Economic Growth within Environmental Limits

Address to the Resource Management Law Association Seminar, 28 March 2018

Tēnā koutou katoa

Thank you for the invitation to be here. I want to talk this evening about economic growth within environmental limits.

I acknowledge our hosts, Minter Ellison Rudd Watts and RMLA, for organising this seminar, and the many members of RMLA who have turned out here tonight, and those tuning in to the livestream around the country. I acknowledge Judges of the Environment Court present. I appreciate all of you taking the time to hear from me.

We are facing some really big challenges as a country, and I’ll cover mainly the environmental ones. Challenges like climate change, which we are seeing with the hottest summer on record in New Zealand and the strength of recent storm events. Unfortunately these will keep on coming, and continue to test our resilience. Challenges like the shocking decline in the health of our waterways, which I can tell you is top of mind for me as Environment Minister. And increasing homelessness and the critical lack of affordable homes, in Auckland and elsewhere around the country.

This is the context for the decisions and investments the Government is making. Sound policy is important to achieving better outcomes for New Zealanders.

Government can’t achieve change alone, and nor should we try to.

On resource management issues, the RMLA plays an important role in providing a platform to debate policy and put forward recommendations to the Government. Your diverse membership shares the common goal of achieving best practice in resource management law and practice – a goal I share.

Aside from being Attorney-General, I hold Ministerial portfolios for the Environment, Trade and Export Growth, and Economic Development; and I’m also an Associate Finance Minister.

These portfolios have a broad scope, and I feel really privileged to have been entrusted with them. Putting them together recognised the inter-related nature of the challenges we face. It is a deliberate part of this Government’s vision for improving the wellbeing and living standards of all New Zealanders through productive, sustainable and inclusive growth.

I am particularly pleased to be the Environment Minister. Much of my professional life as a lawyer before becoming an MP was spent around environmental and resource issues, including advocating for water conservation orders. As a Minister in the Clark government, I held the Climate Change and Energy portfolios. As Land Information Minister, I helped protect fantastic landscapes in the South Island high country, and to improve public access to them. Sadly a lot of the work I did was undone by the National government that followed.

My drive to pursue environmental causes comes from my passion for the outdoors. I swim, I tramp, I camp and I ski. I gather shellfish. I go floundering, and pretend to surf. All these experiences enrich and sustain me. Protecting our environment is hugely important to me, and it’s a lifetime commitment.

My pre-parliamentary business career included a number of start-up ventures across a range of endeavours, including A2 Milk. I am an experienced CEO and company director. I know from experience that we can achieve economic, export and productivity growth within environmental limits.

In our first 100 days in government we took some pretty big steps across housing, health, education, support for families, and in planning action in respect of climate change.

One of our key ongoing priorities is how we shift New Zealand’s economy towards a more sustainable model, one where we add value to products and services while avoiding degradation of the environment.

The path ahead for New Zealand

New Zealand has enjoyed relatively strong nominal economic growth over recent years, bolstered by strong commodity prices, population growth and tourism. More inputs, mostly people, have been added into the economy but, with population growth stripped out, per capita growth has been poor at about 1 per cent per annum.

We also have a productivity problem. Capital has been misallocated, including into speculative asset classes such as rental housing, rather than into growing our points of comparative advantage.

And there have been growing disparities in the distribution of benefits of growth, across regions and between groups in society.

Under this Government, New Zealand will be a fairer and more prosperous country. We want more than equality of opportunity: we want more equal outcomes, no matter your circumstance at birth, or where you live. We aim to diversify our exports and markets as we move from volume to value. We want to change investment signals so more capital goes towards the productive economy rather than unproductive speculation.  Where we need immigration, it will be more targeted.

We’re fortunate to be a country with an exceptional natural resource base. People see New Zealand as an attractive place to visit or to live, and we take great pride in this. But economic management over recent years has put pressure on our social wellbeing and our environment. 

