Key messages from Prof Basil M H Sharp's Guest Lecture presented at the Treasury on 11 June 2002.
Prof Basil M H Sharp
University of Auckland
Basil Sharp's presentation built on earlier work that focussed on developing an integrated framework for sustainable development. An overview was provided of the economic foundations for designing policies to enhance sustainable development. Basil indicated that 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 regulatory approaches based on command and control.
A framework for considering the quality of institutional structures vis-à-vis achieving sustainable development was presented. The framework was applied to a limited number of issues in New Zealand, and highlighted the progress made towards implementing policies to achieve sustainable development. 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 instruments were identified along with suggestions for institutional reform.