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Infrastructure Development

Infrastructure Stocktake

Part 3: Sectoral Infrastructure and Sustainable Development

Sustainable Development and Infrastructure

[ Last Updated 9 December 2005 ]

3.1 Transport Infrastructure and Sustainable Development
3.2 Energy Infrastructure and Sustainable Development
3.3 Water Infrastructure and Sustainable Development
3.4 Telecommunications Infrastructure and Sustainable Development
- 3.4.1 The Social and Economic Aspects - Access and the Digital Divide
- 3.4.2 Environmental Issues

This part of the report looks at those parts of the four infrastructure sectors where the most important issues of sustainability are likely to arise.¹¹⁶ This analysis cannot be comprehensive given the resources and time available, and therefore focuses on what we consider to be the areas of key trade-offs and complementarities with greatest long-term significance for sustainability.

We discuss what we see as important drivers, pressures and responses, where externalities are involved. We do not detail policy responses but simply highlight some key trade-off and complementarity issues, such as tensions between economic and environmental dimensions, and ways in which correcting externalities can generate complementarities. Where possible, we also identify potential opportunities for promoting "wider internalisation" such as awareness raising and behaviour change.

The purpose of the next sections' discussion of sectoral infrastructure is not to analyse infrastructure policy as such, nor do we go as far as suggesting how instruments, processes and institutions might be reshaped. That is a separate and substantial exercise. Rather, what we offer is an identification of the key sustainability issues with implications for infrastructure, as a prelude to policy analysis.

The next four sections consider key issues in the four sectors, taking transport, energy, water and telecommunications in turn.

3.1 Transport Infrastructure and Sustainable Development

Transport sector infrastructure comprises ports and airports (including associated security and biosecurity facilities), and the land transport facilities of road and rail networks. In the following discussion, the focus is on land transport networks and especially roading. With the resources available in this project, it has not been possible to cover a number of transport sector sustainability issues. Some emerging issues were noted in section 2.2.1 above, such as

The impact of more energy-efficient mobility systems, including the potential for dematerialisation (reduced material intensity) of vehicles, and renewables-based transport fuel systems
Immaterialisation (substitution of other services for trips) - e.g. teleworking and managing long-distance activity via e-tools such as video-conferencing.

We focus on the roading network (State highways and local roads considered as a single network) since it is by far the largest transport infrastructure asset, and it raises major sustainability issues. This is because:

Rapid growth in vehicle kilometres travelled (VKT) has occurred in recent years, and is widely expected to continue
While any well-used networks will have peak-time bottlenecks, the growth in VKT is extending the duration and extent, and resulting impacts, of traffic congestion to what are widely regarded as unacceptable levels
There are demands for expanded investment in the network, and proposals to invest in upgrading the rail network to reduce pressures on the road network
There are particularly strong and complex linkages between land transport investments and economic, social and environmental sustainability issues
The existing regulatory framework (although changing) has to date not adequately handled some of these issues.

These trends in New Zealand closely parallel international trends. Road congestion and increasing car dependence are important and intractable phenomena with widespread and significant linkages to sustainable development through impacts on urban design (including "sprawl"¹¹⁷), the economic competitiveness of urban areas, the decline of healthy activity patterns, the growth of various undesired air emissions, and adverse changes in the well-being of children and non-car owning households. There is nothing inevitable about these linkages but their extent and significance point to the need for active management of a range of sustainability issues.

The sections which follow describe these linkages, and draw attention to the manner in which transport sector sustainable development is influenced by different policy instruments affecting infrastructure, particularly pricing policies.

3.1.1 Road Congestion

A single additional vehicle entering a congested motorway can, in some instances, add as much as an hour's delay to the total travel times of other commuters using that motorway.¹¹⁸ When roads are paid for through petrol taxes, or through other mechanisms such as road user charges which do not reflect the capacity and level of usage of the road, the marginal cost of that time loss is not borne by the driver of the vehicle entering the road. The driver of the additional vehicle faces only a fraction of the marginal costs which his or her presence imposes on others. The costs faced are mainly in the form of time, which may not be highly valued by some, but are often highly valued by others using the road.

If, as a means of dealing with this congestion, road (particularly motorway) capacity is expanded, then worldwide experience shows it is quickly filled with increased numbers of peak-time commuter vehicles, through what Downs describes as a "triple convergence."¹¹⁹ At peak times, vehicles converge on the new road capacity from:

alternative routes;
adjoining time periods; and
alternative modes (people moving from public transport, walking or cycling).

Each of these "groups" move to the new road capacity because they are improving their individual amenity. Given the low marginal price of using the facility, the number of commuter vehicles willing to use peak-time capacity in a region is substantially greater than those who are actually able to do so, and the triple convergence phenomenon is driven by those frustrated commuters.¹²⁰ Under existing pricing systems, there is an almost insatiable character to the demand for new road capacity investments. Downs also notes that those cities that have built new public transit systems have not experienced much - if any - reduction in peak-hour vehicle congestion.

Road pricing - adjusted by time of day or level of congestion - is the only congestion remedy that has been able to avert the triple convergence phenomenon. It is a rationing mechanism which ensures the costs and charges of using the roading system become more transparent to both users and providers, and hence enable demand and supply to become more balanced. It has been rarely used around the world, for reasons reflecting either the fragmented character of the governance arrangements for large cities, or the unwillingness of motorists to accept toll charging, or both.¹²¹

A recent summary of North American experience noted, "While technical lessons learned show that congestion pricing does encourage behaviour changes and reduce traffic, it is difficult to secure above 25 percent of the public's approval for pricing. Public approval rates for HOT lane initiatives, however, can be twice as high, indicating people are willing to accept pricing when they are getting something (i.e. a more reliable commute time) in return… Pricing initiatives may be politically most feasible when they are combined with transit [availability of public passenger transport alternatives]." ¹²²

To date, road pricing has been adopted in two main kinds of jurisdictions - relatively authoritarian ones like Singapore, and highly cohesive societies like those in Scandinavia. Tolls have been accepted in various countries (including New Zealand) as an expedient to fund some new facilities. Only rarely, as in the HOT (high occupancy vehicle/toll) lanes of Texas and California, have tolls won acceptance as a means of providing congestion relief - and even there, only as a means of providing a choice for those willing to pay. However, a significant recent development is the adoption, and perceived success and acceptance, of cordon pricing in central London, including initial-stage traffic reduction of up to 40% during charging hours.¹²³

It is considered that a change from petrol taxes to tolling, including congestion pricing, offers very significant potential for resolving some major sustainability issues around land transport. Worldwide, however, transportation professionals have had great difficulty in persuading elected politicians to adopt tolling, with the result that only slow progress is being made with the adoption of new road pricing systems. To achieve greater success, it is suggested that a professional focus on engineering and economic aspects of the subject needs to be supplemented by research on public perceptions and barriers to public acceptance; on the social equity impacts of road pricing and means to counter these; and on educational/social marketing strategies to win public acceptance.

Road Congestion and Urban Sprawl

There are a range of complex factors which drive urban sprawl, and road congestion is one of these. Businesses and employees try to reduce travel times by decentralising jobs and housing. It is not clear that they are successful in achieving this - some US evidence suggests that more sprawling metropolitan areas have slightly shorter average commute times¹²⁴ but other evidence points to decentralisation increasing personal travel costs.¹²⁵

People tend to react faster to growing congestion than do governmental institutions, but their uncoordinated actions can make the problem worse, or at least more difficult to solve. In fast-growing urban areas, a combination of low density settlements and low density workplaces tends to develop. When both ends of commuter routes are thus widely scattered, the viability of investments in public transport systems, especially high volume rail systems but also good frequency bus services, tends to decline. Urban growth is largely or at least partly accommodated in new peripheral suburbs which are not well served by any form of public transport. Dependence on private vehicles thus increases. The mutually-reinforcing combination of urban sprawl and rising private vehicle dependence ensures that vehicle kilometres travelled (VKT) in a city typically rise faster than the growth of a city's population.

The trend to use of private vehicles in cities has been reinforced in recent years by rising household affluence, reductions in the cost of using private transport,¹²⁶ and other social trends such as the growth in the number of households with two or more members commuting to work in different locations, the growth in part-time jobs and people with more than one job; and rising safety concerns about children walking or cycling to school (concerns which are themselves, partly a function of high levels of traffic).¹²⁷

The pattern of urban development centred around private vehicle use has increased choice for many urban residents. Nonetheless there is a widespread public perception, reflected in turn in many local and regional authority plans and policies, that continued urban sprawl is undesirable.¹²⁸ Part of the rationale for using regulatory methods to restrict urban sprawl is the absence of accurate road pricing. Whatever the merits of the land use planning and urban design practices that have sought to modify trends toward rising private vehicle use and urban sprawl, it is clear that they have had only limited success, at least in North America/Australia/New Zealand.

In Wellington, the central city area has become more densely populated in recent years, but sprawl in the greater Wellington region has not been effectively contained, with the result that there are growing commuter traffic flows and congestion issues, much of it on routes which parallel passenger railway lines, and there is strong political pressure for new roading investment. Auckland has begun to pursue urban form policies seeking to contain sprawl and facilitate infill housing and medium-density development along public transport corridors,¹²⁹ and to improve public passenger transport and accelerate travel demand management policies (e.g. travel plans). These policies - and/or the increase in road congestion - have led to some growth in public transport usage, but there has been little overall change in the reliance of residents on private vehicles. Moreover, the Regional Land Transport Strategy, despite some shift towards more innovative policies such as travel demand management, is still largely focused on road transport infrastructure investments.¹³⁰ Further, in all the main centres there has been significant growth in rural residential living beyond the prescribed urban boundary.

In Auckland as in Wellington there are strong political pressures promoting new roading, major rail investment, and prevention of urban sprawl. If it could be achieved, accurate road pricing, including accounting for external costs, arguably has the potential to provide a better basis than current, politically-driven processes do, not only for balancing supply and demand (and modal split) in the provision of transport infrastructure, but also for the managed provision of peri-urban subdivision, and hence the management of urban sprawl.¹³¹

Economic and Competitiveness Effects of Road Congestion

The externality costs associated with congestion include travel time delays, increased vehicle running costs, additional vehicles needed in fleets to achieve equivalent service delivery, increased crash risk and pollution resulting from interference between vehicles in the traffic stream, and driver stress. The congestion cost estimates in an Ernst and Young report for Auckland in 1997 blend two cost estimates together to produce an externality cost estimate of $755 million.¹³² This estimate can be roughly updated to 2003 using data from the Auckland Regional Council's Auckland Regional Transport Model, which indicates that average travel times in the morning peak have increased by 10 percent, average trip speeds have decreased by 10 percent, while traffic has increased by an average of 14 percent. Accordingly, the estimate of the costs of congestion to Auckland now exceeds $1 billion.

The adverse competitiveness effects of urban congestion are widely discussed but have not yet emerged as a critical issue, for probably two interconnected reasons. First, as to competition between smaller and larger cities, the advantages of locating in large cities are significant for many firms and skilled workers, and where they exist, they may still exceed the disadvantages including congestion costs. Second, in Australia and New Zealand, competing cities of similar size have been perceived to have similar congestion problems. However, by the same token, if major congestion-related advantages are in future widely seen to have developed in a particular city (e.g. Auckland vs Brisbane) then - other things being equal - a significant shift in relative competitiveness of these cities could occur, with increased re-location of firms and skilled workers. While many factors affect the competitiveness of cities, there is emerging evidence internationally that urban livability - which includes elements such as quality of transport services - does affect the location choices of mobile companies and workers (see the discussion in section 2.2.1 above).

Environmental Effects of Vehicle Use and Congestion

Road congestion is associated with significant environmental impacts, which are moderated to varying degrees under current regulatory frameworks.

A series of Ministry of Transport-sponsored studies of externality costs associated with road use in New Zealand faced significant methodological difficulties in arriving at precise valuations of some of these, but were nonetheless useful for indicating the rough relative magnitude of different issues at the time.¹³³ A more recent NIWA report has looked more closely at the health effects attributable to air emissions from vehicle traffic.¹³⁴

The dominant (although by no means the only) health-threatening air emission from motor vehicles under New Zealand conditions is fine particulate matter, PM₁₀. This is primarily of significance in urban areas. An estimate of the number of people above 30 years of age who die prematurely in New Zealand due to exposure to emissions of PM₁₀ particulates from vehicles is about 400 per year (with a 95% confidence range of 241 to 566 people).¹³⁵ This compares with 970 people per year dying prematurely due to particulate pollution from all sources (including burning for home heating) and 502 people dying annually from road accidents (all ages). 64% of the increased mortality attributable to PM₁₀ emissions from vehicles occurs in greater Auckland, 14% in greater Wellington, 10% in Christchurch, and 12% in the rest of New Zealand. The raw data can be adjusted to reflect equivalent years of life lost with other causes of death such as road accidents, in which case a figure of 200 annual equivalent deaths can be attributed to vehicle PM₁₀emissions. The introduction of vehicle emission standards and a vehicle emissions testing regime is expected to significantly reduce these figures over time.

Noise was a major item reported on in the earlier studies. Using a widely accepted methodology that compared impacts of noise on property values, the externality cost was valued at $290 million. It is likely to have since grown in incidence and magnitude. Noise is effectively unregulated on existing road corridors because these are treated as existing uses under the Resource Management Act even though the volume of traffic, and the noise levels experienced by nearby residents, may grow substantially with time. In contrast to the PM₁₀ emissions issue, there have been no policies adopted which can significantly influence this impact.

Emissions of carbon dioxide (CO₂) is a major, currently uncontrolled and potentially intractable environmental impact associated with growth in road use. Transport sector emissions account for most of the rapid growth in New Zealand's emissions inventory in recent years,¹³⁶ as in other developed countries.

Congestion can be viewed as a source of fuel waste and hence, of unnecessary CO₂ ("carbon") emissions.¹³⁷ A preliminary estimate generated from computer modelling work by the Auckland Regional Council in 2000 suggested that elimination of congestion in the Auckland region could generate savings of 364,000 tonnes of CO₂ per year during the first Kyoto commitment period 2008-2012. This is just under 4 percent of the estimated total national amount of excess emissions for which New Zealand must take responsibility, after existing policies but before applying forest credits, in the first commitment period.

However, it would be futile to try to eliminate congestion simply by road building, since total carbon emissions would not be reduced at all, and newly generated traffic would lead in due course to renewed congestion. The most effective means to ensure that carbon emissions are in fact reduced is through congestion pricing, road pricing more generally, and provision of effective alternative transport modes, including provision for "active" modes.

Contaminated stormwater is a significant externality associated with road use, which harms estuarine ecoystems and limits recreational use of harbours and beaches in many New Zealand cities.¹³⁸ New roading projects and subdivisions must address the issue through RMA processes, but the major problem is with discharges from existing urban streets. While no estimates of the total national costs of this externality are available, retrofitting of stormwater drains from urban areas is very costly, and there is no mechanism for recovering this cost from road users.

Social Sustainability Issues around Road Use and Congestion

While congestion can disadvantage those on low incomes, one of the principal arguments used against the introduction of road pricing systems in the United States is that they will make things worse for this disadvantaged group.¹³⁹ While little New Zealand data analysis is currently available, data from the USA and Sweden suggest this may not necessarily be the case, depending on factors such as use of peak roading capacity and public transport, by income quintile.

Using US data, Elliott (2000) concludes that:

The richest quintile is three to four times more likely than the poorest to be on the road at peak hours
The richest quintile suffers many times as much loss from traffic delay, partly from being much heavier users, partly from having higher "time values"¹⁴⁰
General road users cross-subsidise peak-hour road users (a higher income group) through their fuel taxes for roads, because roads are generally sized to accommodate peak-hour users.

There is evidence that people in the lower-income quintiles, far from being disadvantaged by the introduction of congestion charges, could be made better off than they are currently, paying for roads through fuel taxes. In the USA, relatively few of the people travelling at peak times are on low incomes, and one estimate is that when the value of their time is considered, average-distance drivers, both poor and middle-income, who pay congestion charges and keep driving, come out slightly ahead of where they would have been without the charge.¹⁴¹ Low-income commuters (or indeed any commuters) who use buses or car-pool are also likely to benefit from congestion charges, as they would gain improved service reliability and reduce their travel time. The findings in the American studies depend on particular data by income quintile for peak time travel and the value of time which may differ from New Zealand patterns.