We are seeing environmental limits and other pressure points being reached at alarming rates. The country’s homelessness rate of nearly 1 per cent of the population is higher than any other OECD country. Pressure on our freshwater through intensification of land use has led to poor water quality and in turn threatens recreational use and our country’s image. Alarmingly, 72 per cent of native freshwater fish are threatened by or at risk of extinction, including four whitebait species, lamprey, and longfin eels.

The scale of change needed is significant. It will require co-ordinated and decisive action right across central and local government, businesses across a range of industries, subject matter experts and decision-makers like yourselves – and others such as scientists, academics and of course our communities.

Our natural capital in New Zealand is huge – in particular the atmosphere, freshwater, soil, fish stocks and biodiversity – and of course is of special importance to our living standards and economic activity.

I often quote former World Bank economist Herman Daly: ‘The economy is a wholly owned subsidiary of the environment, not the reverse.’

This is especially true of the primary sector and tourism.

Our cultural identity also depends on our natural capital. That’s why it’s critical that we collect data and evidence properly, in order to support well-founded policy and measure progress. This will ensure the sustainability of the goods and services our natural capital generates, and also create accountability for the Government.

As you know, land is where the majority of pressures on the environment start. Land and land use by people is a common theme running across issues that we face such as water quality, climate change, natural hazard risks, biodiversity and housing affordability. Decisions about what we use land for, and the management practices, have a significant impact.

The next report in the Environmental Reporting series by the Ministry for the Environment (MfE) and Statistics NZ will be focused on land, and is due to be released on 19 April. This report will broadly cover the state of our land including soil and biodiversity – covering natural pressures such as earthquakes; human pressures such as climate change and land-cover change; and land use impacts from urbanisation, forestry, agriculture and horticulture, waste and contamination.

This will inform policy decisions about the environment and how our economic activity is influencing it.

Building a productive, sustainable economy

As Minister for Economic Development and for Trade and Export Growth, my priorities reflect the reality that our economic success will be underpinned by a more productive, sustainable, competitive and internationally-connected New Zealand.

It is great to see growth in the value of output from our productive sectors. The Government wants to work with them to ensure that the right conditions are in place for firms to thrive and trade, and that we maximise the value of the goods we produce, and encourage high-quality investment in New Zealand. We want our sectors and regions to realise their full potential.

Economic growth and trade helps us create a greater number of sustainable jobs with higher wages and an improved standard of living for all New Zealanders.

However, the Government is clear that economic growth cannot continue to be at the cost of the environment. This is not idealism: it is grounded in common sense. Protecting our environment safeguards our economy in the long term – our country has built its economy and reputation on our natural capital. This is not just the view of the Labour Party. It is also the view of our coalition partner New Zealand First, and of the Greens, our confidence and supply partner.

Investing in wellbeing

A healthy environment underpins the wellbeing of our communities.  

Our vision looks further than financial matters. By 2019 the Government will introduce a living standards framework that measures the impact of policies on the four ‘capitals’ – human, social, natural, and financial or physical capital.

We are developing a comprehensive set of indicators to better show how we are doing as a country — and which holds us accountable to New Zealanders.

With that in mind, I want to detail three priority areas for the environment – freshwater, climate change, and urban development – or in slightly expanded form, improving freshwater quality, pushing towards net zero emissions while also adapting to the inevitable effects of climate change, and providing affordable homes.

Freshwater

Let’s start with water. Clean water is vital to our continued prosperity. Our rivers and lakes are a taonga of significance to Māori and others, and a favourite place of recreation for New Zealanders. Access to safe drinking water is a basic human right, and the life-supporting capacity of water is critical for freshwater species. Water underpins agriculture, horticulture, hydro-generation, tourism and our international image.

In recent years we have seen continuing degradation of our freshwater and waterways caused by contamination such as effluent and nutrients from intensive rural land use, by poor land use practice, and by inadequate wastewater separation from stormwater in some urban areas. We have also seen, shockingly for a first world country, significant contamination of drinking water. The second Havelock North drinking water report made clear how widespread the problem is.

