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Infrastructure Development

Infrastructure Stocktake

Part 2: Framework and Context

Sustainable Development and Infrastructure

[ Last Updated 9 December 2005 ]

2.1 Conceptual Framework
2.2 Context: Key Emerging Trends

2.1 Conceptual Framework

As is evident from the principles adopted by the New Zealand Government, sustainable development, at heart, concerns thinking and acting in the "long term" and "in the round". That is, it requires thinking through long-term implications of current decisions (considering intergenerational timeframes, and intergenerational equity issues) and taking an integrated (holistic) approach to moving in chosen directions⁴¹.

Auckland faces a number of infrastructure difficulties, ranging from major traffic congestion, to a recent failure of the electricity distribution system, to the costs of providing water services for ever-expanding suburbs. Moreover, it is clear that infrastructure difficulties have a range of impacts on the quality of life of Aucklanders, from effects of congestion and the time taken to travel around Auckland, to air quality and water quality impacts, and impacts on social life in local communities. It is worth considering, in the light of these issues, ways in which infrastructure lessons from the last 50 years might be put to use in shaping infrastructure policy and strategy for the next 50.

A first conclusion is that we should examine carefully the assumptions we make when investing in infrastructure. Often, the most critical assumptions about the pattern of future development, such as land use patterns, or social patterns, turn out to be inadequately informed, or only valid briefly. Technologies, social patterns and attitudes have changed radically since the early 1950s. It was also once assumed that water supplies and receiving waters around Auckland were essentially limitless resources. Often, emerging trends are only half-glimpsed, and too frequently discounted. Also, assumptions directly influence the perceived cost and benefit assessment on the basis of which funding decisions for long-term infrastructure are made.

Another conclusion is that unforeseen consequences of apparently neutral technologies and engineering choices turn out to be very important, and tend to lock development into particular patterns with ongoing ramifications. For example, a land use pattern based on motorways has far-reaching effects on patterns of transport, physical activity and health.

In addition, the benefits of joined-up thinking are easily overlooked. It is difficult to think "outside the square", but sometimes major gains accrue from consideration of apparently unconnected developments, such as roading and wastewater. It is only now becoming apparent, for example, how low-impact urban design - including roading design - can reduce the need for costly infrastructure such as wastewater, and improve social and environmental outcomes. Similarly, it is important that the funding assessment process and criteria for investment decisions take into account the full range of social, cultural and environmental considerations.

Thinking about the long term, particularly future generations, is assisted by adopting a long-term vision or statement of intent, against which to measure the long-term implications of current decisions. Taking an integrated approach implies having regard to the many social, cultural, environmental and economic side-effects of choices, including infrastructure choices. It also implies a strong emphasis on maximising complementarities (even if there are inevitable trade-offs, especially in the shorter term), and not placing one dimension of sustainability in front of the others.

2.1.1 Links or Nesting?

In this context, how should links between infrastructure and sustainable development be viewed?

One view, centred on the idea of "linkages", is that sustainability and infrastructure concerns can be thought of as essentially separate domains of policy, but with important linkages to be understood and taken into account in making policy choices. Infrastructure policies and investment objectives might be viewed as needing to be linked, or perhaps reconciled, with sustainable development objectives. A risk with this view is that the primary goal of society may, explicitly or implicitly, continue to be seen as economic development, subject to dealing with operational constraints (environmental, social, cultural).⁴² That is, the pursuit of sustainability might be viewed in essence as one of handling a side-task - managing environmental, social and cultural constraints on economic development⁴³ - through appropriate policy mechanisms such as regulation. Box 2 below discusses the risks in this conceptualisation.

In our view this approach is not broad or robust enough. A more helpful approach is to see sustainable development as an overarching meta-objective⁴⁴ or a paramount goal (consistent with the Government's stated view). The task is therefore one of examining how infrastructure policy and investment decisions can best be shaped to advance that high-level objective, with infrastructure policy and management a part, albeit an important part, of the broader policy and management process. In effect, infrastructure policy and management is nested within, rather than linked to, sustainable development. To put it another way, ensuring quality infrastructure is not an end in itself, but a means to an end. That end is enhanced well-being through sustainable development.

Is it useful to view sustainable development as a process of constrained maximization of economic welfare? This box explains the idea, and considers the pros and cons of approaching sustainable development this way.

Sustainable development can be viewed as equivalent to maximising economic welfare subject to various practical constraints (such as environmental and social constraints). In principle this appears to be a tidy and practical simplification of the complex task of advancing a number of objectives at once. But difficulties arise in practice in interpreting this idea.

A first issue is that constrained maximisation may tend to be interpreted, in practice, in a particular way - i.e. as maximising economic benefit subject to environmental, social and cultural constraints. Clearly this may be a problematic simplification. For example, economic benefit is usually a limited subset of overall wellbeing. Moreover, the difficulty can be seen by turning the formulation around and asking, for example, about comfort with the idea of maximising social wellbeing subject to economic, environmental and cultural constraints. This may be problematic to some, not least because it implies that we might be satisfied if economic conditions were simply maintained rather than being improved.

Secondly, as argued later in this report, sustainable development requires trying to improve social or environmental conditions (as well as economic), not just holding them constant. A constrained maximisation formulation discourages viewing sustainable development in this Is it useful to view sustainable development as a process of constrained maximization of economic welfare? This box explains the idea, and considers the pros and cons of approaching sustainable development this way.

Secondly, as argued later in this report, sustainable development requires trying to improve social or environmental conditions (as well as economic), not just holding them constant. A constrained maximisation formulation discourages viewing sustainable development in this way. It underplays the possibility of complementarities between say improving economic and social outcomes, and instead emphasises just the avoidance of deterioration in social or environmental conditions. For example, rather than just hold constant air quality and health of city dwellers, it is desirable that social and environmental conditions improve.

A third and related issue is that in the past a constrained maximization view has sometimes reinforced a negative connotation in respect of "constraints" on development. For example, some might see social constraints such as spending on health as "constraining" growth or development. This is of course no more valid a view than seeing the enhancement of people's health as being constrained by economic needs.

Fourth, the way that issues are framed can be important in the context of organisational behaviour. If social or environmental matters are seen as a constraint, managers may try to get around them, in pursuit of what they see as their main objective. If social, cultural and environmental matters are part of the organisation's objectives, then managers' sense of purpose, performance measurements and rewards will be better aligned with sustainable development. However, there will be accountability risks - for this to work, considerable thought needs to go into specifying and monitoring the desired objectives.

This more comprehensive approach can be difficult to operationalise, however, given the difficulty of measuring and comparing progress in the different dimensions of sustainability. If and when it is felt that constrained maximisation should still be used as a management construct, sustainable development requires that a comprehensive assessment of alternatives be undertaken in which the primary objective (the one to be maximised subject to constraints) is broadly defined so that innovative approaches with benefits for multiple dimensions of sustainable development can be identified and assessed along with more traditional options.

Below the overarching goal it is necessary to have a set of sectoral sustainability strategies and objectives - for sustainable transport, sustainable energy, sustainable water, ICT, agriculture, and so on. In practice, these strategies will overlap and interact. At present, the government is working to develop these and some already exist (the most relevant ones, such as the Transport Strategy, have been noted above, in section 1.3). Sectoral infrastructure strategies can be seen as nested within these sectoral strategies, but with strong cross-linkages (the dashed lines in Figure 2.1 below). Some key cross-linkages are discussed in Part 4 of this report.