A recent Swedish analysis of urban road pricing reaches similar conclusions. Its assessment is that those with high incomes tend to be affected the most by pricing since they more often drive a car and are more likely to live in areas with poor access to public transport. The net effect if all income groups equally share the revenue is that those with low incomes gain the most. These calculations are still tentative, however, since the models used do not fully consider differences in time values and effects on travel time. In addition, the studies cited suggest that the difference between income groups is likely to be quite small, and it is more important how the revenues are used - for example, low income groups tend to gain more if at least part of the revenue is used to improve public transport.¹⁴²

These conclusions drawn from American and other studies are suggestive rather than definitive. Similar analysis needs to be performed using New Zealand data. The LTSA has gathered some useful data as part of its household travel survey which shows that peak travel increases markedly with personal income, so that people earning $50,000 or more spend three or four times as much time driving during the morning peak as those earning $20,000 or less (see Figure 3.1)¹⁴³ In broad terms this would suggest that, if revenue raised at peak times were recycled equally on a per capita basis across the total population, road pricing could be progressive in its impact on personal incomes.

Figure 3.1: Morning Peak Travel by Income Group

Source: Data extracted from Land Transport Safety Authority Household Travel Survey 2000

More detailed analytical work has been undertaken in the Auckland context by a group of central and local government agencies.¹⁴⁴ The social assessment part of this work appears to suggest that an isthmus cordon toll could have significant impact on those Aucklanders living in areas of greater deprivation (i.e. with a high "NZ dep" index score), but that considerably more work is required to identify both the social impacts of a more sophisticated network pricing system, and the social impacts of revenue recycling options.¹⁴⁵

The results for the cordon tolling option appear to reflect not so much the effects of road pricing itself as the cordon positioning adopted in the study - low income groups are disproportionately obliged to cross it when commuting to work, while higher income groups living closer to the CBD are less likely to have to do so.

The above analysis points to an important conclusion: the economic, socio-cultural and environmental sustainability of roading cannot for the most part be analysed independently of the policy mechanism used - the system by which users are charged for access to the roading network, and the options available for road users. In this sense, the policy mechanisms used are critical for infrastructure and sustainability outcomes. Table 3.1 below, which is not intended as an exhaustive analysis of the different systems, serves to illustrate this fundamental point.

Table 3.1: Economic, Environmental and Social Linkages/Impacts Associated with Different Approaches to Charging for Roading Infrastructure
Pricing	Economic	Environmental	Social
Petrol charges	Large efficiency losses from congestion, leading to time losses and over-investment in vehicles. If peak time congestion is relieved through building more infrastructure, over-investment is likely to result there also.	Provides an incentive for fuel-efficient vehicle choice; but promotes congestion, whose associated emissions may outweigh the benefit.	Congestion disadvantages those whose time is valuable, and those whose opportunities depend on economic growth in the region. If more infrastructure is built to relieve congestion, non-peak transport users, and residents of non-congested town and rural areas, subsidise higher-income peak users.
Tolls on new roads only	Improves efficiency where it can overcome infrastructure bottlenecks, but this effect may be limited.¹⁴⁶	New roads and associated increased traffic have adverse impacts.	Leads to inequities between commuting costs faced by residents in different areas of the same city.
Cordon tolling	Efficiency gains as congestion is reduced, but these gains are limited to the extent that congestion is diverted elsewhere.	Stimulates shift to other transport modes, which may have environmental & health benefits.	Adverse effects on groups crossing cordon to commute - distribution of impacts depends on placement of cordon. Possible adverse impacts on businesses within the cordon, offset by benefits elsewhere.
HOT lanes	Efficiency gains from increasing choice.	If vehicle occupancy increases, total system impacts are reduced. But if externalities remain unpriced, HOT lanes may strengthen road's competitiveness against lower impact modes. Overall balance of costs & benefits is unclear.¹⁴⁷	Benefits those whose time is valuable and who can rideshare or afford extra cost, while increasing the congestion delays faced by others.
Network pricing	Most efficient solution in principle, assuming technology is cost-competitive, pricing is responsive to road conditions & externalities are priced.	Reduces environmental impacts per vehicle-kilometre but may stimulate mobility in longer term and thereby increase emissions & other impacts.	Has potential to make all groups better off, especially if attention is given to social equity in the recycling of revenues.

3.1.2 Other Sustainability Issues Associated with Transport Infrastructure

Evidence has recently been emerging that increasing road vehicle use is associated with some major health costs in New Zealand, as in other similar developed countries. There are three major "transmission mechanisms" - ways in which increased vehicle use affects people's health. These channels are accidents, adverse impacts on air quality and climate change (discussed above), and the effect of reductions in physical activity. In addition, there are transitional effects such as the impacts of road-building on communities; and the uncertainty (sometimes referred to as "urban blight") associated with highway planning (e.g. the extended process of planning and debate over the Wellington bypass).

Physical activity levels have important health consequences, ranging from diabetes to coronary heart disease. Currently, a third of New Zealanders are insufficiently active to protect their health,¹⁴⁸ although New Zealanders nevertheless have higher levels of physical activity than, say, North American or British people.¹⁴⁹ However, health concerns such as obesity and diabetes in New Zealand are growing rapidly (obesity increased 55% between 1989 and 1997),¹⁵⁰ and could impose huge health, social and economic costs in future.

It has been estimated that physical inactivity contributes to around 2600 deaths per year (many more than, for example, road accidents), and is second only to smoking as a negative health behaviour.¹⁵¹ It is also estimated that a 10% increase in the number of adults who are physically active would prevent around 600 premature deaths each year,¹⁵² and it is likely that this number is growing.¹⁵³

A strong linkage is emerging between patterns of vehicle transport and physical activity (and hence health). The Ministry of Health makes the connection in its March 2003 strategy on healthy eating and healthy activity.¹⁵⁴ There has been a major reduction seen in active travel (walking and cycling, and use of public transport, which typically involves walking and cycling at each end), in most developed countries in recent decades. This is strongly associated with growing dependence on car transport. An allied effect is that urban neighbourhood design, which is intimately linked to car dependence, can affect physical activity and hence the health of those living there.¹⁵⁵

These trends and linkages raise some important and wide-ranging issues for infrastructure policies, infrastructure design (e.g. road design), broader matters of urban form and density, and related government policies, both at central and local government level. The New Zealand Transport Strategy has demonstrated that central government advisers are beginning to shape policies to recognise the significance of the issues. For example, the NZTS states (Chapter 5):

Walking and cycling for short trips will be promoted and reduced dependence on private vehicles for mobility is encouraged

The recent release of the draft New Zealand walking and cycling strategy is another positive signal. It is also understood that current inter-departmental policy work on sustainable cities is taking into account these issues.

However, intentions have yet to be widely translated into developed policies, or implemented, and action on the ground (e.g. growth of walking school buses) is still in its infancy. In this context, it is important that infrastructure design and investment takes into account the emergence of the evidence of a major sustainability issue, with social, cultural,¹⁵⁶ environmental and economic dimensions. Policy makers, designers, and investors should begin to take actions to shape infrastructure in ways that accommodate and facilitate a trend back from car dependence to "active travel".

This is an area in which the second element in the framework above, namely encouraging attitudinal change and increased awareness,¹⁵⁷ and providing information and education, are likely to be highly important in changing behaviour patterns over time, supplementing more conventional policies such as road design, land use planning, and perhaps road pricing as discussed in the previous section.

3.1.3 Summary of Sustainability-Related Issues with Respect to Roading

To conclude these two sections on transport infrastructure, we have focused on road congestion and other major sustainability issues associated with roading infrastructure. A number of key questions can be posed:

How can a positive contribution of roading infrastructure to all dimensions of sustainability be secured?
Are the adverse external effects of road use and congestion being comprehensively and adequately assessed, especially in Auckland?
How much does transport system quality affect perceived livability and hence the international attractiveness of New Zealand cities?
How significant a social and environmental externality is traffic noise?
What are the likely equity and other social impacts of urban road congestion pricing in New Zealand cities?
What are the external costs, and benefits, of other modes (walking; cycling; public passenger transport, including rail)?
Are the sustainability issues around transport systems, physical activity and health being given adequate attention in infrastructure
strategies and policies, infrastructure design (especially road design), broader matters of urban form and density, and related government policies, both at central and local government level?

3.2 Energy Infrastructure and Sustainable Development

The non-transport energy sector comprises two main sub-sectors - electricity and gas.¹⁵⁸ In the following discussion of key issues for energy sector infrastructure sustainability, the focus is mainly on electricity services, for two reasons. First, the electricity sector is more important in an economic sense and considerably larger.¹⁵⁹ For example, Table 2.1 presented earlier (section 2.1.6) suggests that electricity supply quality continues to be a critical element of infrastructure as countries' income levels increase. And electricity supplies 27% of total consumer energy, while gas supplies only 8%. Second, in discussing electricity, a number of gas issues arise in any event, since gas fuels around 25-28% of electricity generation.¹⁶⁰ Consistent with a sustainable development horizon, this discussion considers the medium to long term, that is, issues relevant to infrastructure needs over a 20-30 year timeframe.

The discussion focuses on energy system security, and on pressures to reduce thecarbon intensity of energy systems.

The Legacy of the Past

New Zealand's infrastructure for providing energy services has over the last generation been notable for two key characteristics - hydro-electricity dominating the electricity generation sector, and the impact of a large supply of Maui gas, made available at low prices. The geography of New Zealand, with much of our generation capacity at a large distance from electricity demand (loads), has also continued to shape the underlying infrastructure of electricity distribution, presenting challenges and risks for our transmission/distribution system.¹⁶¹ In addition, an important attitudinal characteristic which has influenced the nature of our infrastructure, and was reinforced by the success of our engineering achievements (the Waitaki and Waikato hydro systems, for example), has been an emphasis on supply-side solutions, usually of a large scale, to our energy needs.¹⁶²

These circumstances are now beginning to change, and our energy infrastructure will change accordingly. Security issues highlighted by recent dry years¹⁶³ and the run-down of the Maui gas field have motivated a reconsideration of the lack of diversity in our generation system, and a widely expected increase in energy prices as we emerge from the umbrella of Maui is likely to give extra impetus to diversification.

The rise of climate change as a key environmental policy driver raises the fundamental question of how New Zealand is to meet long-term energy needs while progressively reducing fossil fuel dependence. Accordingly, it has propelled a government commitment to increase the supply contribution of renewables, although the size of the increment so far is modest.¹⁶⁴

The awareness of the potential for economic efficiency gains from greater attention to the demand side, together with an awareness that New Zealand has not so far been successful at decoupling energy growth from economic development¹⁶⁵, have motivated a more strategic appraisal of the relative contributions of supply and demand.

Over the long term, the most significant sustainability-related drivers of energy sector infrastructure appear to be first, the pressure to protect and enhance energysecurity,¹⁶⁶ and second, the impact of decarbonisation - the pressure to move towards a much lower level of carbon intensity in our energy system. These two issues are addressed in turn.

3.2.1 Energy Security

Economic and Eco-Efficiency Aspects

Energy security - freedom from service disruptions and supply uncertainties - is a fundamental energy infrastructure requirement, and is particularly critical in the case of electricity. With the economy's increasing reliance on ICT and other electricity-dependent technologies, the value of electricity security will grow.¹⁶⁷ Security is also important for gas supply arrangements, and may become more salient as Maui supplies run down. Security can be viewed as an externality from the point of view of energy market players (on both demand and supply sides) - it is no-one's direct responsibility, but everyone benefits from it.¹⁶⁸ Conversely, there is a negative external cost of major energy system failure: New Zealand as a whole risks losing reputation and credibility and potentially some foreign investment.¹⁶⁹

There are two main aspects of energy security. One is transmission /distribution system security; the other is managing the balance of supply and demand. This applies to both gas and electricity systems.

Recent electricity outages in a number of countries have highlighted the importance of maintaining adequate resilience and buffering (including aspects such as voltage and frequency support) in electricity transmission and distribution systems. This is an area for careful regulation in a liberalised market,¹⁷⁰ with clear implications for energy infrastructure providers, particularly Transpower and distributors. In considering distribution system infrastructure investment, a key strategic decision with sustainability implications is the extent to which traditional patterns of distribution are reinforced or new, more decentralised, patterns of generation and distribution are encouraged.

Key sustainability issues affecting this aspect of security arise in respect of distributed generation of electricity, and new renewables.

Distributed generation has a number of benefits, including highly aligned economic (efficiency, competition) and environmental benefits (essentially arising from higher conversion efficiency and the ability to exploit both heat and power yields).¹⁷¹ In terms of security, it can reduce overall demand on the national grid, providing system stability benefits, and reduce the need for costly infrastructure investment, in lines. However, extensive investment in some forms of distributed generation raises issues of quality of supply and grid security. It can also have impacts on local communities, and the cooperation of local authorities and communities will be required to expedite distributed generation development.

Similar quality and security issues arise with investment in new renewables such as wind and solar, where output is intermittent. In this respect, the PCE notes that "[it] will be important to ensure that the "guardian" of the grid and distribution companies is not too conservative, thereby impeding the introduction of new technologies (even if more innovative options may, at least initially, be more challenging to implement)."¹⁷²MED's proposed regulatory approach seeks to address these issues.¹⁷³

While exactly the same issues do not arise for the gas sector, there are some similarities. The recent Government Policy Statement on the gas sector noted that post-Maui production from an increased number of smaller gas fields will require more sophisticated pro-competitive market arrangements, including improved arrangements for gas balancing and reconciliation.¹⁷⁴ Supply continuity issues may become more prominent as we transition through the Maui gas supply phase-down.¹⁷⁵ Access to the Maui pipeline is also likely to be important in the fairly near term. More decentralised production of gas will also not only require new infrastructure investment, but will create new opportunities and incentives for gas to be used in a more decentralised way, such as for combined heat and power.

The other, equally significant aspect of energy security is ensuring a continuing balance between supply and demand. At a high level, there needs to be careful institutional design and attention to the ongoing operation of institutions such as the Electricity Commission, to ensure that a competitive market model is able to work effectively in a small country like New Zealand, to deliver this balance. Market processes can deal well with matters of infrastructure investment, return and risk management, if there is regulatory predictability and regulation is appropriate and effective. However, while astutely regulated market processes have many advantages over more centrally planned systems, there are many examples of regulatory failure internationally (and indeed domestically) to point to.

A key role for central government is to ensure that energy market rules ensure long-term environmental and social sustainability, goals which the market is not able to address sufficiently by itself. Associated with this is the matter of pressure for unsustainable regulatory shortcuts, discussed below.

The current shorter-term outlook is that, without significant demand reduction, electricity demand is projected to grow at around 2% or 150MW per year.¹⁷⁶ In addition, security of supply will be affected by the availability of long-term gas supplies to support ongoing thermal electricity generation. Gas supplies seem likely to be sufficient for perhaps the next decade,¹⁷⁷ but in the longer term are less certain, and depend heavily on a continued supply of commercially viable gas-field discoveries, or LNG imports. Given geopolitical, supply and environmental/physical risk considerations, the LNG option has some disadvantages, including cost and a possible dampening effect on local exploration and development.¹⁷⁸ Cost, as well as the constraints which climate change policy are likely to pose within a decade or so, count against coal gasification systems, although the US and some other countries may nevertheless invest in this option and lower its costs.

There are other supply possibilities, but in short, without significant investments or measures on the supply or demand sides, there could be a growing supply-demand electricity gap emerging within a decade or so.¹⁷⁹ The market is likely to be able to address this gap fairly effectively, probably with some increase in energy prices. But there is a risk of customer-driven pressure being exerted either to contain price increase or for regulatory shortcuts - in effect finding ways to trade off environmental goals in order to lower economic or social risks and costs.

The problem is that until a supply-demand gap is imminent, it is difficult for the public to see the need for price increases, significant demand reduction measures, or ecologically-sensitive supply increments. Once shortages or price increases become imminent or real, it becomes more difficult to make rational decisions (including regulatory decisions) consistent with long-term sustainable development. In these circumstances, pressures can mount either for measures such as legislation involving regulatory "streamlining" (to secure a major supply project with some loss of environmental or social values), or for measures to over-ride the market adjustment process. In effect, pressure from the need for rapid adjustment can short-circuit the preferred process - which is that social or environmental costs of energy supply should be factored ex ante into policy instruments and hence investment decisions, and that normal market processes should then deliver sensible energy infrastructure investment. Without such internalisation, the true cost of energy will be understated and investment in production, and use, will be distorted.

In both the short term and the long term, it is undesirable that any form of extra energy supply be subsidised, either directly or indirectly,¹⁸⁰ since this simply creates additional demand for (i.e. creates wasteful use of) extra energy. In line with the full cost principle,¹⁸¹ any ecological, social or other costs associated with (energy) resource development should not be hidden, but fully and transparently factored into the price of energy. These costs should not be underestimated simply because they are difficult to value, or inconvenient to face.

