2. Scope of Work
This section describes the terms of reference and provides some discussion of definitions of quality, infrastructure and sustainable development. It also highlights the limitations of the study.
2.1 Terms of Reference
The text below reproduces the terms of reference for this study.
"The purpose of this exercise is to assess, for each infrastructure sector, the quality of the current infrastructure stock and the future infrastructure stock as determined by policy settings.
Specific elements of how this assessment will be undertaken are as follows:
- "Quality" is defined in terms of whether infrastructure meets and is likely to continue to meet sustainable development needs. The quality of infrastructure also considers the appropriateness of the magnitude, quality and timing of investments that occur under current settings and stakeholders' views on strengths and weaknesses of existing policy settings.
- In assessing quality, the audit will show whether there is currently an infrastructure shortage that will not be resolved by existing settings and whether there are particular sustainable development objectives that are not being achieved. A shortage could be the result of either demand or supply factors, or a combination of both. The audit will discuss the extent to which each factor has contributed to any shortage.
- There will be cross-sectoral quality measures applicable to all infrastructure sectors. There will also be sector specific quality measures, depending on the characteristics of each sector. Such measures will be identified in the first phase of this project.
- The assessment will have an inter-temporal component by considering whether the nature, aggregate level and timing of investment under existing policy settings is likely to be sufficient given the government's growth and sustainable development objectives. This will require identification of likely bottlenecks and determining whether these are likely to be addressed under existing settings.
- Use of an internationally accepted methodology will allow international comparisons to be made, although international comparisons are made difficult given the wide variation in sustainable development objectives among countries.
2.2 Definition of Infrastructure
For the purposes of this study, we adopt the same definition of infrastructure as used by NZIER and Maarama for their respective pieces of work on an Infrastructure Policy Framework and Linkages Between Infrastructure and Sustainable Development.
The study considers physical infrastructure in the energy, water, transport and telecommunications sectors. In defining infrastructure more precisely, we adopt the following basic criteria proposed by NZIER:
- Capacity can only be adjusted in large, "lumpy" increments;
- There are high initial fixed costs and low marginal costs of supply;
- There are high sunk costs and risk of assets stranding as market and other conditions change;
- There are multiple users of the services spanning production and final consumption;
- There are externalities not reflected in service charges that have attracted regulation; and
- Scale and regulatory hurdles create long lead times for installing new capacity.
Although the study is generally concerned with the actual physical infrastructure, the operation of infrastructure cannot be isolated from the functioning of markets and society.
A key characteristic of infrastructure is the need to provide capacity to the peak level of utilisation, which is often substantially higher than average utilisation levels. It is at these peak levels of utilisation (often particular time periods during the day, sometimes particular seasons, but occasionally driven by individual events) that infrastructure is likely to create blockages. These constraints are not necessarily absolute: the infrastructure provider has the choice as to whether to maintain the quality of service, or to allow deterioration. But, given the lumpy nature of infrastructure investment, these choices tend to only operate in the medium to long term - there is limited or no ability to make short-term adjustments.
2.3 Definition of "Quality"
As noted above in the terms of reference, the key objective is to assess the quality of New Zealand's infrastructure in the four sectors under examination. "Quality" needs to be treated with a high degree of caution, as use of the word can incorporate a large number of highly subjective value judgements.
For the purposes of this study, "quality" has been taken to incorporate elements of:
- The physical condition of assets;
- The capability and capacity of assets to meet the demands placed upon them;
- The extent to which assets are "fit for purpose", in terms of being able to deliver services.
These factors are important determinants of the extent to which infrastructure is contributing or detracting from Government's economic growth and sustainable development objectives.
2.4 Sustainable Development
Sustainability analysis takes a holistic view of economy, society and environment. Any activity or process being analysed should ideally be assessed in its entirety to identify its impacts on or response to all facets of sustainable development. This study is concerned with infrastructure, which is typically only one part of or contributor to economic, cultural or social activity.
To illustrate, road transport in New Zealand raises a number of sustainability issues:
- Road transport is a vital part of modern society and a modern, trading economy. An efficient road transport system assists in wealth-generation, leisure activities and the overall connectedness of society. Theoretical and actual freedom of movement is a fundamental civil liberty and a benefit to the modern world of enormous value.
- Road transport also consumes non-renewable (non-New Zealand) energy resources, takes up space (roads and parking) and creates pollution (with consequent impacts on amenity, health and the environment).
Road infrastructure permits modern vehicular land transport, but is only one part of the overall impact of road transport on society, the economy and the environment. If there is a desire to decrease perceived problems arising from road transport, actions affecting the roading infrastructure itself are only one part of a much wider set of potential tools: approaches to vehicles themselves (emissions standards and vehicle technology), fuel taxation, road pricing, integration with other modes of transport etc. Some of the drivers of demand for roading infrastructure are less amenable to policy influence, or might only be indirectly influenced (e.g. choice of location of dwelling or employment). These issues are perforce outside the scope of this study.