Figure 2.1: Schematic Relationship between Sustainability and Infrastructure

For example, policy to shape water infrastructure will form part of a sustainable water strategy, but should also be strongly linked to some relevant others (e.g. a sustainable agriculture strategy). Note that a sectoral strategy, such as for sustainable energy, will contain elements other than those relating to infrastructure.

There may well in addition be cross-cutting strategies, e.g. sustainable construction;⁴⁵ sustainable government procurement. An important point here also is that infrastructure problems may have non-infrastructure solutions. For example, through changes to behaviour in a sector (e.g. reducing the demand for roads) infrastructure investments may be avoided or reshaped.

While sectoral infrastructure strategies establish the strategic directions for infrastructure in the sector, infrastructure policy can answer more focused questions such as "Exactly what", "How much," "When," "Who pays," and so on.

Seeing (physical) infrastructure strategies as nested within broader and higher-level strategies is consistent with a view that physical infrastructure contributes to a range of goals - economic, social, cultural and environmental. Just as social capital (or "capability") contributes to wider well-being⁴⁶, so do various forms of infrastructure contribute to well-being.

An implication of this view is that infrastructure policy needs to be sensitive to the roles ecological, social and cultural systems play in providing a context for, and nurturing, economic activity. Infrastructure which maintains social and cultural capital, for example, will better support economic development in the longer term. As far as natural capital is concerned, ensuring that infrastructure does not contribute to pressures on ecosystems which could lead to limits being breached is vital. Thus, attention needs to be paid to threshold effects and irreversibility (as for example, with the climate system). At the same time, not all use of environmental, social or cultural resources will have significant impacts.

A practical implication of this view is that any assessment of environmental, social and cultural impacts should give full consideration to future "option values" (the value of preserving social, cultural and natural capital) and, where risks arise, err on the side of caution (i.e. assigning a precautionary premium to social, cultural and natural capital where its current or future value is unclear) in making decisions.⁴⁷

Seeing sustainable development as an overarching objective under which infrastructure management is nested also means developing an overarching "sustainability-based" analysis of, and policy approach to, infrastructure. We see this as having the following two key elements for policy makers:

comprehensively identifying externalities associated with potential infrastructure provision, and integrating externalities into policy
working to build awareness of sustainable development, as a relevant high-level goal (a "quadruple bottom line"), requiring positive behaviour change (e.g. monitoring and reporting) and other adjustments of social norms.

This latter element includes defining broadly the objectives for any given problem or issue so that innovative approaches with benefits for multiple dimensions of sustainable development can be identified and assessed along with more traditional options.

2.1.2 Two Key Elements of a Sustainability Based Approach

Element 1: Integrating Externalities into Policy

The best way to curb the demand for oil and promote innovation in oil alternatives is to tell the world's energy markets that the "externalities" of oil consumption-security considerations and environmental issues alike-really will influence policy from now on.

The Economist, 23 October 2003

The first of these two requirements is a focus on identifying externalities associated with potential infrastructure provision (or its avoidance), and integrating these externalities into policy. This includes economic externalities, an important instance being the economic cost of congestion imposed by one road user on others.⁴⁸ This can begin at a simple level, but effective progress towards sustainability requires that externalities be addressed comprehensively.

A base level is to ensure that obvious and serious externalities are identified, assessed and "valued"⁴⁹, incorporated into (at least) simple policy instruments such as regulation, and that the regulation is enforced. Typically, clear and serious externalities are already regulated in developed countries.⁵⁰ Often, national legislation sets an enabling framework, with local authorities regulating for specific conditions, for example, setting permit conditions to be met by industrial premises such as electricity generators.

A preferred, and more sophisticated, approach to addressing externalities in policy involves both identification and valuation of less obvious or less immediate externalities,⁵¹ and the development of more cost-effective and sharper policy instruments or mechanisms (perhaps as substitutes for regulation) for dealing with them.

Three economic concepts important to understanding sustainable development are "internalising externalities", "trade-offs," and "complementarities". How are these ideas related, in the current context?

Internalising externalities means taking account of the "external" effects associated with an activity. These effects can be negative (costs imposed on others) or positive (benefits for others). It is generally desirable that people undertaking an activity face the full costs of doing so, and that they take into account external costs or "spill-over" effects on others. For example, if additional car use causes noise nuisance or air pollution, internalisation requires that car users face a price, or some other incentive, to ensure they take into account that effect of car use. Where externalities are positive, the activity may be "underprovided" in the market, and there may be a case for government intervention to support the activity. This will require weighing up the case for support against other priorities, looking at overall prospects for net gains, and perhaps comparing likely rates of return. A case in point might be support for research into innovations such as new technologies or ways of doing things, which may lead to better use of infrastructure, or reduce demand for infrastructure. Examples exist in the energy area (e.g. bioenergy).

Trade-offs arise when advancing one objective has a detrimental effect on progress towards another goal - for example, protecting a wetland increases the costs of motorway construction, inhibiting economic development. Conversely, complementarities or synergies arise when advancing one goal also contributes positively to another - e.g. extending internet access to rural areas for economic reasons also generates social benefits.

Typically, internalisation will improve outcomes for sustainable development. Another way of saying this is that internalisation can help to get the trade-offs "right," or create complementarities directly. In the policy context, correction of a negative externality is a policy action with complementary benefits, since it will generally lead to economic resources being used more wisely and environmental, social or cultural benefits also accruing. In this sense, negative externalities should not be associated only with trade-offs - their correction generates complementarities.

An example of improving trade-offs is where the external cost imposed by CO₂ emissions associated with transport is internalised into the fuel cost faced by vehicle users: a new and preferable trade-off between economic activity and environmental protection is reached, involving less vehicle emissions and better environmental outcomes. Moreover, the development and use of less carbon-intensive fuels is incentivised, and less carbon-intensive modes of transport is encouraged with, potentially, a reduction in the need for roading infrastructure.

Examples of less obvious economic externalities are reputational impacts (for example, the reputational costs of major infrastructure failure, such as the Auckland power crisis) and aesthetic/ amenity externalities (the treatment of which may signal other issues⁵²). The need to address this sort of externality is one of the reasons for government involvement in infrastructure.

Externalities also change as technologies change, so the analysis and policy development must be ongoing. Ensuring that such evolving externalities are recognised and corrected is vital for dynamic efficiency.⁵³ Dynamic efficiency should not be seen just in terms of recognising evolving economic drivers and signals, but also in terms of recognising signals concerning the other sustainability dimensions, and how they change over time, for example, how cultural values shift. An example is the greater weight now given to maintaining the vigour of Te Reo Māori, compared to a generation ago. In terms of the environmental dimension, effective recognition and correction of changing environmental externalities also maintains "eco-efficiency" in a dynamic sense.⁵⁴

Stronger incentives for sustainable use of resources can often be created by moving from regulation to market-based instruments aimed at "getting prices right," especially for natural resources,⁵⁵ or moving to the use of incentive-linked voluntary agreements.⁵⁶ Indeed, the absence of prices on many resources, whether road space or scarce water, often accompanied by a reliance on regulation (sometimes called "command and control"), can often lead to distortions in resource use, including over- or under-provision of infrastructure. This sometimes occurs because the regulatory mechanisms required to substitute for price signals become outdated or convoluted. On the other hand, market-based instruments are not always appropriate, and - perhaps for distributional or other "political economy" reasons - are often resisted.

