Ecologic Foundation
  Issues we're working on

Market-based instruments

Integrating the cost of natural resources into the market economy

Irrigated dairy farm at Te Pirita, CanterburyThe economy is the primary institution through which society allocates and encourages conservation of most scarce resources. It is of concern, then, that existing management systems treat many natural resources as essentially free for those who have access.

Users have little incentive to conserve those resources and in some cases, “use it or lose it” policies actually encourage wasteful use. The situation is aggravated when resources are allocated on a “first-come, first-served” basis that encourages a gold-rush mentality.

Furthermore, the public typically receives no direct return from exclusive private use of public resources, even though this use is often made possible by, or enhanced by, government management. The lack of return to the public encourages a “winners and losers” mentality, contributing to community opposition to development and undermining the legitimacy of central and local government decisions about resource allocation and use.

Market-based approaches such as polluter-pays charges, transferable permits, and the like offer the potential to create incentives for businesses and consumers to conserve resources while providing a return to the community. This could, in turn, enable reductions in other taxes.

Our research programme aims to undertand the factors influencing the adoption of market-based approaches. We are also investigating methodologies for integrated assessment of market-based approaches and will identify institutional reforms to increase their use.

Case studies

In October 2005, we commenced studies based on potential new uses of market-based approaches. Findings from the first three studies -- Motueka water allocation, Taupo nitrate trading, and resource rent -- are available below. The results of the next three studies were presented at our “Northern Lights” conference in Wellington on 21 August 2007.

Integrated assessment

Findings of our work on integrated assessment are summarised in a paper, Stakeholders and Evaluative Integration, presented at the annual conference of the International Association of Impact Assessment in June 2007. See also our Review of Integrated Impact Assessment, April 2006.

Motueka water allocation

In a study with Landcare Research, we are developing a proposed framework for water allocation (including transferability of permits), using the Motueka catchment in Tasman District, New Zealand as a case study. An interim report on this work can be found here: Update on Motueka case study: responses to water allocation proposals.

Taupo nitrate trading game

Another study examined the use of a role-playing game to increase stakeholder understanding of a regional council proposal to use establish tradeable discharge allowances for farmers as part of managing nitrate contamination of Lake Taupo in the central North Island. A report on some results from our Taupo work can be found here: Berlin conference paper on Taupo stakeholder workshop & survey

Resource Rent

In our third study, we explored the concept of resource rent, describing what it means in a practical sense and how it might be applied in New Zealand. Download our report: Resource Rent - have you paid any lately?

Ex post case studies

Earlier, we concluded three case studies of market-based approaches that have already been used or considered in New Zealand: transferable quota for fisheries, transferability of water permits, and charges for occupation of coastal space. 

Summary report on these three MBI studies. (2Mb)

Adoption of ITQ for New Zealand’s Inshore Fisheries (1.9Mb)

Institutional Inertia? Case studies of Transferable Water Permits in New Zealand (1.2 Mb)

Implementation Failure: Resource Rents for the Occupation of Coastal Space (1 Mb)

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