I am absolutely committed to improving the quality of our freshwater – that is my number one priority as Environment Minister. The most important river to most New Zealanders is the one that we live closest to. In summer, when flows are lower and most swimming occurs, you should be able to pop down to your local swimming spot and put your head under without getting crook.

I grew up swimming in Otago rivers, most of which are not as clean today. Even now in summer when I find a river deep enough to swim in, it’s hard to keep me out.

Our freshwater resource needs to be protected and restored, and that can happen if we all work together.

In that regard, my first priority is to stop further degradation. If we can ‘hold the line’, then people will have social licence to continue operating while cleaning up the freshwater resource. I aim to have past damage reversed within a generation. I am working on a comprehensive programme to achieve this. I am determined to see water quality materially improving within five years; and for us to develop an effective, durable and long-term system for managing water quality and use.

We can’t change the past. In environmental matters there are only three ways to change the future – education, regulation and price. Of these the most important for water is regulation, at both the local and national level; and the NPS on Freshwater Management (Freshwater NPS) is the main regulatory tool.

In my view, we need a new and more comprehensive Freshwater NPS, which I am looking at now. I expect that the new NPS will cover sedimentation (both rural and urban), nutrient allocation, and land use intensification. We don’t need repeated battles up and down the country on allocation of nutrient discharges. And I am reviewing the attributes and deadlines in the NPS.

While only a few per cent of our waterways are in urban areas, they are some of the dirtiest in the country. Most are in better condition than 20 years ago because of efforts to address point source discharges. But as we have seen over the summer, a notable exception to this has been Auckland, which has ongoing problems with wastewater discharges polluting beaches after heavy rainfall events. The Government is looking to improve the management of wastewater, stormwater and drinking water infrastructure.

It is pleasing to see that in response to public pressure, and showing great leadership, Auckland Council intends to bring forward $856 million of investment over the next 10 years to reduce stormwater overflows into the sewerage system. This will be real progress and is expected to reduce sewage flows to city beaches by between 80 and 90 per cent.

This illustrates the need to make progress cleaning up freshwater in both rural and urban areas.

Under the Freshwater NPS, regional councils are required to identify where improvements in water quality need to be achieved, and which types of limits need to be imposed to do so.  

Regional councils are also responsible under the RMA for undertaking effective compliance, monitoring and enforcement (or CME) actions for rules and consents. MfE has stepped up its focus on this area and has developed draft guidelines, currently being consulted on, to assist councils with these responsibilities. My expectation is that CME activity will be improved. It’s fair to say it’s somewhat variable at the moment.

 

 

Climate Change

I think most of us accept that climate change is the greatest environmental challenge facing the world, and its impacts are already becoming evident. If we do not urgently reduce our emissions of greenhouse gases, warming will increasingly disrupt the climates that our industries depend upon, sea level rise will impact our coastal cities and towns, and ocean acidification will disrupt the marine food chain. That is why tackling climate change is another top priority.

Climate Change Minister James Shaw is leading this important work programme. The Government intends to return New Zealand to being a leader in the global fight against climate change. We will be ambitious in our actions on both mitigation and adaptation, and will seek to create solutions that are enduring. This can justifiably contribute to New Zealand’s reputation as a responsible international player.

If New Zealand can’t get this right, with all our advantages – such as renewable energy resources, huge natural capital, an educated population, democracy and the rule of law – who can? We should be a beacon of hope for the world, rather than another source of despair.

Zero Carbon Act and the Climate Change Commission

The Government will introduce a Zero Carbon Bill to Parliament this year. This will set a net zero emissions target for 2050; and establish an independent Climate Change Commission, made up of a range of experts, based on the United Kingdom model. Once passed, the Zero Carbon Act will be a catalyst for the transformational change we need to build a clean economy, and to embrace the huge opportunities it will bring.

The Zero Carbon Act will help hold this Government, and successive ones, to account. It will create the institutional arrangements needed to address the tension all governments face between the long-term nature of climate change and short-term political cycles.