Element 2: Attitudinal Change

The second element recognises that integrating externalities into public policies such as regulation and pricing is important, but may be slow and difficult to achieve in practice and inadequate, in the long run, for achieving sustainable development.⁵⁷ Ideally, all participants in society would fully "internalise" the objective of sustainability, and reflect these attitudes in their actions and behaviours, such as production choices and consumption patterns.

More realistically, some progress towards such "wider internalisation", and engagement with sustainability goals, on the part of business and civil society, is not only desirable but can reasonably be expected.⁵⁸ It can be argued also that the Māori focus on duty and obligation as key to decision making for sustainability is consistent with this approach.⁵⁹

It requires, for example, that decision making processes give conscious attention and equivalent weight to economic, socio-cultural and environmental objectives and how they can be integrated. This requires central and local government and informed stakeholders to work to raise awareness of the potential for advancing sustainability, and provide information and education.

Another way of putting this is that policy makers should go beyond viewing sustainability only in terms of externalities to be corrected or constraints/ requirements to be complied with, and should also work to build awareness of the wide ramifications of sustainable development, as a relevant high-level goal, among the public (as demanders and ultimate funders of infrastructure services), among businesses and local government (suppliers of infrastructure services), and among regulators (central and local government). They should also work to encourage innovation in design for sustainability, and to minimise the need for (costly) regulation. As McDonough and Braungart have said, "Regulations can be seen as signals of design failure".⁶⁰

In economic terms, this involves raising awareness of the importance of social, cultural and natural resources, as well as the role of economic resources, in contributing to well-being. It also involves building awareness of how infrastructure can be designed not just to minimise adverse social, cultural, environmental and economic impacts, but also to promote, in an integrated way, social, cultural, economic and environmental goals - in effect, a quadruple bottom line.

Associated with changing attitudes and greater awareness there needs to be encouragement and "modelling" of behaviour change - in effect, a process of adjusting social norms. An example of awareness building and behaviour change is instilling or strengthening a cultural heritage conservation ethic, a shift which could increase the cultural attractiveness of urban centres, enhance urban amenity, and facilitate business activity and tourism in such centres. Another is encouraging walking school buses in order to reduce car dependence and pressure on road systems, and increase physical exercise, thus advancing a number of linked social and environmental objectives. Both of these examples involve infrastructure and demonstrate complementarities.

For infrastructure operators, increased awareness of sustainability objectives typically has some advantages, and can be seen as part of good business practices of demonstrating accountability to shareholders on the one hand, and responsiveness to community expectations on the other.⁶¹ The incentive for continuous improvement becomes much stronger when "sustainable development reporting" is used, for example, not just as a management tool, but also to give account of activities to stakeholder groups (local communities and customers, tangata whenua, central government). This is the purpose of triple or quadruple bottom line monitoring and reporting, of which the annual sustainability reports of Watercare Services Ltd in Auckland provide a particularly good example.⁶² Given the requirement in the State Owned Enterprises Act 1986 that SOEs operate as successful businesses, and that a successful business exhibits a sense of social responsibility, all SOEs (including energy infrastructure providers) should be providing quadruple bottom line reports.⁶³

The two key elements identified here require attention to policy processes, instruments, and institutions, a detailed analysis of which is beyond the scope of this document. The goal of sustainable development requires adjustment in the orientation of processes, instruments and institutions and, in the present context, adjustment of those particular processes, instruments and institutions which deal with infrastructure, but does not require a fundamental reconstitution of these mechanisms. Such reorientation is summarised in the next section.

Recognise that sustainable development is about a long-term (intergenerational) and integrated (holistic) view
Work to advance all four dimensions of sustainability in making infrastructure policy and investment decisions
Nest sectoral infrastructure policy and management within sectoral sustainable development strategies
"Internalise externalities": comprehensively identify externalities associated with potential infrastructure provision, and integrate externalities into policy
"Change attitudes": work to build awareness of sustainable development, as a relevant high-level goal (a "quadruple bottom line") requiring behaviour change (e.g. monitoring and reporting) and other adjustments of social norms.

2.1.3 Identification of Externalities and Integration into Policy

Processes

Identification and integration of externalities includes ensuring that there are effective processes (covering both infrastructure policy and investment decision making) for engaging with stakeholders affected by externalities, or whose actions create externalities. For example, tangata whenua or local river watch groups may be affected by or be aware of potential damage to watercourses during low river flows, and should participate in resource management processes, as indeed they often do under current RMA provisions. Sustainability-enhancing processes will ensure that all significant externalities are brought to the attention of stakeholders⁶⁴ and decision makers, and adequately debated - i.e. that consideration is not dominated by a limited set of externalities (for example, ones that are most easily quantified or valued, or ones which are considered a risk by a particular social group.⁶⁵) In some instances, trade-offs will be necessary amongst competing objectives; in these cases, processes need to be flexible enough to be able to identify options with minimum losses and find compensating gains which can be shared where that is feasible.

At the same time, processes need to be as timely and rapid as possible. Ultimately, no-one's interests are served by slow and cumbersome processes.⁶⁶

Instruments

All policy instruments,⁶⁷ such as regulation, voluntary agreements or market-based instruments, need to be tested against the objective of integrated correction of externalities, as well as the standard tests such as cost-effectiveness and practicality. Instruments should work to reduce economic losses or build economic value and resilience, enhance the environment or reduce adverse pressures on it, and reduce adverse effects on vulnerable social or cultural groups. For example, the use of (congestion) tolls to "optimise" vehicle flows during peak periods needs to be tested not only in terms of impacts on congestion, and consequent reduction of demand for expansion of road infrastructure,⁶⁸ but also in terms of impacts on air and noise pollution, and impacts on different social groups.

Comprehensive and effective analysis of policy mechanisms entails evaluating any trade-offs (adverse impacts) of the introduction of that mechanism (including compliance costs as well as benefits), but a well-designed instrument should not create major adverse effects such as environmental, social or cultural problems (e.g. loss of access). To address such effects in a coordinated way may require multiple complementary policy instruments, such as pricing of roads and simultaneous provision of low-cost effective public transport.

Institutions

Institutions are critical. They should be mandated and structured to ensure a comprehensive view of the sustainability issues (including recognising changing conditions and needs), identify good processes and instruments, and have the capability to develop effective policy, implement it and enforce it. In a dynamic environment, their adaptability or ability to learn is probably the most important quality.

Poorly mandated or managed institutions can create unintended distortions in terms of sustainable infrastructure - for example, when they do not take into account the full range of sustainable development objectives, or the interaction between these objectives. An example, as the New Zealand Transport Strategy notes, is the transport sector changes of the 1980s and 1990s, which may have increased economic efficiency but "by and large ignored the broader linkages between transport and other issues such as regional development, urban form and social cohesion."⁶⁹

As a related example, in the past, the overly narrow brief of Transfund distorted infrastructure investment towards roading relative to alternatives such as walking and rail transport. The Ministry of Transport now has a brief to work within a broader sustainable development framework, and this brief will - when the new Land Transport Management Act comes into effect - be translated into Transfund's allocation framework.⁷⁰

2.1.4 Progressing Attitudinal Change

Processes

Attitudinal change, the second key element of a sustainability-based approach, entails raising awareness of the integrated nature of sustainable development in a number of ways. It requires that decision making processes should deliberately allow for multiple objectives to be considered in infrastructure decision making - treating an economic objective, for example, as only one of several simultaneous objectives, of roughly equivalent standing. This suggests that both policy and infrastructure investment decisions should draw on economic impact assessment, environmental impact assessment, and socio-cultural impact assessment, or a process which integrates all these elements into a comprehensive multi-criteriaanalysis, factoring in risk and uncertainty. Cost-benefit analysis can certainly help, but to the extent it focuses on a narrow range of tangible economic costs and benefits, may fall short of the mark and need to be extended in scope.

