1

FISCAL INSTRUMENTS AND THE CHALLENGES OF FOSTERING

BIODIVERSITY CONSERVATION

Associate Prof. Hope Ashiabor Macquarie University

Division of LawSydney, Australia

2

3

4

5

6

Thylacine (Tasmanian Tiger)

Picture on slide 4 , is a photo of the last Tasmanian Tiger in captivity, taken at Hobart Zoo in 1933.

7

CHALLENGES

• Degradation of Eco-systems and the Loss of Species Worldwide

• Pricing Environmental Values

• Australia’s Responses: – Regulatory and Fiscal

• Other Possible Responses

8

DEGRADATION OF ECO-SYSTEMS AND THE LOSS OF SPECIES

• Estimates: 34,000 plants and more than 5,000 animal species face the threat of extinction around the world

Source: Report, Secretariat of the Convention on Biological Diversity, 2000.

9

AUSTRALIA’S ENVIRONMENT

• One of 17 mega-diverse environments

Home to 10 % of the world’s known species of flora and fauna (80% of which exist nowhere else in the world)

10

AUSTRALIA’S ENVIRONMENT

• 2,891 threatened ecosystems and other ecological communities identified across Australia

• 94% of bio-regions in Australia have one or more eco-systems, esp. in the highly cleared regions of SE Australia

• Mammal extinction – substantial in the last 200 years:22 Australian mammals are now extinct (representing one

third of the world’s recent extinctions);A further 8 species now only exist on islands

Source: 2000 Report on Australian Terrestrial Biodiversity Assessment.

11

AUSTRALIA’S RESPONSES TO THE CHALLENGES

• International

• Domestic Constitutional Constraints Regulatory and Economic Responses

12

AUSTRALIA’S RESPONSES TO THE CHALLENGES - INTERNATIONAL

• Signatory to Multilateral Environmental Agreements on Biodiversity Conservation

• Integration into Legislative Policy

• Enforcement role – through “command and control measures” Product bans Surveillance & hot pursuit

13

Australia’s Responses … - Domestic: Constitutional Constraints

• Federal Const. does not confer power on Commonwealth to regulate on environmental issues

• Indirect-(External Affairs power, Grants Power)

• Attempts to encroach into State’s regulatory domain, resulted in expensive litigation

• Interaction of Fed & State Policies Charaterised by Inconsistencies

14

Australia’s Responses … - Domestic: Managing Constitutional Constraints

• Intergovernmental Agreement on the Environment: to facilitate standardization of env. controls across jurisdictions

• Co-operative federalism – Examples: Env Protection (Biodiversity Cons) Act 2000 National Greenhouse Strategy Intergovernmental Murray-Darling Salinity Bank

Scheme (The only Fed based tradeable rights regime)

15

CHALLENGES IN VALUING ENVIRONMENTAL EXTERNALITIES

• The successful application of economic instruments is dependent on: Reliable information about the costs and

benefits of resource use alternatives; and Information about non-market social and

environmental values.

16

CHALLENGES IN VALUING ENVIRONMENTAL EXTERNALITIES

• Use of economic valuation techniques have been subject to much controversy and criticism because of methodological uncertainty and lack of public or government familiarity with such techniques.

• This notwithstanding such methodologies have been used in at least a number of resource use decisions made by governments. Examples include:

The joint Federal & Queensland government decision to ban oil drilling on the Great Barrier Reef (1971)

The Fed governments intervention to protect the wilderness values of Tasmania’s Franklin river from hydro-power development proposals (1983)

17

Economic Instruments (Taxes & Charges)

• Pigou- theory of environmental externalities• OECD– Polluters Pays Principle (1970’s)• Brundtland Report (1987)• UNCED’s Rio Declaration on Environment

& Development: Principle 16- National authorities should endeavour to

promote internalization of environmental costs and the use of economic instruments…

18

Economic Instruments (Taxes & Charges)

• Reluctance to use taxes – some reasons: Difficulties in effectively linking a charge to targeted

environmental behaviour Fear of electoral backlash The economically regressive impacts of such taxes on society Competition among states to attract investment by using

(price concessions, subsidies, & infrastructural assistance measures)

Taxes and charges could create problems of commercial competitiveness if different regimes are applied among states

19

Economic Instruments

• Examples of applications of the PPP: Pay-for-use water pricing scheme established in the

Hunter District of NSW (1982-83)Best eg.of a fiscal based demand mgmt strategy

Imposition of Fees on the issuing of licenses Load based licensing systems Earmarked taxes (South Australia’s River Murray

Levy, 200; NSW’s former Special Environmental Levy, 1989-1993)

Performance Bonds

20

Economic Instruments (Financial Subsidies)

• Because of constitutional limitations, the Commonwealths focus on ecological tax reform has been confined to incentive measures (tax concessions, government expenditures, and grants)

• Some subsidies foster an excessive exploitation of the environment

• Positive Subsidies

21

Economic Instruments (Financial Subsidies)

• Environmental Impact Assessments • Land Rehabilitation

Phasing out detrimental subsidies (land clearing 1983, and fertiliser subsidies, 1988). But these have left their scar on the landscape.

State Level: Existing Land taxes provide disincentives for nature conservation on private property

Tax imposed on “unimproved value of the land”

22

Economic Instruments (Financial Subsidies)

Positive Subsidies:Deductions for capital expenditures on measures

designed to prevent land degradationSustainable land management practices

(preventing/combating—soil erosion, salinity, decline in soil fertility)

Flood management, land reclamationWater conservation measuresConservation covenants

23

Direct Regulation

• Following significant economic rationalist reforms which started in the mid-1990’s, there was a re-working of certain regulatory controls (licensing, imposition of conditions on permits, prohibitions, and fines) perceived as hindering economic growth.

• With the de-regulation of the economy (eg public sector reforms in energy & water sectors) such direct and interventionist approaches posed significant risk of contradictions with free market philosophies embraced by governments.

24

INTEGRATED APPROACHES

• Mixed approaches, harnessing a range of direct regulatory and market policy tools

• Unfortunately, such approaches have not been used in a co-ordinated manner.

• Greater focus has been on “soft instruments” such as voluntary arrangements and tradable permits, as they:

Pose few real disincentives to the economic status quo; And are favoured by the business lobby.

25

Conclusions

• Overcoming the constitutional barriers through the co-operative arrangements have broadened the framework for fostering biodiversity conservation in Australia

• The use of performance bonds should be encouraged as they address the issues of precaution and uncertainty

• Implementation of load based licensing regimes to address pollution discharges into waterways has also been a great leap forward

26

Conclusions

• There is a need to address the challenges of dismantling perverse subsidies as this is the one sure way to safeguard the natural systems that support life on earth

• Creative unilateral measures to protect biodiversity might be an option to consider where the matter cannot be resolved bilaterally or multilaterally

27

Conclusions

• Trade-offs can be arranged for countries to upgrade their environmental management in return for investment; or

• International organizations can encourage the transfer of environmentally friendly technology through development assistance or foreign direct investment