The Zero Carbon Act will provide the certainty businesses and producers need for their investment decisions, and it will drive growth and innovation. Setting a trajectory for climate change action now will mean they are well positioned to anticipate and meet growing market demand for low-emissions goods and services. 

Taking a transparent and participative approach is critical to the success of this legislation and the policies that underpin it.  All sectors of the community will have the opportunity to help shape its content.

Under Minister Shaw, MfE is preparing for consultation on the scope of the legislation, which will take place around the middle of this year. The aim is for the Zero Carbon Bill to be introduced to Parliament by October. Consultation will focus on the definition of the net zero 2050 target, and the role, function and powers of the Climate Change Commission.

The Climate Change Commission will help guide New Zealand towards a low carbon economy and net zero emissions by 2050, by recommending interim emissions reduction targets and providing advice. It will look at how we transition to 100 per cent renewable electricity by 2035. We’ve made pretty good progress on this already, from 65 per cent when I became Energy Minister – and set a target of 90 per cent by 2025 ­– to about 85 per cent now depending on hydrology.

The Commission will also look at how and when to bring agriculture into the New Zealand Emissions Trading Scheme (ETS) – and if agriculture is to be included, how the process should be managed.

The Commission is likely to be established in mid-2019. In the meantime, so as not to lose momentum, the Government is establishing an Interim Climate Change Committee. This is expected to be operational in May this year, and will begin work that the Commission will subsequently take over.

Emissions Trading Scheme

The ETS was introduced in 2008, when I was both Climate Change and Energy Minister. It was by international standards advanced, with its inclusion of all gases and all sectors of the economy. The ETS was designed to charge polluters for their emissions and reward those who cut or sequestered them. I’m still very proud of having got the ETS in place.

But it was extremely disappointing to see the incoming National government gut the ETS and render it less effective, through three measures. The 2 for 1 deal and the exclusion of agricultural emissions from the ETS reduced its coverage by 75%. And after Kyoto 2 collapsed, National cynically allowed an influx of cheap imported international emissions units that collapsed the price of our local unit, the NZU, to cents – which shows the folly of a price cap without a floor.

A recent review of the ETS by MfE found that the settings left behind by National are not fit for purpose.

The new Government is committed to restoring the ETS to being an effective carbon pricing tool, and to align it with our international targets in concert with the Climate Change Commission. In the meantime, it is gratifying that the price of a NZU has now risen to about $20.

Climate change adaptation

The economic and social costs of climate change are broad and wide-reaching. This summer we have experienced the extremes of weather patterns and damage to homes and infrastructure. There will be increasingly severe risks from sea level rise, a warmer climate, extreme weather and flooding, coastal storm surges, and new strains of mosquito and other incursions into our country.

It is crucial that we have a clear picture of these risks so that communities, local and central government, business and other sectors of our economy can make well-informed decisions about how we build resilience and adapt.

Much of New Zealand's urban development and infrastructure is located in coastal areas. We have 19,000 kilometres of coastline. It is essential that we minimise risk to existing and new development from the impacts of climate change – and importantly avoid new development making the risk worse. This includes the Government’s urban development work programme.

Last December, Minister Shaw released updated Coastal Hazards and Climate Change: Guidance for Local Government. The Guidance supports councils and communities to manage and adapt to the increased coastal hazard risks posed by climate change and sea level rise. Councils tell me that they want better guidance so they can avoid political battles locally. The Government will consider whether guidance should be given the greater weight of a national policy statement or national environment standard. 

There is a lot of work to do to strengthen New Zealand’s resilience to climate change. The Climate Change Adaptation Technical Working Group has highlighted the scale of that task.  

Urban development

Successful, well-functioning cities are important to any modern economy. When performing well, they can provide a range of benefits including a high quality of life, a variety of housing choices, and the promotion of economic innovation.