Detailing policy to address this issue goes beyond the scope of this paper. However, the principle that ensuring resource prices incorporate full environmental or socio-cultural costs is critical for sustainable infrastructure decisions in the energy sector. Full-cost pricing can not only bring forward appropriate supply options, it also tends to reduce demand. Full-cost prices can be established through including an explicit charge on scarce resource use (e.g. for scarce water, especially under drought conditions) or through a carbon charge, when the externality is carbon emissions: both reflect the external cost of using that resource.¹⁸²

This discussion suggests there are two key questions in relation to demand and supply contributions to the economic and eco-efficiency aspects of energy security:

Given the cost of energy infrastructure, and since demand management has strong attractions from an economic point of view, especially if it can limit peak demand, are there adequate and explicit incentives and information available to market participants to effectively encourage demand-side participation and sufficiently reduce energy wastage? The absence of price signals associated with certain resources and the ongoing presence of some apparently "low-hanging fruit" suggest the answer is probably no.¹⁸³ Moreover, development of demand-side participation tools in New Zealand appears to be still in its infancy, despite initiatives by EECA, Meridian, Vector and others. In economic terms, price signals are still not being exploited sufficiently. Large consumers are beginning to get better signals about the costs of their energy load, but small customers receive very poor price information. Innovative technologies including "smart" meters which respond to price signals, and internet based tools, offer considerable potential in this area¹⁸⁴.
On the supply side, are the full costs of new generation facing decision makers when projects are designed and consented? A requirement here is the comprehensive implementation of the principle adopted by the government (section 1.3.4 above) that the full costs of producing and transporting each additional unit of electricity are signalled so that investors and consumers can make decisions consistent with obtaining the most value from electricity. The discussion above suggests the answer to the full cost question at present is no, since critical resources such as water often remain unpriced.¹⁸⁵ Information available to supply side investors is certainly better than it was some years ago, given the evolution of the energy market, but there is still some way to go in areas such as establishing effective gas trading market institutions.¹⁸⁶ And, at time of writing, New Zealand is still working through important processes to ensure that grid pricing and distribution pricing are providing clear and efficient signals to investors.

Encouraging Attitudinal Change

The key idea proposed in the last section is that incorporation of environmental externalities in pricing is far from complete in New Zealand"s energy market but, if progressed, has the potential to generate more sustainable environmental and economic outcomes. However, as noted in the Framework (section 2.1.1 above), it is not realistic to suppose that every externality will be priced and thus incorporated into individual producer and consumer decisions. For this reason, attitude change ("wider internalisation") strategies, including education and awareness raising and ensuring that decision making processes give conscious attention to social and environmental objectives, have an important role to play in advancing energy sustainability.

Examples of key non-transport areas in which education and awareness are likely to offer gains are those being addressed by EECA in its energy efficiency strategy - e.g. in housing and building design and householder behaviour (e.g. insulation, choice and use of heating systems, dryers, lighting, hot water). Another is awareness raising by local governments such as through the EnergyWise Councils initiative,¹⁸⁷ building an energy conservation ethic. In the UK, similar programmes include a Market Transformation Programme to provide a knowledge base to reduce the energy intensity of key product areas; the Action Energy Programme; and Local Energy Efficiency Advice Centres, coordinated by the Energy Saving Trust.¹⁸⁸

Another area in which awareness is important is in relation to technical feasibility of alternative energy options, such as renewable or distributed generation energy options, and awareness, for example among businesses, of the potential of demand-side energy exchanges.¹⁸⁹

The key point here is that if there is inadequate investment in such measures, there will be pressure for overprovision of energy infrastructure, which is likely, in general, to impose environmental, as well as economic, damage. However, to answer the central question of whether central and local government are doing enough in this area, it is necessary to return to the question of what level of such effort might be optimal.

In the absence of correct full externality based pricing of energy, it is clear that some non-zero level of wider internalisation effort (such as awareness raising) is optimal. But how much is too much? This is a social investment calculation, in the sense that it is necessary to consider the optimal level (and targeting) of investment for the community as a whole. An appropriate principle to guide this assessment is that the full benefits (environmental and socio-cultural as well as economic, and risk management benefits) of an investment should exceed the costs. For example, if energy efficiency or conservation leads to complementary gains in materials disposal costs, waste and wastewater production, and/or air emissions (and reduces some environmental and social risks), as can be the case with measures to support "cleaner production", then all of these benefits (and costs) should be taken into account in considering the size of the investment.¹⁹⁰

Other Social and Cultural Aspects

The key social and cultural issues in respect of energy security relate to cost, access and energy quality; and implications for tangata whenua.

Access and affordability are both important for social inclusion and connectedness. They can usefully be considered together, since access to energy at an affordable cost is a concern for many low-income households, although access to non-interruptible supply is in addition important for some vulnerable groups (e.g. those with certain medical conditions).

As far as infrastructure goes, the principal implication of ensuring affordability is simply that infrastructure investments should be as competitive and efficient as possible in the shorter term, and not lock New Zealand into a path of higher-than-necessary costs in the longer term.

It is already part of New Zealand government policy that electricity lines companies offer a tariff with a low daily fixed charge, and the Government's draft GPS on electricity governance reflects this.¹⁹¹ A low daily fixed charge (and consequent higher energy charge) may have the unintended effect of increasing the incentive on users to economise on energy consumption which, for some low-income users or those in "fuel poverty", may adversely affect their health. On the other hand, it has an advantage in offering households a tariff choice which enables savings on energy to be made, reducing financial stress, especially among low users of electricity.

It is unlikely that this policy involves a significant departure from full cost pricing, which is (as noted above) also an objective of the government. However, to the extent that it did, it may represent a trade-off between social and other objectives which might lead to some distortion of demand and pressure for additional distribution infrastructure.¹⁹²

Another significant social aspect of energy security is energy quality - key dimensions of which are security and availability of supply for the average domestic customer, and service quality, including customer responsiveness. The issue of outages was mentioned earlier in the discussion of economic and eco-efficiency aspects.

Some commentators have suggested that there remains an important government function to negotiate service quality standards and accountability with utilities, and monitor outcomes,¹⁹³ not just for economic reasons, but because of social (including equity) reasons - including the vulnerability of some groups in society. The recent draft GPS sections on consumer protection reflect this objective.¹⁹⁴ The UK government, similarly, puts some emphasis on quality in this area.¹⁹⁵ Government policies for social sustainability in this area are unlikely to have major implications for infrastructure, although there is perhaps a risk that regulatory complexity will raise costs of infrastructure supply.

The Parliamentary Commissioner for the Environment has noted, in the context of his proposed framework for review of the electricity sector,¹⁹⁶ some areas of interest or concern for Māori. Drawing on this analysis, but extending it to energy in general, the most obvious interests in terms of energy relate to the operation and development of electricity generation, and electricity and gas transmission, projects and how these impact on:

rights of ownership of, katiakitanga over, and access to, energy-related natural resources
the values associated with taonga, wāhi tapu, and kaimoana.

Other possible concerns of Māori that may relate to the sustainability of the energy sector include:

access to electricity or alternative energy services (especially distributed generation for remote rural areas)
access to energy efficiency and conservation measures (for low income households and health-related benefits).

It is likely that evolution of the energy system towards more distributed generation and renewables may ease some pressures for larger scale development of some natural resources which Māori own, exercise kaitiakitanga over, or generally wish to protect. On the other side, distributed generation based on geothermal resources, which are sometimes owned by Māori, is likely to continue to form an expanding part of the energy infrastructure.¹⁹⁷ And new distributed generation technologies are likely to mean that access to energy services becomes easier for tangata whenua in more remote areas, even if costs do not fall.

3.2.2 Pressure to Move to a Low-Carbon Economy

Economic and Eco-Efficiency Aspects

The emission of greenhouse gases such as carbon dioxide is a ubiquitous and damaging external cost. The nature of New Zealand's policy response is not at issue in this discussion but, to reiterate a conclusion from the discussion in section 2.2.2 concerning decarbonisation, it is clear that, barring a revolution in climate science, there will be mounting pressure for, and action on, a global transition towards lower carbon energy systems over the next 30-50 years. Increasingly, use of fossil fuels not subject to a carbon charge will be seen as an unwarranted subsidy to energy use.¹⁹⁸ The speed of the transition will vary from country to country, with high-income Northern European countries already leading the transition,¹⁹⁹ and a range of paths and mechanisms will be adopted.

While New Zealand has not yet made any specific commitments beyond 2008-12 (the first commitment period under the Kyoto Protocol), there is a high likelihood that - in order to keep participating in the developed world community - further and more stringent emission reduction commitments will be necessary beyond the next decade. Pressure to make emission reductions of the magnitude of the UK's (a reduction of 60% relative to 1990 levels, by 2050) is not unlikely, given the incremental strengthening of the scientific evidence that reductions of such a magnitude are necessary. Reductions of this magnitude have for some time been noted as necessary (for precautionary reasons) by the Intergovernmental Panel on Climate Change.²⁰⁰

The main features of decarbonisation in New Zealand (leaving aside the implications of reductions in other greenhouse gases) are likely to be strong pressure for enhanced energy efficiency (in production and use of energy), decentralisation of generation to the extent it can reduce demand growth and cost, development of renewables, and a range of actions to indirectly reduce emissions, such as through containing growth in vehicle use and reshaping urban design. Some of these matters have already been discussed and will not be considered further.

This paper does not review the detail of whether there are short-term trade-offs between carbon emission reduction (an essentially environmental goal) and cost (or more precisely, the economic goal of maintaining economic performance), or whether there are in fact complementarities. The national interest analysis conducted in 2002 to assess the merits or otherwise of ratifying the Kyoto Protocol suggests that in the short run, it is a mixed picture for New Zealand, and depends on policy choice. Overall, however, there is a likely positive impact of ratification and implementing Kyoto, arising from maintaining good trade and international relationships, and realising the commercial value of carbon sequestration, assuming the market for carbon credits continues to develop.²⁰¹

It is unclear how big any adjustment costs for affected companies might be - estimates vary widely. Experience overseas suggests that costs may turn out to be lower than feared. This can arise because new capital equipment is usually more efficient than old; because technologies change and improve, and widespread adoption cuts costs;²⁰² and because the prospect of having to adjust can accelerate businesses' rethinking of established practices. In short, although sudden adjustment is painful, making or anticipating adjustment can generate innovation and change, creating advantage.²⁰³ It can also exploit the potential for innovation by universities and research institutes in partnership with businesses.

Longer-term economic trade-offs and complementarities associated with decarbonisation of energy are inevitably less clear and more speculative. Costs will depend on the extent of emission reduction, and the time period over which the change can be made. Prima facie, and if the adjustment required is not sudden, it is perhaps less likely that there will be major cost disadvantages of decarbonisation in the longer term, given that businesses have longer to retire long-lived plant and adjust to relative price changes. However, there will still be significant infrastructure investment requirements and costs involved with renewable energy and more distributed generation, likely key elements of the longer-term sustainable energy path.

Offsetting these infrastructure establishment costs are the economic advantages of a more secure energy system arising mainly from the greater diversification which new technologies such as combined heat and power (CHP) and renewables will bring. As noted above, renewables can present issues for system integrity and stability, but on the whole are likely to increase system resilience and reliability. In addition, if the (low) risk of having to adjust rapidly in the face of early signs of abrupt climate change can be mitigated through early precautionary action, then some very high costs in future may be avoided.²⁰⁴

The costs and benefits of a transition to a low-carbon energy system will be linked to the way the global economy evolves. There may be some strategic positioning arguments in favour of actively pursuing a low-carbon energy path similar to that recently taken by the UK, with its commitment to "creating a low carbon economy".²⁰⁵ Moving early in that direction, and allowing the transition to take several decades rather than telescoping it into a shorter period, are likely to mean a less costly transition.²⁰⁶

Low-carbon energy infrastructure investment requirements, in areas such as bioenergy, remain quite uncertain. They depend partly on operational scale, and partly on bioenergy's end-use. Operations may involve either provision for transporting biomass longer distances to a "central" power plant or cogeneration plant,²⁰⁷ or provision for transporting it shorter distances to a number of small-scale plants, with normal distribution systems then carrying power to the load. Infrastructure costs and returns depend also on whether use is being made of wood process residues already collected on site, whether forest arisings are being extracted, or whether energy crops are being grown. And end-use - use of bioenergy for heat, power or transport (see section 4.2 below for a short discussion of transport energy) - will again entail different infrastructure implications.

A potentially significant longer-term complementarity is that between decarbonisation and innovation.²⁰⁸ In areas such as bioenergy, innovative technology may reduce the cost of decarbonisation and could generate some positive returns from the transition. Even if for various reasons New Zealand has already lost some opportunities for early mover advantage (e.g. in windpower; agriculture-based biofuels),²⁰⁹ new niche opportunities for profitable innovation for New Zealand could arise (e.g. geothermal, gust-resistant windpower, aspects of bioenergy), with possible spin-off gains for sectors such as forestry and agriculture. This depends on exploiting particular skills and circumstances in New Zealand, and our international connectedness in respect of these technologies.²¹⁰

New Zealand has competitive expertise in geothermal energy and combined heat and power systems employing woody biomass and waste, and could potentially apply this expertise both domestically and in export markets. Whether New Zealand sees bioenergy as a likely part of a global decarbonisation scenario, invests strategically in local technology development²¹¹ and gains a good return from such investment, is not an infrastructure decision as such. But it could have implications for the shape of our energy infrastructure, potentially reducing its costs. Further research may be warranted in this area.

Other Environmental Aspects

So far, we have focused on the economic and eco-efficiency aspects of moving towards a lower carbon energy system. Other important environmental effects of decarbonisation (leaving aside the reduction in greenhouse gases), are mainly positive but can also be negative in some areas.

The biggest (non-climate) benefit of reducing carbon emissions is likely to come from the transport sector. A reduction of fossil fuel use is likely to reduce ambient air pollution, yielding significant health benefits. In fact, some observers, such as the European Commission, see the need to reduce air pollution as an important independent driver of the shape of energy systems (separate from energy security and decarbonisation concerns).²¹² While a difficulty is that New Zealand is largely a vehicle technology taker, the potential for health and amenity benefits through use of cleaner fuels such as biofuels is nevertheless very substantial, as discussed above.²¹³

On the other hand, the largest adverse impact of decarbonisation may be the pressure to advance large or medium-size hydro or geothermal generation schemes, which in some instances may have significant impacts on local ecosystems, and, less significantly, the adverse aesthetic / amenity impact (for some) of windfarm development.

How much of a switch towards renewables is likely in response to support through the government's "projects" mechanism, initially, and the introduction of a carbon charge and international pressure on New Zealand to reduce emissions, subsequently? This question is difficult to answer, since it depends in part on the price path of CO₂, and partly on factors such as the incentives for and capacity of New Zealand companies to develop low-carbon renewables. It was touched on in section 3.2.2 above,²¹⁴ where it was noted, for example, that a low carbon charge may be enough to make some renewable energy commercially profitable.

The prospects for bioenergy were briefly examined above. Some recent estimates suggest that geothermal energy may be able to supply around eight times as much primary energy as, for example, woody biomass by 2012,²¹⁵ even despite New Zealand's large biomass capacity.

More densely populated countries with limited hydro and geothermal resources and an unwillingness to invest in nuclear are increasingly finding that among the most competitive options for renewables development are windfarms and solar energy, (including offshore windfarms²¹⁶). The magnitude of these developments suggests that development of renewables in New Zealand has the technical potential to be substantial, rather than simply a gloss on our existing energy system.²¹⁷

An order-of-magnitude indication of potential scope is Pretli's estimate (reflecting earlier EECA work) that New Zealand's technical wind energy generation capacity may be around 100,000GWh per year, or close to three times current total electricity generation levels.²¹⁸ Even if this estimate is optimistic (many sites have not been tested), and one half (say) of this is more realistic, the magnitudes are still large.

Australian estimates, while difficult to translate to the New Zealand context, tend to support a relatively optimistic view.²¹⁹ It seems likely that over the next decade New Zealand will be readily able to surpass the 30PJ of additional renewable energy which commitments under the NEECS strategy currently entail, and increase renewables' share of consumer energy beyond the 31% level.²²⁰

In the longer term, decarbonisation is likely to involve a trend towards renewables-derived hydrogen fuel systems to contribute to transport needs, although - as noted above - the speed of adoption of such technologies is as yet highly uncertain, and the process could well take at least a generation. As far as infrastructure goes, more work is needed to consider likely hydrogen system take-up scenarios and their implications.