Instruments

Wider internalisation requires that the limitations (as well as the benefits) of instruments such as regulation and pricing be recognised. For example, regulation and prices may not be readily able to signal the merits of production and consumption choices which support cultural goals, or internationally agreed social or environmental goals.⁷¹

Policy instruments such as information provision, government procurement, or encouragement of triple/ quadruple bottom line reporting can be considered as means for raising awareness and changing behaviour. Making TBL reporting mandatory (for infrastructure providers and other organisations) is in theory an option, given the relatively slow take-up of such reporting in New Zealand, but this would be inconsistent with the aim of wider internalisation, in which the voluntary acceptance and implementation of sustainability goals is preferred. It might also require a wider reassessment of company law and the responsibilities of directors.

Institutions

Institutions (including many organisations) may need to be reshaped to put approximately even weight across the range of economic, environmental, social and cultural goals, and to consider them together, in a long-term way.^72,73 Like individual humans, there is no particular reason why organisations and institutions need have one-dimensional goals although, without political guidance, some organisations may struggle with the complexities of decision making.⁷⁴

One of the practical difficulties of pursuing the multiple objectives of sustainable development is that responsibility for those objectives is usually spread across agencies (e.g. the various agencies of central government). In effect, "whole systems" thinking is hindered by institutional fragmentation. An option that might involve higher cost but has greater overall returns is often passed over (or not even identified) in favour of a simpler option (but one that is less effective overall) which meets the objectives of the agency proposing the measure. This difficulty may be best addressed by improving coordination of action across the agencies of government.

Also, institutions will need to give more attention to risk, uncertainty and precaution (as noted in the POA's principles, above). Institutions will need to recognise the uncertainties in much scientific knowledge, the limitations and risks of the new technologies which infrastructure relies on, and the need to design corrective mechanisms to provide resilience in the face of shocks and uncertainty in economic, social and natural systems.

These concerns are accentuated by recognition of the phenomena of path dependence and lock-in. The risk with path dependence is that small decisions taken early on during technological or infrastructure development, such as investment in new sewerage or roading systems, or design of building codes, can lock in a particular direction for economic and social development, which makes subsequent directional change much more costly.

A recent review of Canadian urban sustainability issues reached similar conclusions about lock-in problems:

Urban infrastructure… is expensive, tends to have a long life and can influence how and where cities grow. While poorly conceived spending in other areas may just be money "wasted," misguided investments in cities can lead to prematurely redundant infrastructure, longer-term problems with expensive solutions and unsustainable development patterns.⁷⁵

In the case of roading and motorway development, significant implications for environmental and public health (air pollution and healthy lifestyles) are now much clearer in New Zealand and similar countries than they were when our cities were younger and less car-dependent. However, lock-in is also important in other areas such as energy systems, as discussed below.

New Zealand has a history of investing heavily in elaborate and complex systems of infrastructure - for transporting vehicles, water, waste and energy - at least some parts of which are now becoming obsolete as more efficient localised alternatives emerge.⁷⁶ The principal implication is that institutions should attempt to ensure that policy advisers and system designers incorporate flexibility into infrastructure design, and explore alternative, more sustainable system design options at key points of infrastructure renewal.

2.1.5 Incremental Improvement and System Innovation

Finding new system design options, at critical evolutionary points, is the idea behind system innovation, a notion which is particularly important for infrastructure. Writers on system innovation⁷⁷ distinguish incremental technological improvement and redesign which helps improve eco-efficiency initially, from more radical change based on function and system redesign.

Examples of system innovation are the introduction of broadband telecommunications⁷⁸ and, prospectively, a fuel cell network for hydrogen vehicles - requiring larger investments and support of a variety of stakeholders (e.g. resource management authorities, consumer and environmental organisations and financial institutions). Other writers point to industrial process redesign to eliminate chemicals and toxins in water effluent.⁷⁹ A more immediate and less ambitious example in the transport area is a "seamless mobility" initiative in the Netherlands,⁸⁰ which aims to develop mobility systems which combine various individual transport elements, to improve accessibility while meeting environmental requirements.

Many system innovations are market-driven (e.g. broadband) though, typically, government initiatives (e.g. development of the internet) set an initial direction. Encouraging system innovation for a system as pervasive as, for example, transport energy, may require some change in the role of government institutions. A greater effort may be needed to establish or facilitate networks to advance and support innovation.⁸¹ A key issue for government will be maintaining neutrality between participants in such a process. The market-driven pattern of system innovation in the telecommunications sector suggests that the government, while retaining an important regulatory role, need not necessarily participate as an active player.

2.1.6 Setting Priorities

Governments cannot deal with all issues at once, and priorities need to be set.

In considering the adequacy of physical infrastructure and potential new investment, what are the key linkages with economic, environmental and social objectives and why, and how can a new investment be selected and designed to maximise the total contribution to sustainable development? For example, might urban design matter for people's health, and how important is it as a social issue relevant to transport infrastructure, i.e. what priority should it receive?

Another question is how can those issues be brought into the decision making process (what instruments, processes and institutions are needed)? It is beyond the scope of this paper to detail this - it is a matter for policy analysis. However, the very identification of "what and why" (i.e. the identification of major issues) usually gives some hints and indications of how - including the scope for encouraging system innovation (e.g. through "transition management"⁸²) as a policy approach.

The remainder of this section looks briefly at some recent evidence on what forms of physical infrastructure are likely to be most important for sustained economicdevelopment. We consider this aspect because the contribution of infrastructure to economic development has been the main focus of infrastructure policy in the past, and gaining insight into how the economic contribution of infrastructure may evolve in future is important for a long-term perspective. This economic focus does not imply that other aspects of well-being are less important.

It goes almost without saying that high-quality infrastructure is important for economic development. The evidence on this is clear (e.g. Global Competitiveness Report (GCR); World Bank) and is not reviewed here. Some recent empirical evidence suggests that the contribution of infrastructure to economic development changes as countries prosper over time. The GCR points to certain elements of infrastructure becoming relatively less important (for income generation) as countries' incomes rise, while others (e.g. electricity supply) retain their importance. This is argued to be because other factors, such as quality of scientific research institutions, and institutional infrastructure, become relatively more important with rising incomes. It is a reminder that we should not overstate the contribution of physical infrastructure to well-being (or even to economic development, as a subset of well-being).

The significance of various physical infrastructure elements covered in the GCR study is summarised in Table 2.1 below (note, however, that transport and water infrastructure are not separated out). Since New Zealand ranks at the lower end of the high-income country group here, both columns of Table 2.1 are relevant, although it can be argued that over the next few decades the elements ticked in the "high income" column of the table are likely to emerge as relatively more important for GDP growth. The GCR ranks New Zealand 17th internationally (among 80 countries) in terms of overall infrastructure quality, 21st in terms of quality of electricity supply, 11th in terms of telephone/fax infrastructure quality, and 22nd in internet users per capita.