But as you know, some of our urban centres – especially Auckland – are facing very serious housing and infrastructure pressures. There has been a growing bow wave of unfunded capital expenditure for a decade now, and it is getting worse. We cannot flourish as an economy and society with the current failures.

That is why the government is charting a new course for urban development. We have an ambitious and wide-ranging housing and urban development work programme, which seeks to end homelessness, improve housing affordability, make room for growth up and out in urban centres and to help create thriving communities.

This housing work programme is being led by Housing and Urban Development Minister Phil Twyford. It is a difficult and sophisticated piece of work. The planning aspects are a key priority for me as Environment Minister.

We are committed to developing a national urban development authority. This authority will be given special powers for particular large development projects to ensure that urban development is delivered with the right infrastructure, facilities and amenities for thriving communities. Detailed policy proposals should be going to Cabinet for consideration in the next couple of months. A Bill should be introduced this year. You will of course have the opportunity to submit on the Bill.

The urban development authority will be established within the context of the Government’s wider Urban Growth Agenda. I have been working on this Agenda with Minister Twyford, who is also Transport Minister, and with Associate Transport Minister Julie Anne Genter.

The Urban Growth Agenda is intended to lead to improvements in infrastructure and water quality, and to reduced emissions, greater resilience to climate change, protection of elite soils and versatile land, and support for a circular economy.

Work programmes are being developed for each of five Urban Growth Agenda pillars:

  1. First, infrastructure funding and financing. Our objective is to enable responsive infrastructure provision, including providing access to private capital and ensuring that the full social, economic and environmental costs of development are reflected within it.
  2. Secondly, transport pricing. This is about providing for efficient pricing of roads and parking areas to manage demand across the network and to promote access and efficient urban form.
  3. Thirdly, improved planning. We want to improve the quality of regulation to better enable growth through proactive, integrated land use and infrastructure planning, and removing unnecessary constraints on urban development. And we want properly functioning land markets.
  4. Fourthly, spatial planning. We will partner with local government, starting with Auckland, to develop credible spatial plans to enable public and private investment.
  5. Finally, legislative coherence. Our priority will be to ensure that the legislative settings across the Resource Management Act (RMA), Local Government Act, Land Transport Management Act and Reserves Act support our Urban Growth Agenda objectives.

Update on the Resource Management Act

I am looking at the impact of the 2017 changes to the RMA, some of which were clearly rubbish at the time and have proven to be so since. How stupid, for example, to say there can never be an appeal on terms imposed by a council for a subdivision that is a complying activity. As was predicted, applicants have modified their applications so that they are non-complying, in order to preserve appeal rights. Excluding interested parties from having a right to participate was also wrong.

I have work underway to identify the worst of the 2017 changes that may need to be reversed or corrected in the near term. I have also been receiving advice from civil society groups on this, and am expecting to receive more. So keep the lists coming in!

A more comprehensive longer-term review will be considered later this year, building on the Government’s work on urban development and water issues, and informed by work from outside government.

This will include the project being undertaken by the Environmental Defence Society, supported by the Law Foundation, Employers & Manufacturers Association, Property Council of New Zealand, Infrastructure New Zealand, and Watercare. The project is taking a first principles look at how the resource management system operates – not just the RMA but the whole system.

I am not yet persuaded that we should throw out the whole RMA and start again. I worry about loss of jurisprudence, huge costs, and long delays.

But we certainly need improved national direction and substantially improved processes. Too many plans are poorly drafted, and plans take too long to change. Environment and High Court Judges have told me repeatedly that the drafting of plans – which are legal instruments – is poor and sometimes ambiguous. I want to see a considerable shortening of the time it takes for plans to become operative, while ensuring opportunities remain for meaningful public participation.

The Productivity Commission says we also need cultural change within planning departments, warning that law changes alone will not deliver the outcomes we want. I agree with the Commission.

Through all of this, I will be a staunch defender of Part 2 of the RMA – its Purpose and Principles. Part 2 sets out crucial environmental bottom lines. Valuable jurisprudence has developed around Part 2, and I don’t think we should be quick to discard it.

