This page is not a current Christchurch City Council document. Please read our disclaimer.
 |
|
 |
In chapter two of this study we have discussed the factors and issues Christchurch waste management is influenced by to establish a context for total cost assessment. In this chapter we discuss issues affecting the framework for TCA. Each section closes with stating the implications for the framework. Issues discussed include the nature of effects, tangata whenua, public and private service provision, the generator pays principle, measuring total cost in common units, transboundary issues, coordination of total cost assessment, and future costs and benefits.
Costs and benefits are defined as types of effects, with either negative and positive value (section 2.5). In section 3 of the RMA `effect' includes:
(a) Any positive or adverse effect; and
(b) Any temporary or permanent effect; and
(c) Any past, present, or future effect; and
(d) Any cumulative effect which arises over time or in combination with other effects--
regardless of the scale, intensity, duration, or frequency of the effect, and also includes--
(e) Any potential effect of high probability; and
(f) Any potential effect of low probability which has a high potential impact.
This broad approach is required due to the nature of environmental management (including waste management): "Although for analytical and practical reasons [`the environment'] can be treated as having different dimensions, such as a biophysical (ecosystems) dimension, an economic (resource management) dimension, and a social (quality of life dimension), it should be recognised that human activities with regard to one aspect of the environment (such as air pollution) may have repercussions in many other aspects (such as forests, soil fertility, buildings, and human well-being). Such impacts may not always be direct and immediately visible [...] and they may be cumulative, adding to the complexity of environmental phenomena." (Bührs and Bartlett, 1993, p.9).
These two sources show the wide range and complexity of `effects'. Establishing the total cost of waste management (that is, including all the effects, both positive and negative) will mean encompassing a wide variety of interconnected phenomena. Perhaps the best recognised effects which are incurred by waste management are economic ones (refer to section 2.5 for definitions of cost type). Traditionally, financial accounting in waste management has been basic, for instance landfill costing considered only the operational costs (MfE, 1996a).
Some of the economic costs relate to practices which attempt to avoid, remedy or mitigate biophysical effects such as contamination of groundwater and surface water by landfill leachate, or atmospheric release of gases from landfills (Hirshfeld, 1992). Even with special management in place, however, the activities will still have some level of biophysical effects. New Zealand is still dealing with the effects of poorly managed past disposal sites (MfE, 1997b, p.8.62). Activities not specifically related to waste management can also have biophysical effects, such as air pollution caused by collection and transfer vehicles.
Some of the biophysical effects have social effects. For instance, water contamination may jeopardise the spiritual value of water or heritage value of sites. Vermin and vectors attracted may cause both annoyance and health risks. Other effects are directly on society, regardless of their biophysical impacts, eg., increased traffic, mud on roads, visible air pollution, odour, aesthetic degradation, limited land utility, annoyance and health effects from noise or dust (Hirshfeld et al., 1992, p.473; MfE, 1996a, p.15). Stress is also significant for communities near disposal sites (Lang, 1995, p.182). These direct social effects are the kind of effects compensated by the `host fee' concept. In this concept, the area negatively affected by waste management (eg., the town in which a regional landfill is located) is compensated. Social effects can also be incurred via market systems, eg., changing property values.
As the above mentioned shows, the effects of waste management are interrelated. Effects have varying time frames - some current effects are caused by past practices, and some future effects need to be considered now. Biophysical and social effects also occur at different levels. Primary effects can cause more (secondary) effects, for instance leachate contamination can affect local biota. This, and the attraction of `pests' (eg., rats, mice, seagulls and flies) can affect wildlife and potentially the biodiversity of the area.
The implication of the nature of effects for a total cost framework is that it must be able to provide for the variety of types of effect which will be encountered. That is, biophysical, social, economic effects have to be included, also primary and secondary, and present and future effects. The framework also has to be able to separate out the interrelated effects and attribute them to specific causes, ie. to minimise double counting of effects.