This creates a fundamental difficulty in examining the impact of infrastructure on sustainable development: to continue the example, roading or indeed rail, port or airport infrastructure is only one part of an "ideal" holistic sustainability analysis of transport capability and activity. This issue affects each sector under examination in different ways. Sustainability issues are also often incorporated into existing regulation, for instance via the Resource Management Act.
For the purposes of this report we have attempted to identify specific sustainability issues. We have also, where possible, attempted to assess the extent to which infrastructure contributes to, or detracts from, Government's economic growth and sustainability objectives. This is not a simple task, as it is not always possible to identify or articulate infrastructure-specific objectives (as opposed to higher level sectoral or nation/society/economy-wide).
The definition of "sustainable development" adopted by the Government in its Sustainable Development for New Zealand: Programme of Action (the "POA") is that it is:
development which meets the needs of the present without compromising the ability of future generations to meet their own needs
The POA goes on to note that achieving sustainable development involves a different way of thinking and working and that it requires:
- looking after people;
- taking the long term view;
- taking account of the social, economic, environmental and cultural effects of our decisions; and
- encouraging participation and partnerships.
2.4.1 Sustainable Development Objectives
The POA states some overarching "goals" and "desired outcomes" for energy, freshwater and urban areas. We have translated these into six high-level sustainable development objectives relevant to infrastructure provision that have New Zealand-wide application.
- Protection of natural capital, including life-support systems and essential ecological processes.
This objective is based on the premise that the social and cultural well being of New Zealanders, and the quality of life that they enjoy, is dependent on ongoing protection of the productive natural resource base (soils, freshwater, air, natural habitats and biodiversity, and coastal resources including fisheries).
Part 2 of the RMA, Purpose and Principles, requires incorporation of this principle into consents decision-making. It is possible that infrastructure developed prior to passage of the RMA, or which is currently planned (but not yet consented), is inconsistent with the objective. - Avoidance or minimisation of adverse environmental effects including adverse social, economic, cultural and ecological effects.
Section 5(2) of the RMA states that sustainable management involves inter alia managing natural and physical resources2 in a way which avoids, remedies or mitigates any adverse effects of activities on the environment. "Environment" is defined widely to include ecosystems, people and communities, all natural and physical resources, amenity values and the social, economic, aesthetic and cultural conditions which affect such matters. To the extent that new infrastructure requires consents, the RMA will require consideration of sustainability principles into the decision-making process - Efficient resource use.
The need to make efficient use of resources, particularly finite or non-renewable resources, is a fundamental tenet of sustainable development.
Section 7(b) of the RMA requires persons exercising powers and functions under the RMA to have particular regard to the efficient use and development of natural and physical resources.
This objective is particularly relevant to energy, transport, and water infrastructure. Government has set a target, in the POA, of at least 20% improvement in economy-wide energy efficiency by 2012.
The Resource Management (Energy and Climate Change) Amendment Bill (2003) amends the RMA (S7) to make explicit provision for all people exercising functions and powers under the Act to have particular regard to the efficient use of energy. - Increased use of renewable forms of energy.
An adequate supply of energy is fundamental to the future economic and social well-being of New Zealanders.
Supplies of fossil fuel (oil, gas, coal) are, over differing time periods, finite and the combustion of fossil fuels adds greenhouse gases to the atmosphere. This suggests a need to achieve a transition to the use of more sustainable sources of energy (wind, solar, hydro, biogas).
In the POA, the Government has set a target of increasing New Zealand's renewable energy supplies by 30 petajoules of consumer energy by 2012.
The Resource Management (Energy and Climate Change) Amendment Bill (2003) amends the RMA (S7) to require all persons exercising functions and powers under the Act to have particular regard to the effects of climate change and the benefits to be derived from the use and development of renewable energy. - Service provision is equitable (fair), reliable and socially acceptable.
This objective relates to infrastructure issues such as the geographical distribution and adequacy of water supply, wastewater treatment and disposal services, electricity supply and telecommunications services. - Provision of integrated and complementary infrastructure facilities where it is practical and reliable to do so.
A commonly expressed view is that society needs to be smarter about the way in which it plans infrastructure development so that decisions are mutually reinforcing, promote efficient resource use, and advance more than one dimension of sustainability, for example environmental and social outcomes as well as economic outcomes.
The objective is particularly relevant to the provision of urban infrastructure3 (energy and transport services, water services, etc) and is reinforcing of objectives b) and c) above relating to the avoidance of adverse effects and efficiency of resource use.