I am very open to feedback from organisations such as the RMLA on both the near-term and longer-term issues. As practitioners, you know how the Act is working in practice, and I encourage you to tell me or MfE what you think, including about the current institutional arrangements for administering it.

Environment Court

I am a supporter of the Environment Court. The Court performs a crucially important function in implementing the RMA, by making wise decisions. Recently the Court has provided invaluable support to the Auckland Unitary Plan process.

I had a parliamentary delegation from South Korea in my office this week, and I was able to tell them that key to our planning system is independent decision-making by the Environment Court.

The case resolution rate in the Court is now good, and a reduction in the life of cases has resulted in there being no serious backlog.  This can be attributed to a combination of robust case management, alternative dispute resolution, streamlined hearing techniques, and the efficiencies provided by the adoption of new technologies.

I believe that the Environment Court has the capacity to lend its expertise to additional roles under the RMA and perhaps other areas, such as providing support to Board of Inquiry processes, or hearing challenges to notification decisions.  I will be seeking advice on the appropriateness of these options in due course.

Planning Standards

National Planning Standards have been promised for at least 10 years, and provision for them was made through RMA amendments last year. The Standards will significantly improve consistency across council plans and policy statements nationwide, making it easier for those who use plans to understand, compare and comply with them. MfE is working to have the first set of Standards gazetted by April 2019, with formal consultation on a draft likely to begin in June this year.

The first Standards are likely to include content on: definitions; the structure and format of regional policy statements, regional plans and district plans; the need for ePlans and mapping standards; and noise metrics.

Thank you to the RMLA for working closely with MfE throughout the development of the draft Standards, including hosting the roadshow in partnership with the New Zealand Planning Institute and MfE around the country last year. I know that this facilitated invaluable feedback and advice to those drafting the Standards.

We have heard those worried about cost and timing, and we will be trying to implement change in step with already scheduled plan reviews.

As resource management professionals, you can all see the benefits to be gained from more consistent plans. I think consistency is really important. While the phase-in of the Standards may be challenging, they will prove very worthwhile in the long run.

National direction and forward agenda

You may recall that in 2016 MfE released a national direction and forward agenda document, which set out priorities and intended timing for national direction instruments.

There is a widely-held view that national direction can help support the resource management system, provide more certainty for councils in their planning and resourcing, and provide clarity for others.

I anticipate that the 2018 version will be broader in scope than previously. As well as covering priority areas of water, climate and urban development, I expect it to also reflect the Government’s commitments in other areas such as biodiversity and minimising waste to landfill.

I intend to update the forward direction document annually.

Reducing waste and moving to a circular economy

Like most other countries, New Zealand’s economy has been based on a ‘take, make and dispose’ model, which treats the resources our planet gives us as ‘free’ and disposable. The Government wants to move towards a ‘make-use-return’ model, a circular economy, where we continue to re-use resources.

Minister Eugenie Sage, as Associate Minister for the Environment, is working with MfE to achieve this through better implementation of the Waste Minimisation Act, including through product stewardship schemes.  

Conclusion

This government is committed to working alongside you as we work to collectively resolve the long-term challenges we are facing as a country.

Growth must not, and need not, come at the cost of our environment.

With the America’s Cup in Auckland, the Government has just achieved a sound economic outcome within environmental limits. Not only have we secured a lower cost America’s Cup base but, through a much smaller intrusion into the Waitemata harbour, we have also substantially reducing its environmental impact. In addition to cash cost savings of more than $50 million, there will be an environmental benefit in excess of $40 million from avoiding the larger intrusion, which would have been the equivalent of 40 sections of 400 square metres each.

In New Zealand we have a wealth of natural capital, which we must not squander. We should strive to be world leaders in how we manage and invest in it.

Ultimately the Government’s goal is to improve the wellbeing and living standards of all New Zealanders through productive, sustainable and inclusive growth within environmental limits

I’m very happy to answer questions.