economic incentives for sustainable development guy salmon ecologic foundation 15 june 2004
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Economic Incentives for Sustainable Development
Guy SalmonEcologic Foundation
15 June 2004
Ecologic’s work on incentives for sustainable
development
NZ Business Council for Sustainable Development commissioned a report from us
FRST has funded two projects:- understanding barriers to adoption
- comparing NZ with Nordic countries.
Economic Incentives for Sustainable Development
Sustainable Development is about economic growth that takes proper account of environmental effects and is socially responsible
Economic incentives help to reconcile these potentially conflicting objectives by making it easier to achieve them simultaneously
Price and trading mechanisms – firm about outcomes, flexible about how to get there.
Advantages of IncentivesIncentives give businesses and
individuals choice about how to complyThis lowers the total compliance costIt also stimulates innovative approachesCan pre-empt conflict with stakeholdersMainly useful for environmental goals
but can also be used where social goals are important.
A Value Proposition for Business
More accurate pricing discourages waste generation & excess resource consumption
This releases more resources for growth
With revenue recycling, eco-efficient households and businesses can be better off than they were before.
A Value Proposition for Business
Creates sustainable business opportunities
Strengthens the competitive advantage of sustainable business
Tradeable Resource Recovery Certificates
Tackle our waste mountain Level the playing field
Tradeable Resource Recovery Certificates
Certify TRRCs where sustainable resource recovery has occurred Oblige waste disposers to surrender TRRCs at the landfill gate Allow sale & purchase of TRRCs Increase the recovery obligation with experience.
Congestion PricingSingapore: 95% of cars = 45kph +Melbourne: 13-19 minutes now saved
on average tripLondon: Including bus service
upgrade, traffic reduced by 20%26 other cities have announced plans.
Congestion Charges
How it works: the marginal driver faces the costs he/she imposes on other road users
We should develop our own approaches for NZ cities
HOT lanes to provide a trial?
Congestion Pricing:Equity Issues
Impact depends on specifics of local design, and use of revenues
Existing system not equitableShould be able to achieve improved
equity outcomes with better pricing.
Tradeable Water PermitsPotential to improve resource use and
enable allocation to new usersPossible now – sec 136 RMAOnly Oroua Plan and Proposed
Waikato Plan have adopted TWPsBarriers to wider adoption?
Tradeable Water Permits Need to consider potential for localised
impacts, eg from intensification Amend RMA to separate allocation decision
from the effects management decision Then trade allowances subject to consents Question of resource rent should be faced.
Tradeable Water Permits TWPs are not appropriate in every case,
but – Nelson, Canterbury waters overcommitted
– new users cannot access water Waitaki River – Project Aqua vs irrigation Water markets could address Dr Cullen’s
concern that projects with nationally important benefits should progress
Markets a better approach than “waters of national importance.”
Ensuring A High National Benefit Project Can Prevail
Highest net national benefit should prevail in allocation decisions
If such benefit exists, market will deliver But sec 5 requirements, eg to avoid, remedy
or mitigate adverse effects, should apply equally to all projects whether national or local
Kyoto Carbon Charge and Associated Tax Reductions
Aim is to influence growth toward less emissions-intensive path
Revenue from up to $25/t CO2 charge in 2007
Plus revenue from sale of forest credits
Revenue:
~ $380m @ $10/t
~ $940m @ $25/t
Kyoto Carbon Charge: Potential Tax Reductions
6% reduction in company tax, or
2% cut in GST, or
3% cut in lowest tax rate, to 16.5%, or
1.5% cut in all personal income & company tax.
Energy-efficient households and businesses would come out ahead.
Cleaning Up Urban Air
28 dirty cities & 970 deaths/year from airborne particulates (e.g. PM10)
Cleaning Up Urban Air
Emission trading for large point sources & charges for householders could provide flexibility and funding
Revenue could be used for subsidies to low income households to change over to clean heating
Additional legislative powers would be required.
Where To From Here?
Leadership Legislation
Design Debate
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