One factor will be the direction of global developments in hydrogen fuel systems. For New Zealand there may be greater potential if developments open up options for local hydrogen production near the point of fuel cell use, rather than large-scale plants which require pipeline transport infrastructure and large storage systems. Also, the benefits to New Zealand will tend to arise from renewable based system development, rather than developments based on fossil fuel use (the latter being unlikely to be consistent with decarbonisation²²¹).

The Icelandic experience and commitment, while in certain respects unique, offers an example of an operational strategy for conversion of mobile energy technologies to hydrogen, working through bus, car and fishing fleet engine technologies over a 20-30 year period.²²² The plan involves demonstration projects for buses already getting underway. Part of the rationale for Iceland's early moves seems to be that, by being a market leader, they are more likely to gain benefits through foreign investment, innovation and improved global connectedness.

Social and Cultural Aspects

Assuming the Kyoto Protocol comes into force, the introduction of a carbon charge from 2008 will raise energy costs significantly for some groups, such as low-income households who use significant amounts of energy. It may thus have an adverse social (and economic) impact unless offset by other measures (e.g. a fiscally-neutral income tax adjustment). The consequences for infrastructure will tend to follow from the energy switches which households and businesses make in response to the shift in relative energy prices, for example towards renewables and away from fossil fuel based energy sources, and towards greater energy efficiency, and this in turn may be influenced by the nature of any tax switch.

A departure from fiscal neutrality might be considered in the case of programmes to promote low-cost renewable energy options, particularly for low-income households. For example, solar water heating is already promoted through EECA's "low temperature heat" programme, aiming to reduce barriers to uptake and reposition it as a commercially viable, mass-market product. Solar water heating can provide long-term energy services at little or no ongoing cost, beyond the cost of installation, which is attractive for those on low incomes if assistance can be provided for capital costs.²²³

There is also a case for channelling public willingness to support energy system sustainability into constructive action, and in doing so, to enhance awareness of sustainability issues. For example, there may be some public support for green energy such as wind energy, with some preparedness to pay a modest premium for electricity from new renewable sources.²²⁴ However, green power schemes appear to need help in assuring the public that they are credible. For example, the credibility of green power to consumers may require an accreditation scheme involving agreement between EECA and the energy industry,²²⁵ and the government may need to commit government agencies to buying an increasing proportion of green power. Implications for infrastructure will follow from the changes in energy consumption patterns.

3.2.3 Summary of Sustainability-Related Issues for Energy Services

The foregoing discussion of the energy system's sustainability has covered the principal economic, environmental and socio-cultural aspects involved. The main questions for energy infrastructure and sustainability emerging from this discussion are as follows.

In respect of the security of energy services:

Will traditional patterns of energy distribution be reinforced or will more decentralised patterns be encouraged?
How will distributed generation and new renewables contribute to security, and will their contribution be impeded or facilitated?
Are there sufficient incentives and information available to market participants to encourage demand-side participation and reduce energy wastage?
On the supply side, are the full costs of new generation facing decision makers?
Is there sufficient investment in raising energy awareness and an energy conservation ethic to mitigate pressure for overprovision of energy infrastructure?
Does a low fixed charge tariff significantly distort demand, and is it a well-targeted measure?
Will regulation of energy quality, and enhanced accountability to customers, significantly raise costs for infrastructure providers?
Are interests of tangata whenua in energy infrastructure impacts, and access to energy, being adequately considered?
In respect of decarbonisation:
What are the likely benefits to New Zealand innovation from accelerating the contribution of new renewables such as bioenergy?
How much of a contribution might new renewables make to decarbonisation and is the +30PJ commitment too modest?
What factors will affect the longer-term attractions and benefits of hydrogen-based fuel systems?

3.3 Water Infrastructure and Sustainable Development

The water sector, among the four classes of infrastructure discussed in this report, has been most familiar with some of the concepts underpinning the idea of sustainable development, notably that of integration. Terms such as integrated quantity and quality management, integrated surface and groundwater management and integrated supply and demand management have been common currency since well before the term sustainable development was coined in the mid-1980s. Equally, words like reuse and recycling have long been part of the water manager's vocabulary, even if in New Zealand the need for these has not been as urgent as in dry countries.

Also, because water is such a ubiquitous and vital part of nature, society and the economy - and does not respect any boundaries between them - water managers have for long been confronted with social, environmental and economic aspects of water management.

The Government has recognised water allocation and water quality (including drinking water quality) as potential constraints to sustainable development and included these as priority issues in the Sustainable Development Programme of Action, released in January 2003.

This section discusses first the linkages between water infrastructure and sustainable development in relation to urban water supply, and then examines sewerage and wastewater treatment (3.3.2). Section 3.3.3 deals briefly with integrated urban water management, or the integration of water supply, wastewater and urban stormwater management. After a brief summary of these issues in section 3.3.4, the water chapter rounds off with a brief consideration of some aspects of irrigation infrastructure (section 3.3.5).

3.3.1 Urban Water Supply

The Legacy of the Past

Urban water supply systems in most developed countries were built about a century ago. The buried pipelines constituting the bulk (up to 80%) of the investment in these systems have often not been well maintained (partly due to the "out of sight, out of mind" syndrome, partly as a result of the lack of proper capital replacement practices) and are nearing the end of their economic life. Accordingly, many communities are now faced with sudden, large expenditures for replacement and renewal of reticulation networks. The Australian Parliament recently reviewed urban water systems in that country and called for a national policy on urban water systems and on investment to replace the country's ageing urban networks.²²⁶

The stocktake of New Zealand infrastructure currently in progress will show whether (or to what extent) the same situation exists here.²²⁷ A 1997 survey of local authorities (Department of Internal Affairs 1998) suggests that deferred maintenance may be a less significant issue in New Zealand than the infrastructure upgrading required as a result of the New Zealand Drinking Water Standards 2000 and/or the requirements of the RMA. Whatever the reason driving the expected capital expenditure, the next decade or so may present a "window of opportunity" for asking whether the conditions, assumptions and technology that shaped our current urban water supply systems still apply.

These comments about urban water supply can to a large extent be repeated in respect of the sewerage and stormwater drainage system. As infrastructure renewal opportunities arise, and business-as-usual scenarios can be reappraised, it is worthwhile reconsidering systems and strategies in the light of changes that have occurred since these systems were first built²²⁸. We will return to this issue in section 3.3.3.

Environmental Aspects

At a national level, urban residential and industrial water use represent only about 15% and 10% of total New Zealand withdrawals, respectively, whereas agriculture accounts for circa 75% of the total.²²⁹ The environmental impact of water abstractions for urban use will therefore on the whole be less significant than that of agricultural withdrawals. Nevertheless, in dry periods and in certain areas, urban demand can put local water resources under pressure, by threatening the residual flows in rivers needed to protect aquatic life (e.g. Kapiti District) or by lowering groundwater levels/pressures. Questions about the environmental impact must therefore always be considered at the watershed scale.²³⁰ Regional councils are responsible for ensuring that water policies and plans provide for sustainable outcomes from urban water supplies, but in some areas it appears that water bodies may not be adequately protected, prompting central government to step in (e.g. Rotoiti; Lake Taupo).

Conversely, the quality of the raw water at the intake of urban water supply systems affects the degree of purification required to meet drinking water standards, and therefore the associated cost. New Zealand towns and cities are mostly able to exclude other uses from their water supply source areas -a luxury few other countries can afford- but problems with micro-organisms such as Giardia or Cryptosporidium remain (e.g. the case of the Masterton water supply in August 2003). A standard on human drinking water source protection features among the first set of national environmental standards whose development was recently announced by the Government.²³¹

In the longer term, climate change is expected to alter rainfall patterns. Generally, a greater variability of rainfall is anticipated. This means that water supply utilities, for any given demand and level of risk (e.g. dry year with a probability of occurrence of x%), must provide greater storage capacity than is presently the case.

Economic and Eco-Efficiency Aspects

The Government sees a link between drinking water supply and economic development. In the introduction to the Health (Drinking Water) Amendment Bill it says it "recognises that the extent of compliance of drinking water supplies with acceptable safety standards is one measure of a nation's overall well-being." This includes the ability of a country like New Zealand to:

manage and reduce the risk of waterborne preventable infectious disease
positively help its international image in terms of trade and tourism.

The quantity and quality of New Zealand urban water supply infrastructure do not appear to have been a constraint on the country's economic development to date. Where water is a direct input into economic activity, larger industries mostly supply their own water and thereby fall outside the scope of this report. Small and medium-size enterprises are often served by municipal water supplies, but there are few reported cases of supply constraints. In any case, private supplies (e.g. groundwater wells) would often be available as an alternative to drawing from public systems.

As far as the function of community water supplies to safeguard public health is concerned, there are relatively few, and only occasional, worries (see below) so that the active population is generally able to pursue economic activities without being troubled by water-borne diseases. The rate of urban water use (cubic metres per day) affects the cost of supplying water both in terms of infrastructure costs (notably the cost of reservoir storage²³²) and the cost of operations such as piping water over long distances (e.g. Auckland pumping water from the Waikato River). Moreover, new capacity will generally be more costly than existing capacity, because lower cost options are quite logically exploited first. Additional water supply might be a greater distance than existing supplies, or the storage/height ratio for a dam may be less favourable.

Demand management therefore usually makes sense from an economic point of view: by limiting consumption, operating costs will be contained and investment in new infrastructure can be reduced or deferred²³³. Given that water rationing is mostly acceptable only in "emergencies", pricing structures are the main device available for managing water demand.

Application of full "user pays" would imply:

recovering the full capital as well as operational costs via water charges
avoiding cross-subsidisation among different classes of users (i.e. residential, commercial, industrial).

The structure of water charges can further be used to encourage environmental sustainability (water conservation) through the use of volume-based charges and increasing block tariffs (i.e. the unit charge increases with increasing usage).

Section 19 of the Local Government (Rating) Act 2002 allows, but does not oblige local government to apply the user pays principle or otherwise structure prices to encourage more efficient use of water and the associated infrastructure.²³⁴ Most residential customers still pay a flat and, for most, invisible water charge as part of their rates bill. Water metering and volume-based charges are gaining ground (e.g. all of the Auckland area, Tauranga, some voluntary metering in Wellington City), though sometimes these involve decreasing rather than increasing block tariffs.²³⁵ Commercial and industrial users drawing from community supplies, who can account for a significant share of municipal water use, are mostly subject to volume-based charges.

Water allocation methods that are economically efficient, environmentally sound, and fair, are needed in catchments where the availability of water is constrained by environmental factors (as noted above) and competition develops between various water uses (urban, agricultural, hydro). Such methods are currently not available under the Resource Management Act, but providing them has been made a priority under the government's sustainable development Programme of Action.

A potential long-term development that may affect cost structures centres on the use of water for fire fighting. Sizing the design capacity of the local water distribution network (i.e. the "arteries" of the system) is largely governed by fire fighting needs rather than by residential water use, so that any demand management would not benefit this part of the system. However, technology is changing fire-fighting methods, which may result in reduced flows being required in future. Such developments should therefore be taken into account in new subdivisions and in the renewal of networks in existing urban areas.

As noted above, an important aspect of sustainability is the economic efficiency of the operation of urban water supply services. Various standard methodologies, such as benchmarking, are widely used by water utilities around the world to help them assess conventional economic efficiency (i.e. achieve service delivery objectives at least cost) and calibrate their own efficiency against that of others. But a richer light is shed by taking an eco-efficiency²³⁶ perspective, i.e. looking at resource input (electricity, chemicals, water itself) and pollutant output (greenhouse gases) per cubic metre of water delivered. Some of the parameters featuring in the two approaches are the same, but are expressed in a different numeraire. For example, energy use is expressed in dollars when considering economic efficiency, in tonnes of carbon dioxide equivalent when examining climate change impacts, or in tonnes of nitrogen when the concern is local air pollution.

The incentive for continuous improvement becomes much stronger when the above methodologies are not just used as a management tool, but also serve to give account of activities to stakeholder groups (governments, customers, local communities, tangata whenua). That is the purpose of Triple Bottom LineReporting, of which the annual sustainability reports of Watercare Services Ltd in Auckland provide a very good example. Sydney Water is experimenting with a different approach and has calculated the "ecological footprint" of its operations.²³⁷ While it is possible to place question marks behind many of the assumptions used in this methodology, it is an excellent communication tool to show positive or negative trends to a wider audience.

Social and Cultural Aspects

An important social aspect of urban water supply revolves around the issue of public perceptions and expectations. The media report extensively on public reactions to various water-related problems (e.g. Kapiti or Masterton) or city council proposals to change the management arrangements for water supply. Citizen action groups have been formed to keep the provision in council hands²³⁸ (Auckland, Wellington). Clearly, water occupies a special place in the public mind and is not considered to be the same as other commodities.

One commonly held view is that water is a "gift of nature" and should be inexpensive or free, no matter the cost of delivery, the quantity consumed or the purpose for which it is used. Another common view is that water "belongs to everyone" and that the provision of water services should be under public control²³⁹ or that "no one should be allowed to make a profit out of this activity."

Whatever the justification for these views, they weigh heavily in the debate about water pricing and the participation of the private sector in the provision of water services. For example, while application of the user pays principle may be desirable from an economic and environmental perspective, councils implementing such policies have encountered opposition from some members of the public. Creating greater public understanding of the issues involved and instilling a water conservation ethic will be a necessary part of making the provision of urban water services more sustainable.

The attitudes and perceptions of decision makers, whether expert professionals or politicians, will partly reflect those of the public at large, but may also differ on account of their familiarity with the issues. For instance, it is probably true that water managers and, with them, other local government decision-makers have since the 1970s gradually assumed, to a much greater extent than the public at large, a conservation ethic that influences the type of options they investigate and therefore the solutions that will ultimately be adopted.²⁴⁰ Moreover, the survey carried out by the Department of Internal Affairs (DIA 1998) showed the growing awareness that the delivery of water supply services should not be synonymous with supply management, i.e. that the only response to growing demand lies with building additional infrastructure. Greater weight is now given to the idea that water demand should be managed, too, or that existing infrastructure should be utilised more effectively.²⁴¹

Another relevant social change is the increased accountability demanded by the public from governments and utilities. Consultation with stakeholders and citizens and accountability for decisions have become normal parts of doing business for central and local government. The relationship between water utilities, including councils in their role as service providers, and their customers is now also changing to allow for greater accountability. In some countries we can see the relationship between utility and customers developing into a two-way street with service contracts, provision of information to users and various forms of feedback from users back to the utility.²⁴² A similar development is emerging in New Zealand, where the National Asset Management Steering Group promotes the "Creating Customer Value" project, which encourages utilities to agree with their customers and other stakeholders on the levels of service to be provided.²⁴³ Also, the Consumer Protection (Definition of Goods and Services) Act 2003 brings water services²⁴⁴ under the ambit of the Fair Trading Act.

Social equity in the water supply context encompasses both access and affordability. Equity is included as one of the desired outcomes of the POA - that freshwater should be allocated and used in a "sustainable, efficient and equitable way." Internationally, the consideration of social aspects in water management has led to the definition of "sufficient safe water for drinking, cooking and washing at an affordable price" as a basic human need.²⁴⁵ The first two words in that definition refer to access to good quality water, which in developed countries like New Zealand mostly comes down to the performance of community water supplies in meeting drinking water standards (see further under public health issues) and therefore ceases to be an equity issue.

As to the affordability of water services, there is a debate in some countries about the need for relief for low-income households to pay their water bills.²⁴⁶ In New Zealand, legislation obliges electricity retail companies to offer amongst their various pricing schemes one that is fair to small consumers (e.g. pensioners, single person households). There is no equivalent obligation in respect of water services, although local councils would, presumably, be able to use the provisions for rates remission under the Local Government (Rating) Act 2002. It could be argued that the issue will not have the same urgency as long as most water charges are not volume-based and are not as substantial as electricity charges. Also, action groups against the privatisation of water services have invoked the spectre of companies cutting off a household's water supply for non-payment of water bills. Such a measure would probably not be considered socially acceptable in New Zealand, as it is not in England and Wales, where the 1999 Water Industry Act prohibits cutting off supply as a sanction for non-payment.²⁴⁷

The equity question is often presented as a trade-off between efficiency and equity. However, in OECD (2003) it is suggested that it is possible to design economically efficient tariff structures that also achieve equity goals. In fact, the example of Nelson City quoted earlier (i.e. a free entitlement of the first 100m³ per year) illustrates such an approach: beyond this "basic needs" part of water demand, prices for water services should also reflect economic and environmental policy objectives.