Sustainable Development Objectives for Auckland
The POA also identifies some specific high level sustainable development objectives, under the heading of "urban sustainability", making particular reference to Auckland:
- To ensure that infrastructure is appropriate,4 secure and adequately maintained.
- To ensure that there is adequate (integrated) planning for the provision of future infrastructure in rapidly growing areas and that such planning is consistent with modern urban design precepts.
- To ensure that there is adequate infrastructure investment planning and adequate funding of infrastructure services.
These specific objectives for urban sustainability are a reflection of the fact that over 85% of New Zealanders live in towns and cities, making cities an essential focus for Government action on sustainable development. Auckland is New Zealand's largest metropolitan area with close to one third of New Zealand's population. Government has signalled its intent to give priority to the sustainable development of Auckland.
2.4.2 Principles for Sustainable Development
The POA identifies 10 sustainable development "principles" that the Government proposes to apply to policy and decision making:
- considering the long-term implications of decisions
- seeking innovative solutions that are mutually reinforcing, rather than accepting that gain in one area will necessarily be achieved at the expense of another
- using the best information available to support decision making
- addressing risks and uncertainty when making choices and taking a precautionary approach when making decisions that may cause serious or irreversible damage
- working in partnership with local government and other sectors and encouraging transparent and participatory processes
- considering the implications of decisions from a global as well as a New Zealand perspective
- decoupling economic growth from pressures on the environment
- respecting environmental limits, protecting ecosystems and promoting the integrated management of land, water and living resources
- working in partnership with appropriate Māori authorities to empower Māori in development decisions that affect them
- respecting human rights, the rule of law and cultural diversity.
These principles relate more to how Government and other stakeholders should approach decision making under a sustainable development agenda than to the actual objectives or outcomes that are consistent with sustainable development.
2.4.3 Sustainable Development Indicators
Statistics New Zealand, in its publication Monitoring Progress Towards a Sustainable New Zealand: An Experimental Report and Analysis (2002) takes a wide view of sustainable development and promotes an extensive set of sustainable development indicators. Many of the selected indicators have little or no relevance to infrastructure development. However, some are relevant or potentially relevant e.g. greenhouse gases (annual emissions, source categories, atmospheric concentrations), quality of drinking water, energy use, total vehicle kilometres travelled, and household access to telecommunications.
2.4.4 Provision of Sustainable Infrastructure
It is pertinent to consider, briefly, who is responsible for the provision of sustainable infrastructure in New Zealand.
Central Government is able to influence the nature of new infrastructure and/or the level of maintenance of existing infrastructure either directly or by way of policy or funding decisions or indirectly by way of regulation, participation in infrastructure planning,5 resource management planning or the resource consent process.
Local authorities are able to determine or influence the nature of new infrastructure (e.g. water supply and wastewater treatment facilities, roads) and the degree of upgrading or maintenance of existing infrastructure in accordance with their responsibilities under the Local Government Act 2002 and in doing so they are required to take a sustainable development approach and to take into account:
- the social, economic and cultural well-being of people and communities;
- the need to maintain and enhance the quality of the environment; and
- the reasonably foreseeable needs of future generations.6
The "sustainable management" requirements of the RMA7 are consistent with the "sustainable development" requirements of the LGA and it is apparent, from the commentary associated with objectives (1)-(4) above, that the RMA is at present the principal instrument for incorporating many sustainable development issues into economic decision making.
2.5 Limitations of the Study
This study required an evaluation of New Zealand's energy, water, transport and telecommunications infrastructure. This is a far-reaching brief, which for reasons of practicality has needed to be restricted in its approach. Please note:
- The study is not an "audit" or "stocktake" in the traditional sense of the words. It is much more in the nature of an evaluation of capability and capacity.
- The study is inevitably high level, focussing on issues at a national level. It has not been our intention to undertake micro-surveys to identify a definitive list of individual local "hot spots" or problems. Whilst some localised issues have been identified during the course of the work and are noted in the report, it is inevitable that a number of detailed localised issues will not have been picked up. The intention throughout has also been to try to cut through to the essentials of infrastructure capability and capacity on a national level.
- Although the study is of infrastructure, it is often the services that infrastructure provides that are of most interest. The study therefore also considers issues of the inputs to infrastructure (e.g. fuel supplies for energy; water) and the services that the infrastructure provides (e.g. the extent of mobile telecommunications coverage).
- The focus of the study has however generally not been on the market for a particular service. We consider whether infrastructure is capable of delivering a service (e.g. the extent to which local telecommunications exchanges are enabled to deliver broadband), rather than the extent to which that service is necessarily taken up (e.g. the number of households purchasing a broadband service).
- In many cases, the infrastructure in question is owned and operated by private sector companies or state owned enterprises operating in competition with other providers. Information on current and future infrastructure capability and utilisation is therefore often commercially sensitive. This has limited the type of information we have been able to collect and to disclose.
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