These findings should, however, be interpreted cautiously, for various reasons, including that the GCR's analysis does not provide a complete explanation of the determinants of prosperity over time, particular characteristics of New Zealand's economy and society may make certain infrastructure elements more or less important here, and some infrastructure might be as much a consequence of high income as a cause. In addition, GDP growth is of course only one component of well-being.

Table 2.1: Association between Physical Infrastructure Quality and GDP per Capita

Infrastructure quality element	Significance for countries of:
Infrastructure quality element	Middle income	High income*
Overall infrastructure quality	statistically significant association at the 5% (stronger association) level (p<0.05)	no statistically significant association
Railroad infrastructure quality	no statistically significant association	no statistically significant association
Port infrastructure quality	statistically significant positive association at the 10% level (p<0.10)	no statistically significant association
Air transport infrastructure quality	statistically significant positive association at the 10% level (p<0.10)	no statistically significant association
Electricity supply quality	statistically significant association at the 5% (stronger association) level (p<0.05)	statistically significant association at the 5% (stronger association) level (p<0.05)
Telephone/fax infrastructure quality	statistically significant association at the 5% (stronger association) level (p<0.05)	statistically significant positive association at the 10% level (p<0.10)
Cellphones per 100 people (2001)	statistically significant association at the 5% (stronger association) level (p<0.05)	no statistically significant association
Internet users per 100 people (2001)	statistically significant association at the 5% (stronger association) level (p<0.05)	statistically significant association at the 5% (stronger association) level (p<0.05)

*New Zealand is at the lower end of the high-income country group in this study.

Source: Extracted from Cornelius et al (2003) p34.

The next section looks at major emerging trends,⁸³ such as "decarbonisation", which are likely to shape the New Zealand economy and society over the next generation or so.

Processes, instruments and institutions are all important in
- making infrastructure policy and management more sustainable
- ensuring externalities are effectively internalised
- progressing attitudinal change
Lock-in and path dependency risks point to the need for flexibility in infrastructure design
System innovation is important for infrastructure, especially at critical evolutionary points
Certain types of physical infrastructure are likely to be more important for sustainable economic development than other types, among high income countries
Some evidence suggests that electricity supply infrastructure quality and ICT infrastructure are both highly important for continuing economic development.

2.2 Context: Key Emerging Trends

This section steps back to examine the "big picture" context - what drives infrastructure and its contribution over the longer term. We examine key emerging trends likely to affect both infrastructure and progress towards sustainability over the next generation (two to three decades).

NZIER's report for this stocktake briefly reviews the main economic and demographic trends; we do not duplicate that here.⁸⁴ Some key trends are also set out in the June 2003 government report on Population and Sustainable Development which points, among other things, to a stabilisation of total New Zealand population at about 4.6 million by around 2050 (Figure 2.2) and a stabilisation of the age structure with a considerably higher median age (the 65+ age group also doubles in size over the next 50 years).⁸⁵ An implication, if numbers do stabilise by mid-century, is that, across New Zealand as a whole (i.e. abstracting from regional variation), the pressures for new infrastructure investment caused by population growth are likely to begin to ease as we approach mid-century.

Figure 2.2: New Zealand's Projected Population (Medium Projection)⁸⁶

Figure 2.2: New Zealand's Projected Population (Medium Projection)

Source: Statistics New Zealand

However, we cannot assume that this will consistently relieve pressure to invest in new infrastructure since regional variation is likely to be substantial. In any area of significant population or economic growth, infrastructure adequacy is likely to become an issue unless provision is carefully managed, and even in areas of population decline, questions of infrastructure renewal and viability occur, and may become more pressing as the economic base diminishes.

The same population report suggests we are likely to see a continuing clustering of population growth around Auckland, the Bay of Plenty, and Waikato, in part because most new migrants choose to live in the Auckland region.⁸⁷ Auckland's population is expected to grow by 35% by 2021, while Southland and Taranaki, for example, are projected to decline in population.⁸⁸

However, rather than look here in detail at projections of economic variables and population over the next ten to twenty years, or particular sectoral factors such as the impact on transport networks of the growth in wood supply from the forestry industry, what we attempt to do below is pick out the key longer-term technological, market and social changes which we consider will matter most for the sustainable development of infrastructure in the four sectors. In short, the following is a selective assessment of key emerging influences on the sustainability of energy, transport, water service and telecommunications. The uncertainties in these trends are of course substantial and deserve emphasis.

2.2.1 Transport Sector

Key emerging trends which future transport infrastructure will need to take into account include:

Decarbonisation
The need to reduce fossil fuel carbon emissions (not just in New Zealand, but globally in the next few decades) will have a major effect on transport vehicle technology, especially fuel systems,⁸⁹ and on transport infrastructure and urban design. The trend away from carbon-intensive fuels towards renewable fuels and hydrogen-based fuel systems is likely to accelerate, although its speed is a matter for debate.^90,91
Increased urban agglomeration, and concern with livability
With further globalisation of world trade in goods and services and capital flows,⁹² the trend towards knowledge-based goods and service production in more developed economies will continue. Creative industries are likely to become economically more important for New Zealand, and in terms of the geographic pattern of production, positive externalities of proximity (and social networks) are likely to matter more. Competition among cities for creative people will intensify.⁹³ The significance of the emergence of post-modern values can be over-stated but a trend towards an emphasis on quality of life rather than prosperity alone is emerging. This may be accentuated by an aging population.⁹⁴ The livability and walkability of key cities in New Zealand is likely to become more valued⁹⁵ (in part because of increased realisation of associated health and social benefits), and transport infrastructure which reduces car dependence will be increasingly seen as not only important but necessary.
Immaterialisation and dematerialisation
The pressures to replace goods with services (immaterialisation) or reduce the material and energy intensity of economic activity (dematerialisation) are likely to increase, with growing concern over waste volumes, energy and materials usage, and a desire to increase eco-efficiency (this latter trend being more pronounced in Japan and Europe).⁹⁶ It is also likely that the sheer growth in the volume of vehicles and their use in larger cities will, through impacts such as congestion, force changes in transport service "consumption" patterns, as well as eco-efficiency improvements. That is, we will see behavioural changes going beyond gains in transport system materials- and energy-efficiency. Two key ways in which this might happen are the increase in inner-city living, and the trend to teleconferencing and telecommuting, the latter being associated with growth in the number of small independent service/ knowledge producers. While not as clear or pronounced as decarbonisation, a dematerialisation trend could nevertheless in future have significant implications for both transport and telecommunications sectors' infrastructure needs.⁹⁷

2.2.2 Energy Sector

Some of the key trends identified above in relation to future transport infrastructure (e.g. decarbonisation) will also need to be taken into account in planning for energy sector infrastructure, although often the implications are different. In addition, technological innovation in energy generation means we are likely to see the gradual eclipse of the large-scale power plant within coming decades. The following analysis draws on a range of sources, including scenario building exercises such as that of Shell International;⁹⁸ the UK Foresight programme (the Energy Futures Task Force);⁹⁹ the German Wuppertal Institute's future energy path visualisation;¹⁰⁰ the Swedish "SAME" project;¹⁰¹ the United Nations Environment Programme (UNEP) (for its Third Global Environmental Outlook (GEO-3);¹⁰² and the Global Business Network/ Pew Center on Global Climate Change.¹⁰³