Equity issues in water supply have also been formulated in terms of human rights, and have sometimes been given legal status as such. For instance, Smets (2000) distinguishes the right to:

stay connected to the supply network even in case of non-payment (e.g. England and Wales)
financial support for the payment of water bills (e.g. the Netherlands)
a fair tariff structure for small consumers (i.e. control or prohibition of fixed tariffs)
a free minimal volume of water (e.g. Nelson City)
a social tariff for the poor, handicapped, fixed-income earners or large families.

Notwithstanding the attention the water/equity debate has received overseas, notably in Europe, the issue seems less acute in New Zealand, where water prices are much lower and form a rather small part of household expenditure.²⁴⁸ In any case, the issue affects only a small group of consumers. For the large majority of water users, it is important to make sure water prices reflect full cost and fulfil their role in signalling demand.

Public health aspects of urban water supply are regulated by the Ministry of Health through the Drinking-Water Standards for New Zealand 2000²⁴⁹ and the public health grading of the source, treatment and distribution (reticulation condition, management, and actual water quality) of community drinking water supplies.²⁵⁰ Chemicals in drinking water are generally a lesser concern in New Zealand, but bacteria and protozoa (Giardia, Cryptosporidium) are.²⁵¹ Public health regulatory standards have a tendency to become more stringent over time, both in terms of the number of contaminants²⁵² that must be evaluated and the permissible concentrations of individual substances. This has a direct effect on the cost of producing drinking water.²⁵³

Only a relatively small part of the water produced by urban water services is actually used for drinking, cooking and washing. Toilet flushing, garden sprinkling, car washing, etc. account for the remainder. As the cost of producing water increases, alternative sources of water (such as rainwater from the roof, or grey water from showers and baths) for uses not requiring the same high quality are becoming more attractive. The longer-term prospects for implementing such changes are discussed in the section on integrated urban water management below.

Summary of Sustainability-Related Issues for Urban Water Supply

The foregoing discussion of urban water supply and sustainability has covered some of the principal environmental, economic and social aspects involved. The main questions for infrastructure policy emerging from this discussion are:

How does the abstraction of water affect the environment in critical catchments, and what systems are in place to ensure sustainable outcomes?
How well are community water supplies meeting NZ drinking water standards?
How eco-efficient are the water supply utilities?
Does the tariff structure encourage cost-effective water conservation? Is there equitable access to water services?
What are the need and scope for promoting water demand management measures?
Does the public accept the need for water conservation? What is public understanding of the issues concerning urban water management? What activities are carried out to increase this understanding?

Part 6: (in particular Table 6.1 concerning urban water supply) of this report will pick up the above questions and suggest some indicators that can assist in answering them. The first four of the six questions are linked to the high level aim of identifying externalities and integrating them into policy (e.g. through revised water tariffs). Part of this concerns the central economic issue of integrating supply and demand management in order to avoid both under- and over-investment in infrastructure capacity. The last two questions above relate more closely to the issue of wider internalisation - the strengthening of awareness of sustainability, and shaping behaviour in more sustainable directions.

Key policy instruments for water demand management include:

Central government:
- legislation setting rules for local government and utilities, notably in terms of metering, pricing policies and the integration of urban water services
- regulating the efficiency of water-using appliances (or water performance rating of appliances), especially in new buildings and for garden watering; the current review of the Building Act will address some of these issues
- public education on water conservation.
Local government and utilities:
- pricing policies
- regulation (policies and rules) to protect the sustainability of surface and groundwater systems from over-abstraction
- bylaws in respect of water use restrictions, either on a temporary or permanent basis
- technical measures, such as reducing pressure in the water supply system, reducing leakage, or reducing the internal water use by the water utility
- customer education.

Finally, in the longer term, water supply infrastructure needs will be influenced by:

Potential for rainwater harvesting and water reclamation (effluent reuse, discharge recycling) in order to reduce the volume of water needing to be piped in from a treatment plant
Emergence of alternative ways of fire fighting
The need for a greater safety factor in the face of changing rainfall patterns caused by climate change
Effectiveness of demand management.

3.3.2 Sewerage and Wastewater Treatment

The Legacy of the Past

Existing urban sewerage and wastewater systems are characterised by the use of large quantities of water²⁵⁴ to carry human and trade waste to a central point of treatment, from which treated effluent is discharged into a river or the ocean. As is the case in water supply, investment in buried reticulation assets represents about four-fifths of the total cost of sewerage and wastewater treatment. The comments made in the previous section about the buried water supply pipe networks nearing the end of their economic life also apply to sewerage reticulation. Hence, there is a similar "window of opportunity" for reassessing past practices and design philosophies in the light of likely future trends.

Environmental Aspects

The treatment of urban wastewater is an important component in protecting the quality of New Zealand streams, rivers and coastal waters. Other components are the treatment of point sources of industrial and agricultural waste and the prevention of diffuse sources. New Zealand has a natural advantage over many other countries in that a large proportion of its population lives in coastal towns and cities. Much of their sewage effluent is therefore discharged into the sea, which has a large dilluting effect and natural treatment capacity (e.g. Wellington, Gisborne, Napier, Hastings, New Plymouth). However, other coastal cities (e.g. Auckland, Christchurch) discharge treated effluent in semi-enclosed, shallow estuaries which are very sensitive ecosystems.

Control of discharges of treated sewage effluent is exercised through the Resource Management Act (RMA). Regional councils have set environmental quality objectives²⁵⁵ for freshwater bodies and coastal waters in their areas. RMA resource consents for sewage treatment plants must stipulate effluent limits low enough to respect these receiving water quality objectives. However, although current treatment processes can remove a large proportion of various substances (solids, biological oxygen demand (BOD), nutrients) and kill micro-organisms, they are not designed to remove the pharmaceuticals and endocrine disruptors that have become a concern in recent years. Upgrading of current treatment infrastructure might be required if these chemicals are proven to have such a serious impact on aquatic biota that they need to be removed from the effluent.²⁵⁶

Economic and Eco-Efficiency Aspects

Urban wastewater treatment has more often been examined in the light of public health and environmental quality, rather than from an economic development perspective. However, more recently a few cases have been reported where lack of adequate treatment has closed mussel farms (e.g. Northland). The water quality demands of aquaculture are higher, and less forgiving of occasional exceedances of standards, than bathing water standards. This type of conflict may well become more frequent if aquaculture takes on greater importance, as it is expected to do. Another new element is the growing importance of New Zealand's "clean, green" image for its tourist and export earnings. "Pristine" waters are part of that image. New Zealand needs to be able to substantiate its claims in this area and, some would argue, be seen to implement world best practice, even if this is beyond what would be strictly necessary from a public health or environmental point of view.²⁵⁷

The design of an efficient tariff structure for sewerage and sewage treatment for the residential sector is not as critical as in the case of water supply because demand is not independent - it is a function of water supplied. Metering wastewater flows separately would be expensive, and it would therefore be logical to link sewerage and sewage treatment charges in the residential sector to some measure of water consumption.²⁵⁸ This would reinforce the demand management function of volumetric water rates.

Where wastewater functions are carried out by local councils (rather than by LATEs), funding must be raised through rates.²⁵⁹ The Local Government (Rating) Act 2002 does not allow local authorities to strike a targeted sewerage or sewage treatment rate as it does for water supply, but the Local Government Act 2002, under section 101, states that "(3) the funding needs of the local authority must be met from those sources that the local authority determines to be appropriate, following consideration of (iv) the extent to which the actions or inaction of particular individuals or a group contribute to the need to undertake the activity." One of the "Know-How" guides published by Local Government New Zealand interprets this wording as enabling the implementation of the polluter and user pays principles.²⁶⁰

Where wastewater functions are carried out by LATEs, funding must be raised through charges, whose design is not bound by the same constraints as rates. The LATEs in Auckland and Papakura cities do charge on the basis of water use, but most New Zealand householders pay for sewage treatment on a flat rate or on the basis of the value of their property, or the combination of the two (e.g. Wellington).

It is worth noting that the eligibility criteria of the Government's recent Sanitary Works Subsidy Scheme²⁶¹ (SWSS), for apparent social reasons, explicitly contradict the polluter pays principle (PPP). The criteria are primarily based on public health and environmental benefits and the financial position of the local authority requesting the subsidy, but they also demand a commitment from the local authority that the benefits of the subsidy are passed on to the users of the scheme.

Whereas volume-based charges are probably as far as it is practicable to go in charge differentiation in the residential sector, local councils are now introducing, for trade wastes, charges based on estimated or measured pollution load (e.g. suspended solids, biochemical or chemical oxygen demand, COD).²⁶²

The comments made above in relation to the delivery of urban water supply services also apply to the eco-efficiency of sewerage and wastewater treatment. Energy efficiency issues are relatively more significant in wastewater treatment, because energy use represents a larger proportion of treatment cost and also because of the opportunities to actually generate energy (electricity) from the methane produced in anaerobic sludge digesters.

A good feature of the New Zealand practice (absent in many other countries) is the infrastructure asset management planning carried out by local authorities. This is leading local authorities to evaluate the condition of their water assets and take a planned approach to maintenance, renewal and replacement.

The triple-bottom-line approach taken by Watercare Services in Auckland, with its emphasis on improving eco-efficiency, can serve as a model for other utilities to follow. However, it should be remembered that, as a bulk provider of both water and sewage treatment services, Watercare cannot directly engage with individual customers in terms of pricing policies and other demand management measures.

Looking at future potential for eco-efficient innovation, the optimum cost-effective number of connections to a sewage treatment plant (currently between 1,000 and 10,000 connections) is falling and it is likely that in the next decades, treatments will increasingly be viable at the suburb or individual development level.

The Australian Senate inquiry into urban water management (Senate Environment, Communications, Information Technology and the Arts References Committee, 2002) paid close attention to evolving innovations in wastewater treatment. The Senate's report pointed out that new technology enabling the treatment of domestic waste at the subdivision (or even single house) level would allow a "dramatic reduction in the capital costs of the piping systems to convey wastewater and energy required to pump it." Reducing the need to transport wastes also reduces the extent of leakage from the system with the pollution that it causes to groundwater and streams, as well as the resources needed to track down and rectify these leaks.

The greatest obstacle to recycling treated effluent currently is the difficulty of moving it from the single, large treatment station to the multiple locations where the effluent might be used. Distributed treatment would have the advantage of making available multiple sources of water available for various local reuse projects. Treated effluent could be used for a variety of purposes, such as subsoil irrigation of gardens and parks, thereby reducing the use of treated potable water.

However, there are not only advantages. For instance, the ability and willingness of individual householders to maintain on-site systems may be low, necessitating the creation of professional services to keep installation in good working order. There are also public health issues to consider. It is clear that, for now, these systems are not yet mature enough to replace centralised systems. Nevertheless, opportunities are opening up for different types of solutions on a local scale. Central government will need to make sure that the institutional arrangements are flexible enough to allow innovations to happen and to learn from experience for wider implementation.²⁶³

Also, householders and central and local government are not the only, or necessarily the most important, actors in this area. Developers, engineers and architects play a critical role in the innovation process. Local branches of large international engineering practices can be a conduit for fresh perspectives and new technology. Institutions like the NZ Water and Waste Association and the Building Research Association (BRANZ) could provide technical guidance as well as raise awareness of both developers and designers.

Social and Cultural Aspects

The recreational use of lakes and rivers partly depends on the standard of sewage treatment. Even though many lowland streams do not meet bathing water quality guidelines, this is more likely to be the result of contamination from agricultural production (e.g. dairying) than from inadequate urban wastewater treatment. In fact, few New Zealanders fall ill as a result of swimming in open waters. Illness from contaminated shellfish is probably more common, but the relationship with sewage treatment is difficult to prove²⁶⁴.

The design of the wastewater treatment processes implemented in New Zealand over the past two decades or so has been substantially influenced by the Māori cultural prohibition on pouring human waste into natural waterways. The use of artificial wetlands and land treatment as a final stage of treatment has become "business as usual." In fact, some may even argue that Pākehā now demand these features as much as Māori do.

Objections to the potential future expansion of the re-use of treated wastewater, when they arise, may be more difficult to resolve. The recycling of effluent, even if in conditions acceptable from a public health perspective, may well run into public resistance, including Māori cultural concerns. On the other hand, the beneficial use of sewage sludge seems to have gained public acceptance after the product was reinvented as "biosolids."

Summary of Sustainability-Related Issues in Sewerage and Wastewater Treatment

This discussion of sewerage/wastewater treatment and sustainability has covered the main environmental, economic and social aspects involved. The last question in the summary below is the most salient for this report and the most difficult to deal with. If local authorities ignore it they run the risk of unwittingly locking themselves into outdated technology. On the other hand, there is the beckoning prospect of considerable savings in reticulation networks through dispersed systems of treatment. A related policy question is whether local councils should be left to struggle with these issues in isolation, or whether there is a role for central government and/or the local government association LGNZ to provide some support, direction or guidance. We return to these issues in the next section.

What is the environmental impact of sewerage and wastewater treatment, and what provisions are in place to protect aquatic ecosystems from leaks and discharges?
In what critical areas might economic activities be compromised by pollution from wastewater facilities?
How eco-efficient are the wastewater utilities?
How well met are Māori cultural concerns in respect of human waste?
What technological and social / behavioural innovations could significantly affect decisions about infrastructure renewal?

3.3.3 Towards Integrated Urban Water Management

The focus on urban water supply and sewage treatment in this report should not make us overlook the third component of urban water systems, namely the stormwater network. In recent years, a shift of approach has taken place towards stormwater management and its relationship with both water supply and wastewater management. Issues of demand management (raised in section 3.3.1) should not be considered in isolation from issues of wastewater recycling (raised in section 3.3.2) or from issues concerning rainwater harvesting (raised below).

Urban Stormwater Management

The report of the Australian Senate Committee quoted earlier observes that historical stormwater systems are the "inefficient legacy of an out of date mindset that regarded rain water falling on cities as a problem to be dealt with by removing the water as quickly as possible into streams and rivers. These became dumping grounds for the various pollutants that are collected by the stormwater system, derived from vehicles, gardens, rubbish and sewage overflows."

A new approach to stormwater management is now emerging; in a way it is the opposite of the old one. The aim is to slow down runoff, to allow infiltration into the soil and, where possible, retain water temporarily in local retention areas such as parks and playgrounds. In this way, flood peaks in streams and rivers will be attenuated and pollution will be intercepted.

On private property, this new approach leads to holding rainwater from roofs for later use in gardens or for toilet flushing (i.e. rainwater harvesting) and minimizing impermeable surfaces. On public land, it leads to kerbless streets, and grassed swales and gravel trenches rather than pipes. Local councils in some parts of New Zealand (e.g. North Shore City Council, Tauranga City Council) are already making progress along these lines, though they are still pioneers in new territory.

An analysis of urban stormwater management, along similar lines as presented above for water supply and wastewater services, would show the same window of opportunity for considering a change of approach as aging infrastructure nears the end of its economic life. It would also highlight the significant environmental impact - notably on water quality - of current stormwater drainage methods, the link between stormwater and land use, and the potential for using the pricing mechanism for reducing the demand for drainage services. Instead of paying drainage charges based on property value, ratepayers could be charged on the basis of the size of the impermeable area on their property. GIS technology now makes this a cheap and practicable proposition.²⁶⁵ This is, in fact, one of the recommendations of the 2002 Auckland region water review.

Citizen and customer education would, again, be a vital part of a more strategic approach to managing stormwater.

In contrast to the innovative, high-tech solutions likely to change wastewater treatment practices, the approach for stormwater is rather to "re-naturalise" the cityscape (making use of natural depressions for example), to adopt water-sensitive urban design practices, and educate citizens about landscaping and planting.

Integrating Water Supply, Wastewater and Stormwater Management

The contours of an emerging integrated approach to managing the urban water cycle are gradually becoming visible. Rainwater harvesting and re-use of grey water might reduce the demand for potable water and the amount of wastewater discharged from individual properties. Temporarily stored stormwater and recycled wastewater from local (e.g. suburban level) treatment units might become sources for selected local water uses. Expenditure on expensive buried pipelines might fall dramatically. Urban design and land use might be more resilient to the inevitable extremes of rainfall and runoff.

A great distance still separates us from this vision, which certainly is not realisable in the short term and may not be so everywhere even in the long term. But it does provide a benchmark against which infrastructure proposals can be evaluated. It is also directly relevant to the questions about urban form raised under the sustainable cities theme of the Government's POA on sustainable development (including its proposed urban design code). A direct link also exists with transport issues, because the quantity and quality of stormwater generated in an urban area is much affected by the roading infrastructure.

