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Environmental Economics Round Table - Proceedings

Convened by Senator Robert Hill Minister for the Environment
Canberra, 10 July 1997

Environmental Economics Research Paper No. 6
Commonwealth of Australia, 1997
ISBN 0 642 28352 4

Opening Address - Senator Robert Hill

My purpose principally is to welcome everyone here today and to thank them for being prepared to participate in what, from the government's perspective, is a very important round table discussion. This is probably the first meeting of its kind under the auspices of government and is possibly, therefore, somewhat overdue. Be that as it may, we can certainly move forward.

I particularly want to welcome Professor Norgaard, from the University of California, Berkeley, who is going to give our keynote presentation this morning. It is Professor Norgaard's first visit to Australia, so we bid him welcome. He is President-elect of the International Society for Ecological Economics, and what he has to say to us will be very useful. In that light, I am told that we have an Australia-New Zealand chapter of the same organisation. Mike Young, who is here today, is the President of our chapter, so we are strongly represented in that regard. I will not ask you to blush, but this is probably the most eminent group of economists and associated disciplines that we have had grouped together for a discussion on market based instruments to achieve environmentally sound outcomes.

I have to say in introducing the discussion that I have been surprised at the extent to which the various disciplines still take their separate seats. I understood that we were all wedded to sustainable development and that we understood that sustainable development incorporated economic gain to a background of environmental credibility, consistent with sound social policy, and that the disciplines had come together to, in effect, implement sustainable development. Yet when I went to the recent Commission on Sustainable Development in New York, I found that it was still largely the environmentalists who were in attendance, that the economists were still meeting down the road in the World Bank and the social scientists were still conducting their other conferences. There had not really been, since 1992, an integration of the disciplines in the way that we would have thought was desirable.

We would like to do better in Australia. The rhetoric has been fine. In preparation for today, I went back to our national strategy on ecologically sustainable development, which we adopted nationwide in Australia in 1992. I found that it said that two guiding principles were that:

Decision making processes should effectively integrate both long-and short-term economic, environmental, social and equity considerations; and, that cost-effective and flexible policy instruments should be adopted, such as improved valuation, pricing and incentive mechanisms.

So we, like the rest of the world, were saying the right thing back in 1992. The issue that we will be looking at today is the extent to which we have adopted those principles and, to the extent that we have not, how we might better do so in the future.

When we put down our budget document last year, which was the first one of the new government, we emphasised the importance of market based instruments for achieving our environmental objectives. I think there is quite wide acceptance now that the old command mechanisms and regulatory processes are not necessarily the best means of achieving all environmental goals, certainly not the most cost-effective means of achieving those goals, and that the use of market based instruments that encourage certain behaviour can be a more efficient way of achieving the outcomes that we are seeking.

For those of you who are visitors, we published a paper last year which was an assessment of the extent of subsidies that still exist within our country for the use of natural resources. Although some industries quarrelled with the detail, by and large, I think the direction was accepted. It demonstrated that we still have very significant subsidies in a range of natural resource areas, and there is no doubt that they do distort the market, and there is no doubt that, to some extent, they do undermine sustainability. That was a very useful report. It has been supplemented by a report by Dr James, who is here today as well, which we published only a few days ago. It was, in effect, a comprehensive review of such environmental instruments as exist within our economy today. That should provide a very useful base for our discussions here as well.

Bringing all of this together in terms of a policy sense, we are obviously implementing a number of very important policies at the moment. The most prominent, of course, is the Natural Heritage Trust in which we are seeking to reverse in many ways the decline in the health of our natural resources. There is no doubt that in the past we have significantly eaten into the capital base of our natural resources, and it has been at a very significant cost to sustainability. We are now putting in a large sum of public money in an attempt to reverse that trend, but that in itself raises the issue as to the most effective way to spend that money to achieve those outcomes that we are seeking.

I mention one very controversial matter, the issue of land clearing in Australia. Australia has been overcleared in the past, at a very significant cost. We failed to understand the consequences of mass land clearance to our natural systems. We came to this country and set about clearing it in order to adopt European farming practices and found that it just did not hold together: the salinity started to rise, the soils were breaking down, the pollution was being washed into the streams and was destroying the value of the streams. Now we are on the path of remedial action. But the extent to which economic instruments and forms of incentives should be used is still part of that ongoing debate. Today should be very helpful in that regard.

I am conscious that when these economic instruments are not used on a sound policy basis, they can actually be quite destructive. I recently visited a quite precious area of Australia, which some of you might know, the Macquarie marshes. There I saw thousands of hectares of beautiful red gums that were ringbarked back in the times when we gave significant taxation incentives for people to go out and destroy the trees. As a result of destroying the trees, the land has become barren. Now the question is: are we going to provide equal incentives to replant them? Even so, we find that the soil systems have been so degraded by our past practices, it is not that straightforward.

We have the implementation of the Natural Heritage Trust. We are working on the development of our oceans policy at the moment. We are one of the first nations to really wrestle with the challenge of developing an integrated oceans policy. It raises all those complicated questions of fisheries such as how we can achieve the best economic outcome consistent with protecting the natural resource in a way that is socially acceptable. Along with the Natural Heritage Trust and the oceans policy, we have the water reform agenda for Australia, which many of you will be familiar with through the Council of Australian Governments (COAG).

The background to this also is the reform process that we have in mind for Commonwealth-State relations. Like many countries in the world, we are wrestling with what is the effective level of government to be responsible for environmental responsibilities. Furthermore, what are the right instruments for that level of government to be implementing to achieve those outcomes?

This meeting today is timely. I think we have picked the subject matters that are vitally important. If anything, I think we probably have a touch too much on the agenda, but we have a full day in which to do this. I do appreciate the fact that all of you, who are busy people, have been prepared to contribute to the development of sound public policy by being here today and giving your expertise and effort, to our mutual good. With those few opening words, I welcome you and I hope the day goes well; I am looking forward to it.

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