Section 2.2 introduced the Treaty of Waitangi as a document which formalises the relationship between Maori and Pakeha in New Zealand, and which directly influences public sector policy. Specifically, the RMA requires the Council to take into account the Treaty (s8), and "recognise and provide for the relationship of Maori and their culture and traditions with their ancestral lands, water, sires, Wahi tapu, and other Taonga" (s(6)(e)). In addition, the Waitangi Tribunal has found that "waste management systems and policy should be constant to the principles of the Treaty of Waitangi" (MfE, 1993). National support for the implementation of these policies is improving, and a new advisory committee on Hazardous Substances and New Organisms - Ngaa Kaihautu Tikanga Taiao - should soon be able to provide policy guidance on hazardous waste issues affecting Maori (ERMA, 1998). Christchurch City Council's Draft Waste Management Plan for Solid and Hazardous Waste (from which this study's aim is derived) acknowledges and commits to these Treaty obligations. The key principle (2) in the Draft Plan is to "ensure a consultative process" with tangata whenua. The plan's appendices also contain policies on solid waste management from a city runanga, Ngai Tuahuriri.
The MfE document Waste Management Planning: Guidelines for Maori (1993) note some key points that need to be considered. One is that tangata whenua generally face considerable resource constraints and are not able to direct large amounts of time, effort and money into resource management issues. Another key point is that tangata whenua have a distinctive way of seeing the world (environmental value systems), which is different in many ways to European or Western modes of understanding. Aspects which non-Maori (tauiwi) might consider quite separate are inseparable from a tangata whenua perspective. For instance, tauiwi keep religion or spirituality very separate from public planning processes but in the Maori world view these cannot be considered separately (Gray, 1997). Similarly, western science divides the world into parts such as astronomy, geology, botany, geography and other disciplines, while Maori cosmology views all physical elements as related through genealogy since creation (MfE, 1997c, p.15). Thus for tangata whenua the value of water is not simply as a resource, but includes spiritual, physical, economic, social and mental aspects (MfE, 1993, p.22). As a result of this different understanding, tangata whenua may have specialised local knowledge to contribute to total cost assessment (MfE, 1997c, p.14).
The environmental value systems of tauiwi and tangata whenua are like two rulers of equal length lying side by side. One sets out to measure environmental values in centimetres or spiritual, mental, physical and social terms and the other measures it in inches or materialistic and financial terms. (MfE, 1993 p.4).
This quote suggests that tangata whenua and tauiwi are seeking to measure the same things in different ways. In fact, the approach the Council has taken in requiring total cost assessment and reporting incorporates far more than "materialistic and financial terms". In this way, CCC's approach may not be so incompatible with the tangata whenua value system described here. However, it is recognised that considerable differences do exist. Tauiwi assessment methods are reductionist - that is they break things down into components and study them to understand the whole, whereas tangata whenua tend to consider the big picture. This is true of the approach to total cost taken in this report - the whole picture is built up by understanding specific components.
Given CCC's obligation to the Treaty of Waitangi, costs and benefits of waste management need to be considered from a tangata whenua perspective (in addition to a tauiwi perspective). To at least some extent, physical and economic effects can be expected to be the same for tangata whenua as for tauiwi, and their measurement techniques mutually acceptable (MfE, 1997c, p.13). It is the spiritual, social and mental costs which flow on from physical effects which are likely to be significant. The fact that Maori have different ways of measuring means that if costs which they incur are translated into common units, some meaning may be lost in the process. Allowing values to be expressed qualitatively would negate this problem. The separation of costs into different types (biophysical versus spiritual) may be inappropriate from a tangata whenua perspective. This would seem to suggest that costs to Maori (in particular social, mental and spiritual) should be kept together for assessment, and measured in a way that retains meaning. Tangata whenua need to be asked and included in the development of total cost assessment in order to clarify this.
However, it seems unlikely that iwi or runanga would be able to spare the time, money and effort required to carry out assessment on a comprehensive annual basis. One option may be to ascertain a clear set of criteria against which to measure effects of waste management to tangata whenua, if acceptable. This could be developed through the consultative processes mentioned in the Draft Plan, which could seek specific input on TCA implementation. Alternatively, a single statement by tangata whenua could be prepared by a representative group on an annual basis.
It is important to note that although the Draft Plan relies on policies from Ngai Tuahuriri, other runanga will be affected by waste management, particularly with developments such as a regional landfill. In addition, the Te Runanga O Ngai Tahu Act 1996 requires consultation with Ngai Tahu is done with the official Ngai Tahu body, rather than individual runanga, suggesting that the extent of consultation will have to be widened beyond Ngai Tuahuriri.