Whether current institutions will produce the required quantum shift in thinking is unclear. The Parliamentary Commissioner for the Environment, in two reports on urban water systems (2000, 2001), stressed the problems associated with the fragmented nature of the institutional framework for managing urban water in New Zealand. The PCE noted that the "lack of a specific Minister for this very broad sector does not assist overview and accountability nor offer direct leadership to improve the current framework and overall performance.²⁶⁶

Finally, the issues brought out in this report's analysis of sustainability and urban water infrastructure are well captured by the "required outcomes" stipulated for the Auckland region review of water, wastewater and stormwater (2002). These outcomes may therefore double as an apt conclusion of this section:

3.3.4 Summary of Sustainability Issues Associated with Water

The discussion so far of sustainability issues in relation to water, leaving irrigation issues aside for the moment, can be summarised as follows.

Urban water infrastructure

Sewerage and wastewater treatment

What is the environmental impact of sewerage and wastewater treatment, and what ecosystem protection provisions are in place?
In what critical areas might economic activities be compromised by pollution from wastewater facilities?
How eco-efficient are the wastewater utilities?
How well met are Māori cultural concerns in respect of human waste?
What technological and social / behavioural innovations could significantly affect decisions about infrastructure renewal?

Integrating water supply, wastewater and stormwater management

Services should be provided in a way that meets agreed standards for safety, security and reliability, and environmental sustainability
Development of a range of innovative water, wastewater and stormwater services and facilities should be encouraged
Planning for infrastructure capacity should support the region's strategies for growth, and economic development
Consumers should meet the costs they impose on the systems
The industry should recognise and provide for the relationship between tangata whenua, their culture and traditions, and natural and physical resources
The industry should be governed and regulated in a way that ensures it is accountable for its performance to all stakeholders
Where charges for services cause adverse social impacts, steps should be taken to ameliorate these impacts
In achieving all the other outcomes, the costs of providing the services should be minimised.

3.3.5 Irrigation as Infrastructure

As noted above, irrigation accounts for about three-fourths of abstractive water use in New Zealand and 84% or more in Canterbury, Otago, Tasman and Gisborne.²⁶⁷ Many irrigators have individual abstractions from surface or ground water, while others are members of irrigation schemes that own physical infrastructure that serves a group of users. Large irrigation schemes are especially important in Canterbury and Otago. Nationally, irrigated land constitutes 3.5% of farmed land but it provides 9% of the total farmgate contribution (excluding forestry) to Gross Domestic Product, according to the Ministry of Agriculture and Forestry.

Although irrigation schemes were typically developed as government-funded projects, these schemes were sold to users in 1989-90 after a shift in government policy. Most are now managed as private companies with irrigators as shareholders, while a few are run as incorporated societies.

In terms of this report, irrigation schemes satisfy the first, second and fourth criteria for physical infrastructure (see definition in section 1.2), but vary in the extent to which they meet the remaining requirement that they "serve a large or diverse set of users that collectively constitute a major portion of the local, regional or national economy."

Because irrigation schemes tend to serve a particular sector rather than a local or regional economy as a whole, despite their significant economic contributions they generally do not constitute infrastructure for which government policy needs to make specific provision. Maintenance or development of schemes may be significant issues for local or regional development, but not in the same way that energy, transport systems, telecommunications and public water supply and wastewater services underpin the entire economy.

With that proviso, there are some general points that can be made about the linkages between irrigation infrastructure and sustainable development:

From an economic perspective, irrigation development can promote rural and regional economic development as intensification of land-use and subdivision of farms leads to increased investment and employment. This is best achieved when schemes have management structures and incentives that promote allocative efficiency (i.e. water is only used when it is economically efficient to do so, and it is used by those who can realise the greatest benefit from its use) and dynamic efficiency (i.e. usage is efficient over time). Allocative efficiency includes consideration of the welfare that people and communities derive from non-abstractive uses of water. Water allocation is efficient if, at the margin, a cubic metre allocated to abstractive use generates the same return as it would have been worth to the community had it been left in the stream. Because in-stream values are rarely quantified, local authorities have to make judgements for the community about "minimum flow" regimes.

Dynamic efficiency includes the ability to finance development of additional capacity where it is efficient to do so. This can usually be provided through commercial capital markets, although the government has in recent years provided contestable funding for investigating the potential for new schemes.²⁶⁸ Current policy does not extend to direct funding for irrigation scheme development. If government did fund development, it could end up subsidising irrigation capacity that is inefficient or, conversely, funding economically worthwhile projects that should be paid for by farmers who benefit rather than by ratepayers and taxpayers. Either way, government funding of irrigation schemes can have adverse consequences for social equity and/or environmental outcomes.

Allocative and dynamic efficiency depend not only on management structures of irrigation schemes but also on policy frameworks and settings by local authorities, e.g. whether and how minimum flow regimes have been established, and the extent of transferability of water permits between irrigators and other users to ensure that water is used by those who can realise the greatest benefit. Unless water has an actual or implied price, it is difficult to achieve water usage that even approaches allocative efficiency. A report by Lincoln Environmental (2000) identified a lack of economic instruments among a long list of obstacles and research needs for achieving more efficient allocation of water in New Zealand. The challenge of allocative efficiency has been recently highlighted by the conflict between power generation and irrigation as potential uses of water in the Waitaki River and the lack of a mechanism to allocate this water efficiently between users.

From an environmental perspective, irrigation schemes raise issues that are similar to those raised by other abstractive uses. Abstraction from surface water can have adverse effects on in-stream flows and hence ecological and amenity values, while use of groundwater can have effects on aquifer levels, other users, and create the risk of saltwater intrusion.²⁶⁹ In addition, the intensification of land use that irrigation makes possible can have significant implications for water bodies due to nutrient run-off, faecal contamination, and physical damage to riparian margins from livestock. In Canterbury, for instance, meeting water quality and aquatic ecosystem objectives for downstream water bodies such as Lake Ellesmere, and protecting groundwater supplies from nitrogen contamination, could become more difficult if irrigation were to increase. Adverse impacts can also extend to the coastal area, where harvesting on marine farms is sometimes restricted due to contamination from land-based activities.

There are no significant legal impediments to local authorities protecting these values in regional plans, although commentators have identified a number of research needs and other institutional impediments to better performance in this regard, and have in particular recommended more national leadership and guidance.²⁷⁰

Irrigation development can contribute to social and cultural well-being through increased viability of schools and businesses in the community, provided people are not drawn away from other rural communities. The most significant social or cultural issues which irrigation infrastructure raises relate to competing uses of water, such as recreational interests and interests of tangata whenua, which need to be taken into account when water allocation is considered as discussed above.

A further social issue could arise if irrigation scheme participants were able to transfer water entitlements out of the scheme without the approval of the scheme collectively. If such transfers left the remaining participants to cover fixed costs, the entire scheme could become non-viable, with social and economic consequences. In New Zealand, however, irrigation management companies rather than individual scheme participants hold the water permits, so this situation is unlikely to arise.

Irrigation schemes are not strictly physical infrastructure as defined in this report, but they are large users of water in New Zealand
For economic reasons, schemes should promote allocative efficiency
Government funding of schemes is currently limited to feasibility studies; government funding of irrigation development could have adverse consequences for social equity and/or the environment
Without an actual or implied price on water, it is difficult to achieve efficient water usage
Abstraction has environmental effects on in-stream flows and aquifers
Also, intensification of land use tends to damage water bodies such as downstream lakes
Coastal water can also be adversely affected
National leadership and guidance may be necessary to help local authorities protect these values
The main social or cultural issues that irrigation infrastructure raises relate to competing uses of water, e.g. recreational interests and interests of tangata whenua.

3.4 Telecommunications Infrastructure and Sustainable Development

As noted above, while the Government's Programme of Action for sustainable development does not place a short-run priority on telecommunications as a key domain for sustainable development, other strategy statements identify information and communications technologies (ICT) as an important component of the government's framework for social development, economic growth and innovation. ICT, which are made possible by telecommunications infrastructure, unquestionably contributes substantially to innovation and economic development²⁷¹ and may also contribute to social connectedness, although the international evidence on this is less clear.²⁷² While ICT makes a contribution to productivity in all sectors, there is some Australian evidence that ICT can make a particularly positive contribution to multifactor productivity growth in the cultural and recreational services sector; this may be of particular value in the New Zealand context, given the emergence and potential of our creative and tourism industries.²⁷³

While the present context is not one in which to review in general terms the state of ICT infrastructure, we note that New Zealand could do better in general terms in this area. For example, the Global Competitiveness Report placed New Zealand's "networked readiness index," which attempts to measure a country's ability to participate in and benefit from ICT, at a ranking of 23rd globally, with the infrastructure sub-index for New Zealand ranked 14th.²⁷⁴ This suggests that while the infrastructure supporting our ICT is moderately good, other contextual aspects, such as the political/regulatory environment, could be more conducive to using and benefiting from ICT.

A salient sustainable development issue arising in respect of ICT infrastructure is a social issue - access by a range of groups in the community to ICT, to enable fuller participation in society. This includes both low-income groups in urban areas, and rural groups, such as farmers and small-town communities, for whom the tyranny of distance can be mitigated to an extent by ICT. For many in rural communities, ICT links also generate direct economic benefits, as it enables them to use e-commerce options to increase diversity, and contain costs, of supplies, and to access wider markets, e.g. for rural tourism services.²⁷⁵ But these opportunities depend on adequate infrastructure supporting quality internet access at an affordable price.

In addition, there are some specific environmental issues relating to ICT infrastructure, in particular the possible health implications of the location of cellphone towers in urban areas, and tensions over the use of key hilltop sites for cellphone towers.

Finally there are also more general impacts of ICT on the economy, and hence on infrastructure requirements and environmental outcomes across the economy as a whole. These are complex and arise largely from second and third order impacts of ICT - i.e. not direct impacts of ICT production or infrastructure installation on the environment, but indirect environmental impacts relating to the structure of the economy, including whether dematerialisation occurs and under what conditions, or indirect effects occurring mainly through the impacts of economic growth on consumption patterns, with consequent impacts of infrastructure on the environment.²⁷⁶

3.4.1 The Social and Economic Aspects - Access and the Digital Divide

As noted in section 1.3.6 above, the Growth and Innovation Framework emphasises that telecommunications can form an important underpinning of social connectedness, which in turn is an important part of the Government's goal of promoting social cohesion. This is valuable not just in itself - i.e. in terms of the social objective - but also as an "essential building block for a growing and innovative economy".²⁷⁷

In the discussion of trends in section 2.2.4 above, we noted that while New Zealand scores well in respect of some aspects of social connectedness (e.g. phone and internet connections), certain groups do less well, and this gap may persist for some time (as the continuing gap in phone access suggests)²⁷⁸. Internet access among European families was 44% in 2000, but among Pacific families was 16%.²⁷⁹

Similarly, there is a marked regional variation in telecommunications infrastructure services and access. This is largely due to scale economies that mean it is more costly to extend (or maintain) networks into areas with fewer customers. As ICT connectedness becomes increasingly important as an underpinning for human capital development, rural communities and schools which have already slipped behind will have to be brought up to reasonable standards of access, if a significant loss in terms of social and economic potential is to be avoided.²⁸⁰

As noted earlier, the Government's "digital opportunities" strategy involves a range of measures to close the digital divide. Many of these entail building ICT skills through the education sector, and establishing "community hubs" and community websites (e.g. CommunityNet Aotearoa)²⁸¹ but others involve initiatives to build (economic) infrastructure.

A key initiative here is the piloting of broadband telecommunications access in rural areas through the Provincial Broadband Extension project (PROBE), with a view to improving broadband infrastructure throughout the country, for provincial schools, libraries, farmers, local government, marae, welfare agencies, community services, and home users.²⁸²PROBE's aim is that, by the end of 2004, every region will have high speed internet access,²⁸³ in some cases through wireless connections. For such access to achieve the desired objectives, it also needs to be affordable. Having broadband internet available in a small rural town will achieve little if families and small businesses cannot afford to access it.

The converse of avoiding rural slippage in connectedness is that new ICT infrastructure and use holds out the prospect of maintaining the viability of rural and regional communities. This is a significant issue at the social-economic interface, especially for otherwise declining rural communities. ICT infrastructure can provide for rural communities to remain sustainable in an economic sense, as e-commerce and teleworking arrangements underpin employment in rural areas.²⁸⁴ An example is internet marketing and facilitation of local eco-tourism. There is also some prospect that e-commerce may reverse the movement of skilled people to urban centres, and enrich rural communities again.²⁸⁵ Overall, there is, in the area of ICT infrastructure policy and investment, the potential for a real complementarity between economic and social objectives.

3.4.2 Environmental Issues

Scientific evidence suggests that the radiofrequency transmissions from cellphone towers are extremely unlikely to raise health issues and, accordingly, this is not a significant health or sustainability matter.²⁸⁶ Usually, concerns over this issue can be allayed by infrastructure providers working in close partnership with local communities, listening to their concerns and discussing the scientific evidence. It therefore acts as an illustration of the benefits achievable by adherence to the local partnership sustainable development principle (5th bullet) set out in section 1.3.1 above.

An ongoing - if relatively minor - infrastructure issue exists with the amenity impacts of the siting of some cellphone towers on scenically valued hilltops (e.g. Te Mata Peak in Hawkes Bay).²⁸⁷ The Ministry for the Environment noted in 2000²⁸⁸ that the visual/landscape/amenity effects of radiofrequency transmission facilities vary according to the scale, height and design of the facility and the landscape in which they are located. Since amenity is an issue that varies from community to community, MfE did not provide national guidance. Visual, landscape, and amenity effects should be assessed against the relevant objectives and policies in the district plan, and take into account section 7c of the RMA, that persons exercising functions and powers under the RMA are required to have particular regard to the maintenance and enhancement of amenity values.²⁸⁹

The wider impacts on the environment arising from ICT use and infrastructure requirements is beyond the scope of this report,²⁹⁰ and we are not aware of any New Zealand analysis of the issue. A recent UK report for the OECD pointed, on the supply side, to a role for government in encouraging innovation which would support substituting information for material resources and mobility, thus reducing infrastructure needs. On the demand side, the report argues, there is a role for government in shaping telecommunications and "hard" infrastructure (transport, utilities, urban form and buildings) to take advantage of opportunities for radical improvements in resource productivity arising from the diffusion of ICT. The report also argues that government has a role in terms of procurement of dematerialised solutions and in the delivery of government services.²⁹¹

ICT (and its supporting infrastructure) makes a positive contribution to economic productivity in all sectors
New Zealand may have moderately good ICT infrastructure, but there is evidence that we could use and benefit more from ICT
A salient sustainability issue is the social one of the digital divide, i.e. access by a range of groups to ICT, including those on low incomes and in rural areas
ICT can help maintain rural community sustainability - i.e. a real complementarity between economic and social objectives
There are some local environmental issues relating to cellphone towers
In terms of wider environmental implications, on the supply side, there may be a role for government in encouraging innovation which would support substituting information for material resources and mobility, thus reducing infrastructure needs
On the demand side, there may likewise be a role for government in shaping telecommunications and "hard" infrastructure (transport, utilities, urban form, buildings) to take advantage of opportunities for radical improvements in resource productivity arising from the diffusion of ICT.

¹¹⁶To limit the scope of this analysis we generally exclude technologies and focus on systems - e.g. land transport systems rather than vehicle technologies.

¹¹⁷More formally, sprawl is low-density suburban or peri-urban development; the use of the term sprawl here is as a convenient shorthand, rather than a value judgment. For an analysis of the pros and cons of sprawl, see Transit Cooperative Research Program (2002).

¹¹⁸Measured for San Francisco - see Downs (1992) p194.

¹¹⁹Downs (1992).

¹²⁰It is not suggested that commuter frustration should be completely avoided, since as Hau (1998) demonstrates, there is an optimal level of congestion and therefore, presumably, of commuter frustration. In addition, the direct costs to commuters associated with the congestion externality have two major components - time delay and lack of reliability as to travel time - which have somewhat differing policy implications. However, congestion pricing addresses both components.

¹²¹Lack of suitable technology is often given as a reason for non-introduction of congestion pricing. However, Singapore has since 1975 operated a congestion pricing system that is widely regarded as successful. It now even differentiates by type of vehicle fuel, with electrical vehicles from 2001 paying a fee 20% lower and hybrids a 10% lower fee (Swedish National Road Administration, 2003, p21).