Scale reduction in generation, and "infrastructure energy"
Liberalisation of the electricity market and the trend to gas-turbine generation drove the beginning of the decline of the large power plant and the centralised distribution system. However, a wider range of innovative small-scale modular generating technologies is widening the generation options available, and potentially increasing system resilience. They include microhydro and other renewable energy technologies (wind, bioenergy, solar, photovoltaics). The costs of these energy technologies are likely to continue to fall as their take-up expands. Their economic viability rests in part on "learning" (e.g. about wind conditions in New Zealand, and what technologies work best). However, take-up of smaller-scale generation in New Zealand over the short to medium term is clouded by the difficulty of projecting technological and commercial developments. "Infrastructure energy" - energy generated as part of infrastructure operation, such as building operation - could grow rapidly, especially where distribution systems are less reliable. The options that these innovations offer for ownership, siting, operation, new network functions and system configurations are quite distinct from those of traditional generation and distribution. Their major implications for the shape of electricity systems are still emerging.¹⁰⁴
Greater concern about energy security
Over the last few years there has been an increase in the scale and scope of geopolitical security concerns (including concerns about "terrorism") bearing on energy systems, and this may intensify. A related trend is the "instability" (in a geopolitical sense) of liquid and gas hydrocarbon sources.¹⁰⁵ Among possible consequences is an increase in the political imperative, among western nations, for energy self-sufficiency, security and system resilience. This is likely to reinforce the trend, noted above, towards development of smaller-scale, renewable and decentralised technologies.¹⁰⁶ New Zealand may be able to take advantage of opportunities arising from this if we have developed export technologies and capabilities sufficiently.
Decarbonisation
The need to reduce fossil fuel emissions will have a very large effect on energy generation and distribution infrastructure.¹⁰⁷ The "driver" of decarbonisation will translate into a strong pressure for enhanced energy efficiency (in production and use of energy), decentralisation of generation, development of renewables, and less obvious but nevertheless important trends such as less energy-intensive urban design. One manifestation is likely to be a trend towards renewables-derived hydrogen fuel systems, although - as noted above - the speed of adoption of such technologies is as yet highly uncertain.
Dematerialisation and immaterialisation
Reducing the energy intensity of goods and services is as much a driver for dematerialisation and immaterialisation as the desire to reduce material intensity.

2.2.3 Water Sector

Future investment in water infrastructure will need to take account of the following trends:

Decentralisation
Much of the buried water supply, sewerage and stormwater reticulated infrastructure was put in place nearly a century ago and will be nearing the end of its economic life over the next 20 years or so.¹⁰⁸ These inherited water infrastructure systems were shaped by the notion that i) clean water is a limitless resource; ii) rainwater falling on cities should be diverted to streams and rivers as quickly as possible; and iii) wastewater is best treated by large-capacity facilities. Today, we are placing question marks over each of these three premises. For instance, although New Zealand is rich in water compared to most countries, temporal and regional shortages, as well as the high cost of extending the capacity of water supply systems, suggest that inefficient use can impose significant economic costs. Also, we now know that stormwater is often heavily polluted and that overloaded drains¹⁰⁹ cause flooding further downstream. These considerations therefore pose the question whether it is wise to base the renewal of our urban water infrastructure on a paradigm of relatively centralised system design.¹¹⁰
Scale reduction
The optimal size of wastewater treatment stations is gradually coming down as new technology is becoming available. This opens the prospect of more decentralised systems of sewage treatment that are both cheaper (because there is less need for expensive, buried pipelines) and would allow greater opportunities for reusing treated wastewater. While the need for wastewater recycling and reuse is not as urgent as in dry countries like Australia, and even if renewal of systems is a gradual process rather than a sudden switch, it would certainly be worth exploring the opportunities for a different approach before committing to existing systems for a long time to come. This applies particularly in respect of development of new subdivisions.
Integration of urban water management
The increasing emphasis placed by individuals on the "quality of life" and the attention given to improving the livability of New Zealand cities by local government may also affect the shape of urban water infrastructure. The concept of Integrated Urban Water Management (or water-sensitive urban design), where water supply, sewerage, stormwater and wastewater treatment are considered in an integrated way, is likely to fit in well with the Urban Design Protocol (based on a NSW example), to be developed in line with the Programme of Action's "Sustainable Cities" theme.
Increasing impact of environmental factors
The first of these is the increasing value of being clean and green. Foreign markets increasingly see New Zealand tourism as a clean, green and culturally distinct product, and such characteristics are increasingly valued. Thus, the pressure will be on infrastructure policies and management to protect our natural and cultural capital while allowing development to take place.¹¹¹ Wastewater is a case in point: there is a need to ensure that wastewater treatment infrastructure is adequate, not just to safeguard public health but also ensure that aquatic ecosystem functions are maintained at a high level. A second factor is climate change, particularly changing rainfall patterns. Climate change may cause more frequent and more severe floods and droughts. This will affect the design criteria for urban water infrastructure as well as flood protection.

2.2.4 Telecommunications Sector

Future investment in ICT infrastructure will need to take account of the following trends:

Rapid development, and merging, of technologies
Telecommunications in the old-fashioned sense of telephone communication is losing its distinct boundaries and identity, and a suite of services is (currently) emerging whose boundaries are flexible and changing. This sort of change is likely to continue and may accelerate. Rapid development, while increasing availability of high quality and integrated services at lower cost, increases risk of lock-in to a technology that subsequently becomes obsolete. A key area of rapid development is broadband. New Zealand, despite very high spending on ICT in relation to GDP,¹¹² has been slow to take up broadband (always-on, high speed) internet technology, but may well increase take-up speed and possibly catch up with some other OECD countries over the next decade or so.¹¹³ The entry of wireless technology seems to be accelerating broadband take-up, and this is likely to grow rapidly, at least in urban areas.
Persistence of the digital divide
Internet and indeed telephone access in the home are likely, for some years at least, to be socially stratified. This differential¹¹⁴ is unlikely to diminish quickly - as the persistent differential in telephone access across social groups suggests. Access (and connection quality) in rural areas may also continue to lag behind that in urban centres. Because of the likely importance of ICT for social connectedness and access to knowledge, it is likely that policy measures will continue to be seen for some years, aimed at minimising the digital divide. However, standard economic assumptions about the barriers to supply in rural areas and natural monopoly of the local loop are being eroded by technological change, as well as by government initiatives.
Dematerialisation
Reducing the material intensity of production (dematerialisation) could, as noted above, be an important driver of the take-up of ICT. Manifestations of this trend are the reducing size of ICT technologies such as cellphones and computers, and the increase in teleconferencing and teleworking, which have the potential to reduce the material and energy intensity of production. Teleworking is associated with growth in the number of small independent service/ knowledge producers. It is notable that Europe - a leading region in terms of ICT - is committed to promoting teleworking by accelerating investments in next generation communications infrastructure and services, and that this objective is part of the European Commission's Strategy for Sustainable Development.¹¹⁵

⁴¹Bell (2002) p12, suggests that an important component for achieving sustainability is leadership: "Sustainability leadership requires the ability to forecast coupled with the ability to envision a desirable future from which to "backcast" and identify actions and strategies that can bring it about."

