4    Law and Institutions

There is little point in designing a new rights framework without taking account of the structure in which it will need to operate. “The choice of an agent responsible for the implementation of a system of economic instruments, and the careful construction of incentives that support policy objectives, can be just as important as the introduction of economic instruments” itself while “governments must also acknowledge that policy-making takes place only within the context of formal and informal institutions that are key to success” (Andersen 2001 :23-24).

One element of this is existing perceptions of property rights by users and other stakeholders. Any changes will need to allow for resistance due to such perceptions and for time-lags in the adjustment of perceptions once the changes are in place. Other key institutional elements are the legal framework and central and local government structures.

4.1 Statutory Frameworks

A key issue for designing use rights is the extent to which their implementation will require changes to the existing legal framework. This can range at the central government level from legislative amendment to regulatory change to statutory codes, and at the local government level from plan changes to new rules to new bylaws. To the extent that changes can be made generic, and therefore limit the complexity and frequency of formal processes and the difficulty of compliance, there are clear advantages in doing so. The key pieces of legislation will be the RMA and the Local Government Act (LGA) 2002.

The RMA allows the use of some economic instruments such as financial contributions to offset environment impacts, non-compliance fees or fines, bonds, transferable development rights and in some circumstances transferable permits (Kearney and Sinner 1997). It is not, however, seen as encouraging or particularly facilitating such mechanisms and limits the ability of councils to operate use rights schemes through its restrictions on how and when coastal[9], water[10] or discharge permits[11] can be transferred.[12] The Act also constrains councils by preventing transfers of parts of a consent, constraining maximum terms of consents, and not allowing for non-use of resources (consents cannot be issued for non-use and consents for use automatically lapse if not used within five years, or longer specified period).[13] The Coastal Tendering provisions of the RMA (Part VII) have not been used. A new regime for defining aquaculture management areas (AMAs) and tendering space within them is now being developed.

The LGA now provides councils with greater discretion in their own activities through the power of general competence but this does not extend to regulatory powers which are specified and constrained by procedures or to taxing arrangements, which are limited to rates on land under the Local Government (Rating) Act 2002. It also facilitates joint provision of services or transfer of responsibilities to other councils which can help address capability and economy of scale issues.

Use rights can take a number of forms of varying complexity but do involve a minimum cost in development and implementation which must then be offset by benefits. In the New Zealand context, generally only central government will be in a position to undertake that work but the regime must then be capable of implementation by regional councils of varying scale and competence across what can be quite small individual markets, such as specific river catchments. This leads towards a strong preference for as simplified a core statutory framework as possible, designed for councils to pick up and apply wherever it may be feasible to do so.

4.2 Central and Local Government

Both central and local government have roles in defining and operating use rights regimes, with the extent of central government involvement depending on factors such as the degree of national interests in particular locations or resources (eg; climate change policy and renewable generation) and the degree of regional variation in resource availability and use. Some issues will be better dealt with at regional or local, rather than national level. This will be particularly the case where the impact is constrained such as within a river catchment, or where transport costs allow local price differentiation, such as for waste disposal.

The RMA provides for central government to set priorities and rules through National Policy Statements (NPSs) and National Environmental Standards (NESs), but these have not been used to any real extent which has limited the guidance available to regional councils in performing their tasks and allowed more regional variation than was perhaps originally expected.

There are also variations in regional councils’ resources and performance, part of which reflects their sheer diversity in scale. This factor, combined with the national significance of some issues faced by councils, can lead to calls for central government support which can cause conflicts with the clear division of responsibility between the levels of government and risk undermining the financial independence of local government. Better legislative frameworks to support resource assessment and allocation, and expanded guidance for local government on how to design and implement regimes, are less problematical but there is a question of whether these can deliver enough support. A distinct issue is the extent to which national and local interests and priorities can diverge, resulting in decisions that clash with the national interest or delays in implementing centrally supported initiatives. These are factors that must be considered in designing a use rights regime which depends on local implementation.