More recently, six other countries have been operating congestion pricing in urban cordons and/or motorway sections, while 26 cities surveyed by Deloitte Research say they are planning to start congestion charging within the next decade. For useful recent summaries of experience see the Deloitte Research study (Eggers, Samuel & Munk, 2003) and Transportation Research Board (2003). While further development of GPS technology will strengthen the case for adoption of congestion pricing, there is a growing focus on the role which political rather than technical barriers are playing in the slow adoption of road pricing systems - see Schade and Schlag (2003).

¹²²See UCLA Extension Public Policy Program [link to external website] (2003) p25. Somewhat similar findings were reported from the limited attitudinal research conducted in New Zealand, reported by Jones (2001).

¹²³Eggers, Samuel & Munk (2003). However, concerns have been voiced about a drop in retail sales within the cordon zone, and low levels of revenue collected relative to forecasts: Ruscoe (2003).

¹²⁴Crane & Chatman (2003).

¹²⁵Transit Cooperative Research Program (2002) p21.

¹²⁶It is unclear what relationship exists between the costs faced by private users of the road network and the cost to society of that use. On the one hand, users of non-diesel private vehicles make a significant contribution to the Crown accounts through the petrol excise; on the other hand, there is no transparent capital charge for the use of roading assets, and many significant externalities of vehicle use are neither accounted nor charged to the user. A draft study of transport costs in Auckland suggests that transport revenues do not even cover 50% of total transport costs, and that externalities were equivalent to over 2 percent of Auckland's GDP in 2001 (Jakob et al 2003).

¹²⁷The safety of cycling increases as the number of cycles on the road increases: Jacobsen (2003).

¹²⁸The benefits and costs of this pattern of urban development have not been extensively analysed in New Zealand, but some US evidence (Transit Cooperative Research Program, 2002) suggests that there may be net benefits from more managed urban development: "The cost of this [sprawl growth] pattern in dollar outlays and resources consumed is both continuously increasing and basically unnecessary to achieve a very high quality of life. Too much land and infrastructure are being consumed by development. Two sets of infrastructure are being created and both are underutilized: the one Americans are running away from (cities and older developed suburbs) and the one they never catch up with (the new spreading development). This development pattern results in overly high costs to local governments, developers, and housing consumers. As a result, taxes are increasing in the older communities due to excessive capacity in their infrastructure and in the sprawl developments due to the need for required systems to serve the new growth, including such physical infrastructure items as community water and sewers. It is possible to accommodate growth in another way-to be more centrally focused in development patterns and to consume fewer resources when development takes place. This is compact development, or smart growth."

¹²⁹"At the strategic level, the [Auckland} Regional Land Transport Strategy is aligned with the Regional Growth Strategy, which proposes accommodating a large part of the region's future growth through selective intensification around urban nodes and corridors." Auckland Regional Council (2003) p7 (Section 1.3).

¹³⁰An analysis of the ARLTS is beyond the scope of this report, but in short, we note that there seems to be a divergence between its sustainable development aspirations and the commitments to funding and implementing more sustainable infrastructure options. The Overview makes clear that travel demand management is given short shrift in the strategy. Important elements of the strategy such as travel time targets (in part to measure congestion) have not yet been developed, nor has a target relating to walking as a mode, while the target for cycling is unambitious. See Auckland Regional Council (2003) Overview, and Chapter 11 (monitoring), especially pp 110-111.

¹³¹Planning controls would still be justified to the extent necessary to protect site-specific values.

¹³²Ernst and Young (1997).

¹³³Ministry of Transport (1996). LItman (1999, p7), in an Australian study, estimates that "About a third of automobile costs are external, and a quarter are internal but fixed (i.e., not proportional to vehicle use)… As a result, motorists only perceive about half of the total costs imposed by their automobile use when making individual trip decisions. To put this another way, motorists only receive part of the savings that result when they drive less."

¹³⁴Fisher et al (2002).

¹³⁵Fisher et al (2002).

¹³⁶Electricity sector emissions growth has also been rapid but is uneven, and about half the total size of emission from transport. MED (2003) states: "The domestic transport sector is the largest single source and has increased by 59% since 1990. It accounted for 45% of energy emissions in 2002, compared with 38% in 1990."

¹³⁷A study by Cambridge Systematics Inc (1999) of the 167 worst highway congestion bottlenecks in the United States suggested that greenhouse gas emissions on these road sections could be reduced by 71% by eliminating congestion, compared with business as usual over a twenty year period. This represented total national savings on an annual averaged basis of about 11 million tonnes/year.

¹³⁸Gatt et al (2003)

¹³⁹Giuliano (1994)

¹⁴⁰Elliott sources his data for these two points from TRIPS, 1991 Origin & Destination Survey and Wilbur Smith Associates, Estimated Annual Transportation Costs and Benefits per Capita Anaheim California May 22, 1996.

¹⁴¹Giuliano (1994)

¹⁴²Swedish National Road Administration (2003) p23 ff.

¹⁴³Personal income may underestimate standard of living, especially where a household has only one income earner but has two or more drivers. These data attempt to reduce the resulting distortion by excluding people under 18 years of age.

¹⁴⁴At the time of writing of this report (the end of 2003), it was not yet ready for public release.

¹⁴⁵Anna Percy, ARC; pers comm. 23 December 2003

¹⁴⁶The number of sites where tolling can practicably be used on new roads appears likely to be limited over the next decade to two or three sites around Auckland and Tauranga. On Auckland's proposed eastern motorway, "because of the short nature of journeys shown by the modelling done to date it is likely that tolling will be difficult," according to Opus Consultants, as reported in Rudman (2003).

¹⁴⁷See Elliott (2000), Section VI

¹⁴⁸Sport and Recreation New Zealand [SPARC] (2003b); Ministry of Health (2003a).

¹⁴⁹Sport and Recreation New Zealand (2003b); Luengo-Fernandez, R (2003) p15.

¹⁵⁰Sport and Recreation New Zealand (2003b) p23.

¹⁵¹Sport and Recreation New Zealand (2003a) p5.

¹⁵²Tobias and Roberts (2001), cited in Ministry of Health (n.d.) Toolkits: physical activity.

¹⁵³Similarly, the UK Cabinet Office's recent summary of the effects of physical inactivity puts the total cost to England of physical inactivity in the order of at least £2 billion a year (conservatively, about 54,000 lives lost prematurely); a 10% increase in adult activity would benefit England by at least £500m a year, saving about 6,000 lives (although these estimates exclude the costs of injuries); the burden of physical inactivity is an increasing problem, as the continuing rise in obesity and other inactivity-related health challenges demonstrates; and as these escalate, so will the costs of physical inactivity: See POSTnote October 2001 [link to external website].

¹⁵⁴Ministry of Health (2003a) p19: "Obesity is …strongly related to the physical environment, urban design, the convenience of motorised transport, …"

¹⁵⁵See e.g. McCann & Ewing (2003) (the effects of sprawl in the US); Jackson & Kochtitzky (2002) (US data); Giles-Corti and Donovan (2002) (Australian data).

¹⁵⁶An example of the cultural dimension is that different ethnic groups engage in physical activity to varying extents, with adult Māori, for example, being around as active as Europeans, but Pacific Island people being significantly less active: Luengo-Fernandez (2003) p14.

¹⁵⁷Sport and Recreation New Zealand [SPARC] (2002?) is focusing usefully on one part of the picture - raising awareness of the importance of physical activity. Their Statement of Intent (p14) sets out a range of important awareness goals.

¹⁵⁸Domestic transport needs constitute about 42% of consumer energy use: EECA (2001) p24. However, the judgment formed here is that transport sector energy use does not raise major energy infrastructure sustainability issues (e.g. relating to sustainability impacts of refining, distribution, etc.) requiring policy attention, other than those arising principally from the use of hydrocarbon products to fuel motor vehicles. These issues are touched on in section 3.1 above on transport infrastructure and sustainability, and further considered in section 4.2 below (the transport-energy interface).

¹⁵⁹The Global Competitiveness Report (2002/2003) p32, states that "Among factor conditions, overall infrastructure quality, the quality of electricity supply, venture capital availability, the quality of public schools, and university-industry research collaboration have the strongest bilateral association with GDP per capita."

¹⁶⁰Blakeley, J (2003): pers. comm..

¹⁶¹This has also lessened effective competition among generators.

¹⁶²There is evidence that these attitudes are changing- e.g. among engineers, there is a preparedness to look at the demand side, a conservation ethic, and other aspects of our energy system: see Coates, G (President of IPENZ) (2003) p1.

¹⁶³Dry year security is particularly salient because of our almost unique position internationally of having around 65% hydro output with only around 8 weeks of storage capacity.

¹⁶⁴"Achievement of the [additional] 30PJ target is expected to raise renewables' share of total consumer energy from its 29% share in 2000 to 31% in 2012": paragraph 34 of Cabinet Policy Committee paper Renewable Energy Target and Mechanisms Cabinet paper [link to external website]. Decisions on this paper were made on 7 October 2002 (CAB Min (02) 26/20). Note that this is a "non-mandatory, best endeavours" target, according to the Cabinet minute at: Cabinet minute (02) 26/20 [link to external website].

¹⁶⁵PCE (2002) pp 51, 63.

¹⁶⁶Note that this is a wider concept than increasing the security of energy supply, since both supply and demand can make a contribution to security. Security should also be thought of as having various dimensions - including security in relation to international events, dry years, gas field disruption or redetermination, etc.

¹⁶⁷Stock, R (2003) pD3.

¹⁶⁸This is of course, a simplification - part of the logic of the reforms of the 1990s was to shift some responsibility for supply security towards market actors. Note that part of the role of the new Electricity Commission will be to "internalise" the security externality.

¹⁶⁹Infometrics (2003) p15. The reputational externality is usually argued in terms of loss of export markets or deterrence of new foreign investment. The spate of system failures in a variety of countries in mid-late 2003 suggest this effect might become somewhat weaker to the extent that failure becomes more common. However, it should not be underestimated.

¹⁷⁰Note that this issue goes beyond issues of provision or regulation for reserve capacity. The nature of the interaction between reserve capacity and investment decisions by market actors will be important, but is beyond the scope of this paper. See also MED's consultation on Revised Electricity Governance Rules MED's consultation on Revised Electricity Governance Rules for quality.

¹⁷¹MED (2003) pp1-2. See also Kats et al (2003) and US Green Building Council (2003) for consideration of the multiple benefits (and costs) of green buildings, including distributed energy (heat, power and cooling) generation. All generation, of course, has some environmental consequences.

¹⁷²A key factor here will be market rules for both grid pricing and new investment in the grid. See, e.g. PCE (2003) p25; also pp21-23.

¹⁷³MED (2003) p10 ff.

¹⁷⁴Hodgson (2003) [Government Policy Statement, March]

¹⁷⁵Infometrics (2003) p16 note: "Several firms pointed out that the reliability of gas supplies would deteriorate as capital spending to maintain Maui production was influenced by the looming closure of the field. Disruptions to gas supplies would affect some firms directly and many others indirectly through surges in spot electricity prices."

¹⁷⁶Centre for Advanced Engineering (2003) pp23, 24. Note that this is of course only one estimate of demand growth - there are others. (The CAE report suggests this is the equivalent of 300 new wind turbines annually. However, this number depends on load factors and site conditions which will affect usable power output. Meridian's latest project, the 55-turbine, 90MW Te Apiti project, suggests that it is possible that 150MW could be supplied by fewer than 300 new turbines.)

¹⁷⁷Hodgson (2002) p5, citing Shell: "Projections from Shell …suggest current known reserves are enough to meet demand, at a wellhead price of $4/GJ, until 2010."

¹⁷⁸Weir (2003) reports Meridian as indicating that LNG based power might be around 10c/kwh, significantly above wind and CCGT power prices, for example.

¹⁷⁹The impact of climate change on our hydro system in the longer term may be problematic, although this should not be overstated. Warmer, drier conditions in some (often eastern) areas may lead to increased irrigation demands which could compete with hydro needs. But warmer winter conditions could reduce electricity demand. On the other hand, more extreme weather events could increase the risk of spilling and flooding risks to dams and downstream areas: MfE (2001) p27.

¹⁸⁰When ecological or socio-cultural costs are not reflected in the price of a resource, such as river water, it is highly likely that an indirect subsidy is being delivered.

¹⁸¹See section 1.3.4 above.

¹⁸²Note that facing hydro projects with a resource price on water used (including provision to reflect the high ecological value of water in drought conditions) would not, by itself, be adequate: fossil fuel based alternatives should also be faced with a carbon price. Only when all major externalities are priced does the market provide a good indication of what developments remain "economic" taking into account sustainability issues. Electricity company TrustPower stated recently, for example, that windpower would be commercially viable with a carbon tax of $3 per tonne increasing wholesale electricity prices to 7c per kwh (Steeman, 2003, pC2). This is supported by Meridian's reported estimate that wind is becoming competitive at 6c per unit (Weir, 2003). Note also that the need to price all major externalities suggests that instruments such as renewable energy certificates (Frequently Asked Questions About Bionenergy [link to external website] ) are second best. A "REC" would reward production of renewable energy because it is essentially carbon free, but have the disadvantage of encouraging energy consumption by lowering the cost of energy. It would be unnecessary in the presence of an adequate carbon charge, although there may be a case for it in the absence of such a charge.

¹⁸³For example, almost half of the average household electricity bill is for hot water, but hot water cylinders waste around 40% of the energy they consume: Hodgson (2002) And around 250,000 New Zealand houses are uninsulated, despite emerging evidence that insulation can not only reduce energy use, but can also improve comfort and health outcomes.

¹⁸⁴In 2000, technology company Sage Systems introduced an Internet-based product called Aladn that allows customers to go online to monitor and adjust the energy consumption of home devices such as lights, kitchen appliances, and air conditioners, so they can save money on electricity bills during peak load times. Sage Systems also developed software for utilities that enables them to scale down load by setting back thousands of customers' thermostats at once over the Internet. In 2001, Puget Sound Energy in Washington State in the USA began offering residential customers discount power at night and on weekends (when demand is low) and installing smart meters in homes that offer price signals. Grid Lock: Lessons from Blackout 2003 [link to external website]

¹⁸⁵The underpricing of carbon (dioxide) is addressed below, but it is noted here simply that this is a key distortion, given clear indications of an external cost imposed on the atmosphere and hence on future generations.

¹⁸⁶Hodgson, 2002, p5.

¹⁸⁷Energy Efficiency and Conservation Authority (EECA), Founding Energy-Wise Councils [link to external website]

¹⁸⁸DEFRA and DTI (2003) pp27, 28.

¹⁸⁹Vector, which has (1 October 2003) launched the country's first national internet-based demand-side exchange, states (Mark Franklin): "Education is number one. A lot of businesses just don't understand how demand-side participation works or how they could get involved. Vector is taking the initiative in finding customers who have flexibility to shift their load. We're going out and talking to them about how they could run their operation with more of an eye to the energy market, which would save them money and in the very worst case, shutdowns." (Text on EMProve [link to external website] website as of November 2003 - removed by May 2004)

¹⁹⁰See, e.g. BusinessCare (New Zealand) case studies (especially on energy): BusinessCare [link to external website].

¹⁹¹Hodgson, 2003a; section 14.

¹⁹²This in turn may cause environmental damage (depending on the effectiveness of other policies), although probably of a limited magnitude. Where issues of "fuel poverty" arise (usually because of a combination of low incomes and the energy inefficiency of homes) it is generally preferable that they are addressed as income or social support issues, e.g. through provision of home insulation, rather than by constraining energy /lines prices. Fuel poverty is when households are unable to heat their homes adequately without spending a disproportionate amount of income on fuel. In New Zealand the Government's home insulation retrofit programme and solar water heating purchase programme may contribute to relieving fuel poverty, as they are focused on low income households (see Cabinet Policy Committee paper Renewable Energy Target and Mechanisms Cabinet paper [link to external website]). However, funding is limited, especially for the solar water heating programme ($200,000 in 2003-04): Funding boost for energy programmes ). For a summary of the UK's initiatives, which centre on home energy efficiency improvement (now delivered by the "Warm Front Team") see DTI (2002).p59; and chapter 6, p129 ff.

¹⁹³Wuppertal Institute (2002) p33.

¹⁹⁴Hodgson, 2003a; sections 20 ff.

¹⁹⁵Some exceptions are discussed in DTI (2002) [Energy - its impact on the environment and society], for example: [Distributors should] recognise that customers, who are of pensionable age or are disabled or chronically sick may be more dependent on a reliable supply of electricity than some other groups of customers, particularly where the use of special electrically operated equipment is essential. Reasonable steps should be taken to provide customers on the [Priority Service] Register with information and advice about supply interruptions." (p115).