As discussed in section 2.2.7, delivery of waste management services is a statutory duty of territorial authorities (s.538 of the Local Government Act). The Draft Plan sets directions for Christchurch Waste Management and promotes: 1) minimising the amounts of waste requiring disposal; 2) minimising the effects of waste on the environment; and 3) ensuring efficient use of the Council's resources (CCC, 1998).
Some services (eg., collection, operation of refuse stations, landfill) can be provided by the private sector where distinct roles and responsibilities can be defined. Boyle (1997, p.44) for example, identifies `collection', `operation of disposal facilities' and `separation of recyclable waste' as services which may be contracted to private companies. In Christchurch there are currently several privately run waste services, eg., Onyx collects household recyclables through its kerbside collection scheme (Crean, 1998). A discussion of the advantages and disadvantages of private versus public supply of waste management services is beyond the scope of this study. It is necessary, however, to determine the implications of private sector participation for total cost assessment of waste in Christchurch City.
The main goal of private companies is to maximise financial return. It follows that traditional cost accounting in the private sector has been limited to financial accounting (Ostrenga, 1992). More progressive methods of cost accounting (eg., Full Cost Accounting) have focused on improving accounting systems, but retain a financial and commercial focus (Turner, 1997). This means that non-financial costs and benefits (ie. social, biophysical and some economic effects) are typically excluded from private accounting systems.
In assessing the `total cost' of waste management, CCC must assess economic, social and biophysical effects of Christchurch's waste management services. Where those services are delivered by CCC, the Council is in a position to account for all effects (costs and benefits) associated with their programmes. Where private companies deliver waste management services, CCC can account for the commercial contract value and contract administration costs (eg., monitoring, policy development, enforcement and administration). Any further breakdown of these or assessment of the other costs (eg., social and biophysical) associated with individual activities of those companies requires further information from businesses than is currently provided.
Commercial sensitivity may restrict the type of information private business may provide to the CCC. Because assessment of non-financial costs are not currently required of private sector service providers, they are not readily included in a framework of total cost assessment. CCC will need to develop a policy to promote the inclusion of those costs and benefits. Some possible ways are listed below.
In New Zealand society, waste is generated at two main levels, production and consumption (Boyle, 1997). Producers create waste as a by-product of their production process. Consumers then purchase the products and generate waste by discarding packaging and the products themselves (or their parts) as they reach the end of their useful life.
Currently, the total cost of waste is not being met by either type of waste generator. The need for this is encapsulated in policy two of the Government's waste policy (MfE,1992; section 2.2.3). The need for generators to pay for the total cost of waste management is directly related to the economic concept of externalities outlined in section 1.3. This is conveyed in Principle 4 of the Environment 2010 Strategy that:
"Resource management should ensure that the unpriced environmental effects (or external costs) associated with the production, distribution, and consumption of goods and services are "internalised", that is, they are assessed and consistently charged to users and consumers who benefit from them" (MfE, 1995, p.15).
Charging the total cost of waste is regarded as a means of providing the right balance of incentives to promote desirable standards of behaviour, namely waste reduction, reuse, recycling and recovery (MfE, 1995, p.45; CCC, 1998, p.5-6). However, there is little specific research to support this belief within the field of waste management. Related to this, the issue of distributive effects should be considered in the development of any charging system. Different waste generators have a different relationship to money. A given charge for waste disposal may represent an excessive incentive for low socio-economic groups whereas it might be irrelevant for higher socio-economic groups. Establishing the relationship between various incentive structures (eg., charging systems) and the behaviour of waste generators is therefore important.
Within the waste management hierarchy reflected in government policies, reduction of waste at source is the first priority in waste management. Holding producers responsible for the waste which results from their products would do this, because there would be an incentive to design products which create less waste. This can be done through direct monetary requirements, or though requirements as exist in some European countries (where all packaging can be physically returned to the producer who must take responsibility for its reuse, recycling or disposal) (Boyle, 1997, p.48). Directly charging waste producers for the cost of waste associated with their products has not yet been attempted (ibid. p.49). Direct charging seems particularly problematic for New Zealand given its high level of imported products as the application of charges to domestic producers only would create competitive disadvantage. Charges to imports may also contravene current trade agreements.