⁴²A useful recent discussion of the difficulties with this approach is available in UK Sustainable Development Commission (2003).

⁴³There are also important economic externalities, such as congestion, to manage. Note that externalities (external effects on parties other than those involved in the immediate transaction) can be positive or negative: typically we are concerned here more with negative externalities.

⁴⁴That is, an overall objective which sits above and beyond (i.e. subsumes) objectives such as economic prosperity, environmental protection and social and cultural development.

⁴⁵The forthcoming Construction Act review will embrace sustainable building as a guiding principle.

⁴⁶Treasury (2001) p15-24.

⁴⁷One view ("strong sustainability") is that there is essentially no remaining scope for substitution of human-made capital for natural capital, in part because future options need to be preserved, and partly because current ecosystem services would be lost. For example, remaining wetlands should not be converted to a production use, since the loss would reduce options for maximising future overall welfare (and may well render future generations worse off), and cause a loss of wetland ecosystem services. A pragmatic view is that scope for substitution remains - e.g. there may be instances where wetland conversion makes sense. But where a wetland is highly distinctive or unique, and the ecosystem services are not under-valued, it is unlikely to be desirable to convert it to a production use.

⁴⁸It is essential that the long-term impacts of this externality are considered in infrastructure policy since roading and other transport infrastructure has a long life.

⁴⁹Valued in the broad economic sense - i.e. a value (reflecting a range of objectives, not simply "economic") is placed on them. Valuation in a dollar sense (monetisation) is often useful but may not always be possible.

⁵⁰In New Zealand there is a notable lack of national environmental standard setting under the Resource Management Act; there has been much greater reliance on non-prescriptive guidelines. According to the Ministry for the Environment [link to external website], no national environmental standards yet exist, although the RMA has been in place for over a decade. However, work is underway to produce a package of standards, including (initially) air quality and (later) drinking water standards: National Standards for Health and Environment - Media Release by Hon Marian Hobbs, Minister for the Environment - 16 September 2003 [link to external website].

⁵¹Some less obvious externalities - such as nitrous oxide production (a greenhouse gas) - may nevertheless be serious.

⁵²An analogy is dealing with graffiti: rapid cleanup is recognised by some communities as a cost but one with a signalling benefit - that the community cares about amenity values and is not prepared to tolerate insidious degradation.

⁵³Efficiency concepts such as dynamic efficiency are discussed in more detail in the NZIER report on an Infrastructure Policy Framework, which is part of the wider Infrastructure Stocktake project.

⁵⁴Eco-efficiency has been defined in various (similar) ways. The World Business Council for Sustainable Development sees it as: "the delivery of competitively-priced goods and services that satisfy human needs and improve quality of life while progressively reducing ecological impacts and resource intensity, throughout the life cycle of the product, to a level at least in line with the Earth's estimated carrying capacity."

⁵⁵A key element in the OECD's prescription for sustainable development, and a widely agreed policy recommendation beyond the OECD, e.g. Arrow et al (2003).

⁵⁶These are common, for example, in the Netherlands: see Chapman (2003, forthcoming).

⁵⁷UK Sustainable Development Commission (2003); Soderholm and Sundqvist (2003).

⁵⁸Meridian Energy Ltd (2003), in its annual report, states: "The challenge now is to help New Zealanders appreciate the need for a mind shift to sustained energy efficiency efforts." Meridian exemplifies opinion leaders such as the New Zealand Business Council for Sustainable Development. Engagement is more evident in Europe - e.g. British Telecom (2003). The European Commission (2001b, p11) remarks: "If we can support and encourage the development of a greener market place, then business and citizens will respond with technological and management innovations that will spur growth, competitiveness, profitability, and job creation….Leading business organisations and companies are already integrating sustainable development considerations into their core business strategies."

⁵⁹See Pacific Rim Institute of Sustainable Management and Knight (2001) p11.

⁶⁰McDonough and Braungart (1998).

⁶¹British Telecom (2003; p27) is notable for its efforts to explore the implications of meeting community sustainability expectations. A recent document, "Just Values", suggests the following ways in which business can act practically to extend corporate social responsibility:

…it's part of the moral obligation of business to support moves that create this capacity to change. In practical terms, this means:

Making sure that the company talks with one consistent voice in its interactions with government, promoting governance frameworks that enable the business community to accelerate an inevitable transformation. This includes influencing trade associations to be much more positive advocates for moves that build sustainable development throughout the market place;…
Encouraging a longer term perspective, publicly questioning the wisdom of today's excessive emphasis on short-term profit maximisation;
Communicating and marketing sustainability concepts relevant to their industry."

⁶²See Reinhardt (2003) p364 for a discussion of sustainability reporting. He notes that "Firms whose current operations benefit from unsustainable environmental subsidies in the form of inefficiently lax regulation are no different from those that benefit from more direct government handouts…".

⁶³A good example is Meridian Energy Ltd (2003).

⁶⁴It is preferable that stakeholders are given an opportunity, initially at least, to assess the significance of externality impacts, rather than those generating the externality, or the regulator, deciding that the externality is not significant.

⁶⁵Slovic (1999) and others provide evidence that risk perceptions typically vary by social group.

⁶⁶Lewin, P (2003) (Wellington Regional Chamber of Commerce) for example, argues a need for faster decision-making on infrastructure.

⁶⁷A fuller discussion of policy instruments comes within the brief of the NZIER report in this wider MED project.

⁶⁸There are likely to be localised traffic displacement effects, but nevertheless, the introduction of a price on some portion of a congested road system is likely to reduce overall demand for roading infrastructure in that area. Those saved resources can then be allocated to a higher value use.

⁶⁹New Zealand Government (2002) Chapter 1: Background.

⁷⁰The Land Transport Management Act passed its third reading stages as this report was being drafted (early November 2003). It will change Transfund's principal objective to align it with the NZTS. The NZTS guides transport policy to create a sustainable, affordable, integrated, safe and responsive transport system. The five main objectives used to guide the funding of the most effective transport solutions across all modes were set out earlier in this report. See Transfund Land Transport Programme - Transfund's Objective [link to external website].

⁷¹"Green" producer and consumer choices will be important where international trade rules exclude government regulation (e.g. exclusion of non-sustainably harvested timber), or the cumbersome nature of international negotiations stymies effective international regulation. An important example of the latter relevant to the transport sector is that shipping bunker fuels for international aviation and shipping are not included within the Kyoto Protocol, so that the full costs of international travel and imported products are not (and in the foreseeable future will not be) reflected in prices. This leads to over-consumption of transport and overprovision of infrastructure to meet transport demand.

⁷²The OECD's 2001 Environmental Outlook (OECD, 2001) notes: "In the future, it is likely that the institutions that support environmental policies will need to increasingly [work] within the broader framework of sustainable development…. More decentralised and co-operative policy decision-making and implementation (i.e. working with the business community and non-governmental organisations, greater public accountability) will be needed, and greater commitments to internationally agreed targets for addressing global and regional environmental concerns."

⁷³An immediate example is the new Land Transport Management Act - which, among other things, shifts the focus of transport funding and management to give greater emphasis to social and environmental needs: Interim Website of New Zealand Legislation [link to external website].