¹⁹⁶PCE (2003) p34.

¹⁹⁷The Mokai field is an early example.

¹⁹⁸e.g. Reinhardt (2003): "…energy consumption by firms and households may be subsidized quite heavily because energy prices do not reflect the social costs of global warming."

¹⁹⁹See, for example, the Baltic region's adoption of an emission trading regime, the "Regional Testing Ground Agreement for Flexible Mechanisms of the Kyoto Protocol" [link to external website].

²⁰⁰The 1992 Framework Convention on Climate Change, which came into force in 1994, called for voluntary commitments by developed countries to cut greenhouse gas emissions to a level that avoids dangerous human-induced interference with the climate system, as well as a range of other actions, such as measures to enhance carbon sinks.

²⁰¹Hodgson (2002): "New Zealand will be in the fortunate position of being a net seller of carbon credits in the international carbon market that will be established under the Protocol. For that reason this country stands to gain economically as well as environmentally from ratification. Nevertheless some of our industries face competition from countries that will not have emissions targets in the Protocol's first commitment period. We have designed our domestic climate change policies to protect the interests of those industries, and the economy as a whole, while ensuring that our emissions target can still be met."

²⁰²For example the widespread adoption of wind generation technologies has halved the cost of electricity from wind in the last decade: Department of Prime Minister and Cabinet (2003) p16.

²⁰³Taylor (2001). The evidence of a trade-off between environmental regulation and jobs is also weak to non-existent: Goodstein (1994); Morgenstern et al (1998).

²⁰⁴Possibility of Abrupt Climate Change Needs Research and Attention (11 December 2001) [link to external website].

²⁰⁵UK Department of Trade and Industry (2003). Creating a low carbon economy is the title of the recent energy white paper.

²⁰⁶As a point of comparison, the UK commitment is to a 60% reduction in carbon emissions by 2050. The German government's "Kyoto commitment" is a 21% reduction in greenhouse gas emissions from 1990 levels by 2008-2012, and reductions to date are running at around 19%. The 2020 target is a 40% reduction below 1990 levels (Thorning, 2002, p2).

²⁰⁷In most cases transport costs will be high due to the relatively low energy density of the biomass carrier compared with fossil fuels. Hence the growing interest in pyrolysis bio-oils.

²⁰⁸GIF (Growth and Innovation Framework) objectives for innovation and industry development are relevant in formulating goals in this area.

²⁰⁹Crop subsidies and land use payments have fostered development and uptake in the US and Europe, giving biofuels a history of use and acceptance of 10 years or so in these countries: Andrew Carran, AgResearch (pers. comm.; October 2003)

²¹⁰One estimate is that, globally, "wind power will expand from $5.5 billion in 2002 to approximately $49 billion in 2012.": Clean Edge (2003).

²¹¹e.g. through the Projects Mechanism under the Climate Change Office's aegis.

²¹²European Commission (2003).

²¹³Currently 99% of transport energy is from non-renewable sources. New Zealand also imports almost all its vehicles. However, EECA's transport programme includes work on biofuels and investigating the benefits of a hydrogen and fuel cells pathway. An indicative target for the transport sector has been set at 2PJ [EECA (2002) p6], but this is probably conservative given that total transport energy use in 2000 was 188PJ.

²¹⁴See footnote referring to Steeman (2003) above.

²¹⁵East Harbour Management Services (2002). Availabilities and Costs of Renewable Sources of Energy for Generating Electricity and Heat - 2. Renewable Energy Packages. Medium confidence estimates are used here.

²¹⁶e.g. in January 2002 the Irish government gave the go-head for a 200-turbine, 520MW offshore wind farm: Irish Wind Energy Association: Wind Energy Offshore [link to external website]. The comparative merits of onshore and offshore windfarms depend on a variety of factors including land use intensity near load centres.

²¹⁷The NZWEA estimates that wind might supply 10-15% of New Zealand's total electricity needs, although at present the percentage is negligible. However, rapid expansion is in train. Meridian's Chief Executive Keith Turner is recently reported to have stated: "Suddenly, wind is real": Weir (2003).

²¹⁸Pretli (2003) p3.

²¹⁹The Australian Mandatory Renewable Energy Target (MRET)is expected to deliver enough renewable electricity per year by 2010 to meet the residential electricity needs of four million people. The MRET has some flaws as a policy instrument, including its limitation to electricity rather than all forms of renewable energy. However, it has succeeded in creating a national renewable electricity market backed by legislation: Australian Government (2003) p13.

²²⁰When it was set, this target was more often than not criticised for its timidity. It represents an absolute 23% increase over a 12 year period (2000-2012), or less than 2% pa. As noted above, it also represents an increase in renewables' portion of consumer energy from 29% to 31% over 12 years. Viewed in these terms, it is not an ambitious increase. (The Energy Data File (July 2002) confirmed the base year 2000 renewable consumer energy as 133.5PJ. This means the total renewable consumer energy required in 2012 to meet the target will be 163.5PJ (133.5 + 30): See EECA and MfE (2002)). Blakeley (2003) notes that, excluding projects planned or under construction, total geothermal electricity generation capacity is around 370MW. This represents about 7% of total annual generation output; while total wind/alternative capacity is 58.5MW with 0.62% of total annual generation output, 2000/2001 (0.38% from wind and 0.24% from biogas and landfill gas). This is principally made up of wind farms at Hau Nui (3.7MW) and Tararua (32MW), landfill gas plants at Rosedale/Greenmount (8.3MW) and Silverstream (2.7MW), and various small biogas co-generation plants (12MW).

²²¹Unless carbon sequestration technologies advance rapidly.

²²²"Hydrogen Plan of Iceland" [link to external website].

²²³EECA suggests a target of 10,000 installations p.a.(the rate in 2001 was fewer than 1500 p.a.), which represents less than half of new homes constructed each year and would contribute around 0.5PJ to the overall 2012 target: EECA (2002). EECA also notes that "The support under consideration for SWH is short-term and "barrier busting"…. the goal of the SWH programme is "market transformation" - to lift the game of the industry over the next 3-4 years by which time it is intended it will be at a much higher, self sustaining level of output. The types of incentive being considered - a short-term bid-in fund and a Government purchase programme - are both extensions of existing initiatives (albeit with somewhat more focussed outcomes in mind).": EECA and MfE (2002) p20.

²²⁴(article on New Zealand Wind Energy Association website) [link to external website] is suggestive, but inconclusive. [No information on article referenced. Not on New Zealand Wind Energy Association site as of May 2004]

²²⁵It might also be assisted by provision of critical and credible information, such as sources of electricity being announced on a daily basis by, say, the electricity system operator.

²²⁶Senate Environment, Communications, Information Technology and the Arts References Committee 2002

²²⁷Circumstances may not be as acute here because a larger proportion of the infrastructure may be of more recent vintage, or the asset management practices adopted by local government in recent years may enable us to even out expenditure to a greater degree.

²²⁸This is precisely what a committee of the Australian Senate has done in its inquiry into Australia's management of urban water (Senate Environment, Communications, Information Technology and the Arts References Committee, 2002).

²²⁹Ministry for the Environment (1997).

²³⁰The scope of this report does not allow a comprehensive discussion of all sensitive aquatic ecosystems in New Zealand.

²³¹National Standards for Health and Environment - Media Statement by Hon Marian Hobbs - 16 September 2003 [link to external website].

²³²The cost of the extreme ends of the local distribution system is largely governed by fire fighting requirements.

²³³The 2002 Auckland Water review observes that "if everyone used less water, it would mean the need for new water sources could be delayed. If this led to 10% lower capex [capital expenditure], then in early years this would save nearly $3 million a year, or as much as $13 million in about 20 years time when a large new dam could otherwise be needed."

²³⁴The same is true for the water user charges imposed by water supply LATEs.

²³⁵In Nelson City, households and other small users, after an initial entitlement of 100m³/yr, pay $1.19/m³ for amounts up to 10,000m³, while the largest users pay only $0.72/m³ for amounts in excess of 100,000m³.

²³⁶A closely related concept is that of "decoupling" environmental pressures from economic drivers.

²³⁷Sydney Water's ecological footprint for 2001/02 was 71,800 hectares or 173 square metres per Sydney Water customer.

²³⁸Concern about water is not always the only issue motivating these actions; security of employment can be another.

²³⁹Only rarely a distinction is made between the management of water services and ownership of the infrastructure.

²⁴⁰This is sometimes called the "new water culture" and has been given expression in the numerous amendments to water laws in many countries, including the Water Framework Directive of the European Union or UNESCO's International Hydrological Programme.

²⁴¹In the UK, for instance, a project to carry water from Scotland and Wales to London and the South East area was postponed as the government forced companies to stop the leaks in the water piping systems first.

²⁴²In New Zealand, organisations representing large users have been created in the electricity and telecommunications sectors; there is no analogue in the water sector because most large water-using industries have their own supplies.

²⁴³INGENIUM [link to external website].

²⁴⁴As well as electricity, gas and telecommunications services.

²⁴⁵This is usually worded as "Meeting basic needs for safe and sufficient water and sanitation" (UNESCO, 2003).

²⁴⁶In many countries, water prices have risen strongly in recent years as a result of more stringent standards as well as the implementation of the user pays principle. This has fuelled the debate about affordability and inspired various measures for financial relief. For example, in the Netherlands, municipalities pay the water bills for people on a benefit. In Belgium, the first 15 cubic metres of monthly consumption are not charged. However, when the free entitlement is too large, it can lead to over-consumption among average or smaller sized households, and thus encourage over-investment in infrastructure, or excessive use of the water itself (OECD 2003).

²⁴⁷Smets (2000). When householders default on their water bill, utilities can install trickle valves that allow users to draw water for basic needs only.

²⁴⁸In any case, lack of income is not necessarily the only reason why some households find it difficult to pay their water bills; for example, budgeting skills may be another factor.

²⁴⁹The standards are not mandatory as per October 2003, but are expected to become so in the near future.

²⁵⁰The stocktake of infrastructure currently being prepared will report the results of the MoH grading.

²⁵¹Ministry of Health, 2003.

²⁵²This includes contaminants generated by the purification process itself, such as the chloramines (suspected carcinogens) formed in chlorination. The amount of chlorination required depends directly on the quality of the raw water, so that is why the protection of drinking water source areas is important.

²⁵³DIA (1998).

²⁵⁴The Australian Senate inquiry into urban water management makes the point that sewage systems themselves are large users of water required for "self-cleansing flows for systems". A move towards localised systems would promise possible water savings.

²⁵⁵These are partly based on various national guidelines issued by the Ministry for the Environment, such as the June 2003 guidelines on recreational water quality.

²⁵⁶This would apply mainly to treatment facilities discharging into inland waters, because discharges to the sea are diluted to a much higher level..

²⁵⁷This is what Austria, with its high dependency on the tourist industry, felt was necessary in the 1970s when the quality of its Alpine lakes began to deteriorate. It adopted effluent standards that were more stringent than those of neighbouring countries and built extensive infrastructure to divert effluent discharges away from its lakes.

²⁵⁸As not all water supplied to a household will be delivered to the sewerage system again (e.g. garden sprinkling, car washing), charges could be based on a percentage of actual use, with different percentages being set for summer and winter.

²⁵⁹Rates are taxes and non-payment incurs penalties which rapidly increase as long as they remain unpaid. Unpaid water bills sent out by LATEs are subject to normal commercial debt recovery processes.

²⁶⁰The current government has not explicitly committed itself to the polluter pays principle (PPP). The Environment 2010 Strategy (Ministry for the Environment, 1995) committed the previous government (from 1995) to the PPP - see Principle 4 (Internalisation of external environmental costs).

²⁶¹The SWSS provides a subsidy of 50% towards the capital cost of sewage treatment works for communities of up to 2000 people, with the subsidy rate declining for larger communities (down to 10% for towns with up to 10,000 inhabitants); there is also a 50% subsidy for installing fluoride treatment in water supplies.

²⁶²For instance, in the Hutt Valley, as from July 2004, trade waste will be charged as follows: volume at $0.1862 per m³, suspended solids at $0.4651 per kg, and COD at $0.1786 per kg

²⁶³Other technological innovations include the use of grey water (from the kitchen, shower and bath) on individual properties for toilet flushing or garden sprinkling or the separation of grey, yellow and black water. Black water contains urine and faeces, yellow water is only urine. Advance designs of toilet bowl separately collect urine (mostly nitrates) and faeces (mostly phosphates).

²⁶⁴Shellfish contamination is often caused by natural toxic organisms whose proliferation may be the result of increased nutrient loads, but causes are generally not well understood.

²⁶⁵The analysis would further show the obstacles created in metropolitan areas by jurisdictional boundaries not coinciding with catchment boundaries.

²⁶⁶The PCE states: "The absence of a specific agency or unit to advise the Ministerial group limits what information and technical advice the Ministers receive. New Zealand has no Ministry of Infrastructure or equivalent infrastructure policy unit within an existing ministry that can provide sufficient information on all urban water system management issues. There is no Government ministry promoting an integrated response to urban water systems, models and tools to assist integrated management, water efficiency and conservation measures, equitable and efficient pricing and charging measures, and research. The lack of focused research on urban issues within the Crown Research Institute (CRI) system is a major weakness."

²⁶⁷Lincoln Environmental (2000).

²⁶⁸e.g. Agriculture New Zealand (2001); Gamble & Irvine (2002)

²⁶⁹Forest and Bird, for example, argue that demands for water are (along with invasion by pests and weeds) creating "enormous pressures" on the South Island's braided rivers: Royal Forest and Bird Protection Society (2002), p2.

²⁷⁰Robb et al (2001)

²⁷¹Gretton et al (2003) [Productivity Commission], who note that "Appropriate access to reliable communications infrastructure is also likely to be important [for uptake and productive use]." (p17).

²⁷²e.g. Spears et al (2001).

²⁷³Gretton et al (2003) Figure 4, p15.

²⁷⁴The index includes the ICT environment, readiness and usage: Cornelius et al (2003) pp279, 282.

²⁷⁵Martech Consulting Group Ltd (2001).

²⁷⁶Berkhout and Hertin (2001).

²⁷⁷Office of the Prime Minister (2002) p28.

²⁷⁸Comparative figures for phone access are 99% and 88% for European and Pacific families, for example: Ministry of Social Development (2003) p110.

²⁷⁹Ministry of Social Development (2003) p111. A 2000 survey of rural residents found that 58 percent of respondents reported problems with their telephone lines, and 52 percent of rural non-farm businesses felt disadvantaged due to poor telecommunications services or infrastructure, compared with urban-based businesses: MAF (2000), cited in Department of Labour (2002). There is also a strong income gradient in internet access: Department of Labour (2002).

²⁸⁰"Almost all schools are now connected to the internet, but many schools in provincial areas are affected by very slow connection speeds or cannot afford the available high-speed connections. As a result the Internet is not being used as an integral teaching, professional development or administration tool in these schools."PROBE media statement Questions and Answers [link to external website].

²⁸¹CommunityNet Aotearoa - E pā ana/About Us [link to external website].

²⁸²Office of the Prime Minister (2002) p29; and for background on PROBE: Sep 2002 Rural Bulletin - Provincial Broadband Extension Project [link to external website]

²⁸³Government pushes high speed internet into rural NZ - PROBE Media Statement 23 July 2003 - Ministry of Education [link to external website].

²⁸⁴Martech Consulting Group Ltd (2001) p10.

²⁸⁵Ibid, p18.

²⁸⁶See, e.g., Ministry for the Environment (2000) and, for a survey of the medical literature, Cell Phone Antennas and Human Health [link to external website].

²⁸⁷Item 27 of Environmental News Bulletin - 1997 ENB 43/1-51 - 13 November 1997 [link to external website].

²⁸⁸Ministry for the Environment (2000)

²⁸⁹In some cases involving mobile phone base stations, visual and landscape effects may need to be considered under section 6 of the RMA. Under that section, certain matters of national importance must be recognised and provided for by decision-makers. For example in Mason-Riseborough v Matamata-Piako District Council A 143/97 it was held that Mt Te Aroha was an "outstanding" natural feature and landscape, and to allow a proposal to establish and operate a cell site on the lower slope of Mt Te Aroha would compromise section 6(b) of the RMA.

²⁹⁰Some recent analysis of wider impacts is also available from Digital Europe at More ICT could increase resource use (eceee news) [link to external website].

²⁹¹Berkhout and Hertin (2001) p2.

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Printed: 26/11/2009