scheme. Indeed there is a total absence of an allocation mechanism other than a requirement that councils process applications on a first-come first served basis. According to Bullen at al (2000) there is no legal authority for regional councils or district councils to implement economic instruments to deal with air pollution.
5.3.4 Fisheries
Development of New Zealand’s fisheries over the period 1963-83 occurred within an institutional framework that encouraged growth. By the end of this period economic rent in the fishery was low and important commercial stocks were depleted – that is, development was unsustainable (Sharp, 1997). In 1986 a quota management system (QMS) based on transferable rights, operating within the constraints of sustainability, was implemented. As noted in Section 2, the QMS is structured around individual transferable quota rights and a total allowable catch. The former institution provides the basis for allocating rights across commercial interests. The latter institution is based on scientific information and stakeholder consultation (Batstone and Sharp, 1999). The QMS easily out-performs its predecessor.
Positive rents and sustainable harvest are distinguishing features of New Zealand’s fishing industry. Figure 15 shows the size of the “star” reflecting the quality of rights. In contrast to water use in irrigation, we know that economic rents are positive (the market value for ITQ > 0) and this information can be incorporated into the Ministry of Fisheries’ stock adjustment process. Fishers know the cost of harvest and they will form expectations in the market over stock abundance, market conditions, and so on. Thus managers have some additional information to base the allowable catch recommendations on. Furthermore, the Ministry can examine the impact of regulations in terms of value (Batstone and Sharp, forthcoming). It was pointed out in Section 2 that commercial fishers pay a significant share of the costs of management and research. Taxpayers finance the “public good” component of management and research activity.
5.3.5 Discussion
The RMA uses the term “economic instruments” and asks administrators to undertake an evaluation – appropriate to the case – of the costs and benefits of alternative courses of action. However the Act is silent on whether regional councils are authorised to use economic instruments (Bullen et al 2000). More significantly, the Act precludes the use of tradable instruments in point sources of air and water pollution. Two regional councils have seriously looked at MBIs as a possible solution to air pollution only to be thwarted by infeasibility in law.
In the case of water allocation, tradable permits are feasible, yet only one regional council has implemented a scheme. Adoption of tradable permits in the Oroua Catchment was prompted by submissions (from the Ministry for the Environment and Ministry of Agriculture) to hearings on the water plan. Water use in some areas is not even monitored. Users view monitoring as a precursor to charging and strongly oppose its use. This state of affairs stands in stark contrast to successful tradable rights system underpinning commercial fisheries in New Zealand.
What differences might have led to this outcome? First, fisheries policy has always been the function of a central unit of government. In contrast, since 1991 water resource management has been the primary responsibility of regional government. Thus we could follow the path dependency line of argument and conclude that reforms are somehow linked to the status quo. Second, we might look for reasons in the technical complexity of fisheries management vis-à-vis water resource management. Given that water resource managers must base their allocations on scientific information the issue is really one of relative cost. On the surface, the science of water hydrology would not appear to be any more complex than fisheries science. Third, the bio-economic state of New Zealand’s fisheries prior to reform required action. It might be that the state of water management has not reached a similar point. Maybe the looming contest between abstractive users and other non-abstractive interests will lead to market based instruments. Time will tell. Ownership is not an obvious issue – fish in situ are not owned, what is owned is a right to harvest. The same can easily apply to water. Finally, reluctance to embrace MBIs might be traceable back to pre-RMA days and the prevailing regulatory culture in regional government. Even the Section 32 requirement to assess the costs and benefits of alternative approaches is not sufficient to incentivise serious consideration of MBIs.
5.4 Conclusions
The above examples highlight shortcomings in the current institutional structure. First, the environment court has imposed its interpretation of the overarching aims of the RMA. Its interpretation is now at variance with the political view at the time. The contemporary view is one of “balance”, as opposed to securing “environmental bottom lines”. More significantly the courts interpretation of requiring an overall judgement sits well alongside the key concepts of sustainable development. This may not be a surprise because language of the RMA is remarkably similar to the Brundland definition.
One of the most striking observations has to do with MBIs. The use of MBIs is severely constrained by legislation and by the CAC culture that exists in regional government. For all intents and purposes MBIs are not feasible for controlling environmental externalities – viz pollution. Where scope does exist for their use – eg, water allocation – administrators invariably shy away from their application. Command and control is the favoured instrument and BAT is often selected without economic analysis. Administrators are not able to report on the cost of compliance. In short, we currently have no idea of the true costs and benefits of policies related to sustainable development.