Charging of producers is legally and logistically beyond the scope of a local authority, and this is recognised in the Christchurch City Council's Draft Plan, which identifies encouraging consumer influence and lobbying for national legislation as the best methods of applying pressure to producers. However, waste generated during production within Christchurch City can be charged for through fees for waste management services provided. It is this form of charging that the plan identifies as being based directly on the total or `real' cost of waste management (CCC, 1998, p.5-6).
There are several options for setting charges available. Charges on the basis of waste type (eg., plastic, paper) could provide very direct incentives to work towards the implementation of the waste hierarchy. However ascertaining the total cost for different types of waste is difficult (as discussed in section 4.4.5), if specific costs of each waste type were to be used. A system of accurate waste sorting, identification and charging would be infeasible, complex and expensive for municipal waste generators but may be feasible for larger scale waste generators.
Instead of allocating the cost of specific waste types, generators could be charged on the basis of the amount of waste assuming an average mixture. However, charging by amount for mixed waste continues to send a distorted message to waste generators. For example, a bag of shredded paper would incur the same charge as a bag of used batteries or PVC products which leach up to ten times the acceptable level of softeners known as phthalates (Greenpeace, 1997).
The economic rationale for internalising external costs is to eliminate market failure (section 1.3). Including externalities is one aspect of market failure and other potential sources of market failure need to be addressed. One of these is the lack of information to (or understanding by) waste generators (eg., how to compost garden waste privately). The Draft Plan recognises this and identifies charging as one of a range of methods or tools for meeting waste management requirements (eg., funding new initiatives, education and promotion). However, other types of market failure, such as the ability to enforce illegal dumping, are also hard to overcome and not currently addressed.
Given that the `generator pays' principle is set down by present Government, the challenge to CCC is to minimise market distortion as far as is practicable so that the application of the generator pays principle is more robust. This requires not only economic incentives and disincentives (ie. a well designed charging system) but also other methods such as lobbying for national regulation, education and mobilising consumers to better influence producers as outlined in the Draft Plan. Identifying links between causes and effects of waste by type (of waste) is desirable, but is currently difficult and requires further attention. Thus, a total cost assessment framework should allocate the costs and benefits of waste management in a way which allows any charges to be based on a transparent, accountable system. However, the framework should also be able to contribute to the other strategies of the plan, eg., education.
This section discusses the use of common units for the measurement of effects on the environment, in terms of the advantages, feasibility, appropriateness and efficiency of using a common unit. The final section discusses the implications this has on a framework for total cost assessment.
A common unit has to fulfil the following two criteria: 1) be applicable to many effects, and 2) allow direct comparison. Undoubtedly the most commonly used unit is money. The list of potential common units for use in waste management is infinite (some examples are provided below). However the general public understands and usually values money. Other units include indices which combine several units in one index unit. An example is the index of `barrels of oil equivalent' used to compare the energy level of fossil fuels such as oil, gas and coal. `Indices of sustainability' have been applied to waste management, for example, the `index of sustainable economic welfare' developed by Daly and Cobb (1994) or the `ecological footprint' indicator (MfE, 1997b, p.1.4).
Total cost assessment and charging as one of the potential applications are closely associated with neoclassical economic theory and are a product of their ideologies and theories (for a discussion see section 1.3). We also recognise that total cost is a product of an international trend of assessment of the effects and costs of human activity. However, one of the assumptions of neoclassical economic theory and ideologies is that everything can be measured in dollars.
The main advantage of measuring costs and benefits in a common unit is for ease of comparison. By comparing different effects expressed in the same unit the relative significance or seriousness of costs or benefits can be compared directly. Economic methods such as Cost-Benefit Analysis compare the monetary costs with the monetary benefits, using the Net Present Value as the main measurement. The comparison allows for transparency and accountability. This includes comparison between regions or waste management programmes.
Despite these advantages, the use of common units is constraint by three limitations which relate to the absence of feasibility, appropriateness, and efficiency.