⁷⁴Project Aqua provides a recent example of institutions struggling to deal with large infrastructure choices. This proposed development raises questions about the ability of our current institutions (e.g. the RMA) to deal effectively with competing uses of natural resources on this scale (or even on a lesser scale). In this case, for example, the government is carrying out a cost-benefit analysis, which is not part of the decision making process under the RMA. It also announced on 2 September 2003 that it will introduce special legislation for the Waitaki River catchment which the Government says will enhance the RMA processes for current applications including Project Aqua.

⁷⁵National Round Table on the Environment and the Economy's Urban Sustainability Program (2003), Chapter 1.

⁷⁶See discussion in later parts of this report.

⁷⁷Nuij, 2001; McDonough and Braungart (1998).

⁷⁸Broadband introduction is assisted by, but does not depend on, wireless technologies. In some areas in New Zealand, wireless companies' plans to expand into voice and video are widening broadband penetration. At the time of writing, the Telecommunications Commissioner has advanced the provisional view that there may be net benefits from local loop unbundling: e.g. Steeman (2003a); Brown (2003) p38.

⁷⁹McDonough and Braungart (1998); Bonda (2002: In one celebrated Swiss design initiative, Rohner Textil, a textile factory itself has become virtually a water filtering plant, with water coming out cleaner than it goes in.

⁸⁰MOVE Programmabureau voor Mobiliteit [link to external website].

⁸¹Driessen and Glasbergen (2002) p262.

⁸²Chapman (2003); VROM [Dutch environment ministry] (2002).

⁸³Sometimes called "megatrends".

⁸⁴It covers total and regional population; labour force participation and household size; economic growth; structural change (contribution of the service sector); forestry production; international trade; and tourism; together with a brief conspectus of some principal international trends in consumption and technology which may affect infrastructure.

⁸⁵Ministry of Economic Development, Ministry of Social Development, Dept. of Labour (2003) p24.

⁸⁶These projections have as a base the estimated resident population at 30 June 2001. The projection series (no.4) assumes medium fertility, medium mortality and long-term annual net migration of 5,000 people. See Statistics New Zealand, Population Monitor : Future Population - Graph Detail [link to external website].

⁸⁷MED, MSD, DoL (2003) [Population and Sustainable Development report] p8.

⁸⁸Auckland is projected to have the largest growth, up 430,000 from 1.22 million in 2001 to 1.65 million in 2021. Auckland Region will be home to 37 percent of New Zealanders in 2021, compared with 31 percent in 2001. Other regions with large projected increases in population between 2001 and 2021 are Bay of Plenty (up 61,000), Canterbury (up 54,000), Waikato (up 40,000) and Wellington (up 29,000). Six regions are projected to have fewer people by 2021: Southland (down 14,000), Taranaki (down 10,000), West Coast (down 4,000), Gisborne (down 3,000), Manawatu-Wanganui (down 2,000) and Hawke's Bay (down 2,000). See Statistics New Zealand One Million South Islanders by 2021: Subnational Population Projections (2001(base) - 2021) - Media Release [link to external website].

⁸⁹MoT (2003) (Statement of Intent 2003-2004; Environmental Scan section) recognises the importance of new fuel technologies: "The development of alternative fuel technology is also likely to reduce negative environmental impacts of transport. Technology opens up new opportunities for the provision of funding of transport infrastructure…".

⁹⁰Emission reduction/ decarbonisation has taken time to become accepted as necessary, but is now underway, at least in most countries which have ratified the Kyoto Protocol, i.e. most of the developed world. A broader and related trend has been suggested by some (but is as yet unclear) - greater commitment to internationally agreed environmental targets and governance arrangements, and a commitment to addressing any environmental degradation embodied in imports. See Harrison et al (2003) concerning OECD work on this topic.

⁹¹A timetable set out by the European Commission (2001), in its strategy for sustainable development, gives some idea: "Alternative fuels, including biofuels, should account for at least 7% of fuel consumption by cars and trucks by 2010, and at least 20% by 2020." Kok et al (2002; p14) cite key scholars as predicting that a drastic transition in the energy system will take at least two generations, based partly on a retrospective analysis of historical transitions from wind to steam (in the 19th century) and from coal to electricity (in the early 20th century). See also ICCEPT (2002).

⁹²UK Cabinet Office (2002).

⁹³Florida, R (2002); National Round Table on the Environment and the Economy's Urban Sustainability Program (2003), Chapter 1.

⁹⁴The Population and Sustainable Development report suggests that an aging population is likely to drive "an increase in demand for improved urban environments" (MED, MSD, DoL, 2003, p43).

⁹⁵Wellington City is moving in this direction: its draft transport strategy, for example, states: "A Transport Strategy for the city cannot be developed in isolation and must be derived from the vision for the city. The Strategy must, therefore, draw on the Council's overarching policy framework for the city as a centre of creativity and innovation and contribute to this objective. It does this in terms of providing sound infrastructure to allow economic growth, and facilitating social and economic activities."

⁹⁶For example, the EU sees a need for "a major reorientation of public and private investment towards new, environmentally friendly technologies.": European Commission (2001), p2.

⁹⁷Heiskanen et al (2001); and Te Riele et al (2000).

⁹⁸Shell International (2001).

⁹⁹Energy Futures Task Force (2001).

¹⁰⁰Wuppertal Institute (2002).

¹⁰¹Swedish EPA (1999).

¹⁰²United Nations Environment Programme (2003)

¹⁰³Mintzer et al (2003).

¹⁰⁴Patterson (2000; 2003) and Refocus Weekly (2003). Technologies for "climate conscious buildings" may include new insulation materials, solar cooling, solarthermic equipment, photovoltaic systems, and, in high rise buildings, "flow-to-wire" technology.

¹⁰⁵Economist (2003a). Whether there is any increasing scarcity is more contentious - opinions remain sharply divided.

¹⁰⁶Economist (2003a): "Hydrogen-powered fuel cells, and other alternatives such as bioethanol, might provide a means of escape [from the oil market influence of Saudi Arabia] in a decade or two, if pursued vigorously enough in the meantime."

¹⁰⁷This is particularly likely in Europe. For example, the title of the 2003 UK White Paper on energy is "Our energy future - creating a low carbon economy." And the UK energy minister, Stephen Timms, stated recently that "For the first time, the environment is at the heart of Government's energy policy." (Timms, 2003).

¹⁰⁸Another significant part was put in place in the post-WW2 period.

¹⁰⁹Stormwater systems are normally designed for short-return period events (once in 5-20 years).

¹¹⁰Water sector infrastructure is already decentralised compared with energy sector infrastructure; what we are referring to here is a further move to smaller scale systems.

¹¹¹We can also expect increasing pressure on, and incentives for, water-using industries to design products and processes in ways which are ecologically sensitive. See, e.g. McDonough and Braungart (1998).

¹¹²Dutta, S and A Jain (2003) p289."The Networked Readiness of Nations"

¹¹³Brown (2003); Griffin (2003). Telecom NZ (2003) reports that broadband coverage now extends to 84% of New Zealand households (Annual Report; Strategy and Performance Section, p11), but active broadband use is much lower: Steeman (2003a) reports that Telecom has 72,000 DSL customers but many are on cheaper, slower speeds. Wireless traffic is still relatively small - Telecom Mobile has 320,000 customers (using CDMA) - but this level is presently doubling annually (Annual report S&P Section, p13).

¹¹⁴For more details, see section 3.4.

¹¹⁵European Commission (2001) p13.

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Printed: 25/11/2009