In some cases, no reliable and accurate scientific method exists to measure costs and benefits in a quantitative way, ie. no suitable unit is available. This means, preferences and trade-offs cannot be expressed because costs and benefits are regarded as incommensurable. Examples might be the spiritual benefit of clean water to tangata whenua as described in section 3.2, or the ethical cost of accumulating waste, thus compromising the state of the environment for future generations.
The use of common units, especially money, is not always appropriate. A requirement for the appropriateness of a common unit is its ability to accurately represent value. For a common unit to be useful, there needs to be widespread agreement that this representation is accurate, ie. that `cost' is not diminished through translation to a common unit. In social and biophysical assessments, where frequently no market prices exist, the accurateness is often not satisfactory. For example, the benefits of protected areas is usually underestimated (Dixon and Sherman, 1991). Likewise, an underestimate of the costs of waste management is likely.
Another possible disadvantage of using common units is that this will lead to loss of understanding of costs and benefits and therefore reduction in informed decision making. The concern is that once the (monetary) costs and benefits are established in the common unit and decision makers and the public are communicating through the common unit, the degree to which the costs and benefits (ie. the effect itself) are considered may be diminished. The waste manager must carefully consider the nature of an effect in order to establish its costs and benefits, eg., in a monetary unit.
The use of money as a common unit is a source of general debate. Some people associate money with unethical decision making, and therefore strongly resent any attempt to translate particular values into monetary units. For example, O'Neill (1997) argues for the complete absence of monetary assessment, favouring policy making solely based on public participation. Winpenny (1991) claims that some items are simply unmeasurable by economics (such as biodiversity - p.72). This view would make total cost assessment at least partially redundant because of its close association to theories of externalities and generator pays (section 1.3). However, these viewpoints may be too extreme to receive general support. Also, CCC has a strong desire to use the assessment for charging purposes, requiring a monetary unit.
The appropriateness of using common units can be compromised because people can have different relationships to money. This means that people value money to differing degrees as discussed in section 5.3.4.
The discussion shows that the decision whether or not it is appropriate to express costs and benefits of waste management in quantitative, especially monetary, terms, is an ethical one. The degree to which the public wishes to use quantitative, and especially monetary units, to assess total costs in waste management, needs to be revealed through a public participation process.
By definition, economic costs and benefits can all be expressed in monetary units and most financial effects are easily assessed. In contrast, many tools currently available for assessing social and biophysical costs and benefits are less developed and give rise to costs expressed in a broad range of units. Intangible costs and benefits (eg., aesthetic or olfactory costs and benefits) can be extremely difficult to quantify with an acceptable level of accuracy, and considerable barriers exist to converting the quantities provided into common units. Tools for measuring intangible costs and benefits in common units (mainly contingent valuation methods) must be designed very precisely, if they are to mirror reality (Bjornstad and Kahn, 1996). Thus, further research is required to develop tools for the assessment of costs and benefits (eg., social and biophysical costs and benefits). Consequently, the conversion of costs and benefits into common units may require substantial investment. CCC must make a decision on which costs and benefits are important enough to be measured, and which are efficient to convert into common units. This decision is also an ethical decision, influenced by the costs of measuring, the expected magnitude of the costs and benefits, the usefulness of the knowledge about costs and benefits, and the need for directly comparing the costs and benefits with others.
When assessing total cost, quantitative assessment should be used where this is possible. Common units should be used where this is possible, especially the monetary unit because of its widespread use, established methods of monetary-based analysis such as Cost-Benefit Analysis and as this is required in accordance with central Government policy. However, it is essential to acknowledge the limitations of any units chosen in terms of their feasibility, appropriateness and efficiency. It is unlikely that all costs and benefits will be converted to a single common unit. Thus, a total cost framework must allow for some costs and benefits to be quantified in monetary terms, others to be quantified in physical units or indices, and still others to be qualified or described. Furthermore, waste management must account for ongoing assessment of the selection of the common units, due to changes in their feasibility, appropriateness and efficiency to assess total costs over time.
In terms of waste, transboundary movement refers to the export and import of substances to and from an area outside the jurisdiction of the state (or region) in which they were generated for treatment, disposal, dumping at sea or incineration. This can be caused by scarcity of disposal facilities, NIMBY syndrome, tightening environmental regulation, or high costs of treatment or disposal (Kummer, 1995).
Two main issues are raised by transboundary waste movement. Firstly, the motivation for export or import of waste may not be `ecologically sound'. This would include waste going to developing countries where regulation and/or enforcement is poor and practices cheap in order to avoid high costs or stringent regulations in the country of origin (as opposed to more sound reasons such as superior technology, proximity of facilities in neighbouring countries, shared or multinational facilities). Secondly, where hazardous waste is being transported there is the risk of accidents in transit or during handling. A range of policies regarding the transport of hazardous substances have been developed in response to this, including the UN Committee of Experts on the Transport of Dangerous Goods' "orange book", Part VII of the SOLAS convention, Annexes I-III of the MARPOL convention and the International Maritime Dangerous Goods Code (Kummer, 1995). Dealing with hazardous wastes more generally is the Basel Convention, which arose out of UNEP's Montevideo Programme and `the Cairo Guidelines' they developed.
The Basel Convention states that:
The Convention has been contentious and there are still problems with definitions and scope (Kummer, 1995). Nevertheless, New Zealand is party to the convention and under it exports PCBs to France, vanadium slag to Russia and China, spent cell lining to Australia and copper alloy dross to the United Kingdom. New Zealand also has approval to export aluminium dross, tungsten carbide grindhouse residue, zinc oxide baghouse dust and send lead acid batteries (MfE, 1997a; 1997b). This export is allowed because no facilities to handle these wastes exist nationally. Only two types of plastic (PET soft drink bottles and plastic milk containers) are recycled in New Zealand, whereas much paper and plastic is exported to Asian countries (Crean, 1998). However, some reductions in exports have been experienced recently, with newspaper being shredded and reused locally instead of exported.
Apart from this international movement of waste, there are some substances for which there are appropriate facilities nationally but not locally, leading to export and import of waste between regions. Within the Christchurch area, used tyres have caused considerable disposal issues for Christchurch and international export seemed likely. Christchurch City Council has agreements with Waimakariri and Banks Peninsula District Councils which result in some waste from those districts being disposed of in Christchurch (E. Park pers. comm., 1998). Informal import also occurs in Christchurch where residents from neighbouring districts using CCC facilities to dispose of waste. This is because facilities in their own districts can be further away or not available, eg., compost facilities (ibid). Glass is now being sterilised for reuse (wine bottles) instead of being crushed and sent to Auckland for recycling (Crean, 1998). It is already recognised by the Council, through initiatives like the RMF, that dealing with waste locally is preferable to exporting (in either a regional or national sense). In the future, there are likely to be more regionally shared facilities, such as current moves to establish a joint landfill program among local authorities in Canterbury. The Christchurch City Council, district councils of the Canterbury Regional area except Waitaki, the Canterbury Regional Council, and waste firms Waste Management and Envirowaste Services are close to forming a joint venture to run a regional landfill (Press, 1998b). This would obviously increase transboundary movement of waste between local government territories.
Because of the likelihood of shared waste management facilities in the future, a framework for assessing total costs of waste management must be flexible enough to be applied on both a local and a regional level. Accordingly, flexibility is a criteria for cost assessment (section 4.1). If the Christchurch City Council becomes the administrator of the new regional landfill, waste would effectively be imported into Christchurch City's waste management system (if the landfilling occurs within the City's geographical boundaries). The inclusion of import into the total cost framework as a result of a regionalisation of the waste management system is, as explained in section 4.4.1, possible through expanding the framework by adding another distinct programme, which specifically takes into account the import activities and its associated effects.
Export of waste from Christchurch is slightly more complex, as the definition of this study in the terms of reference was assessment of total cost of wast management in Christchurch. The only cost of waste export to Christchurch itself is the cost of transport and the price charged by the receiving party. Ideally, any costs not covered by that price (eg., social and biophysical costs) should be assessed, although in reality this may be hampered by a lack of information and administrative costs. There could be positive implications of increased regionalism in waste management for total cost assessment, by including more linkages outside Christchurch and gaining the financial and technical support of other councils for cost assessment.
The Ministry for the Environment, regional councils, and district and city councils are key organisations with responsibility for the coordination of waste management at national, regional and local levels (section 2.1 and figure 3).
The OECD (in their review of New Zealand's environmental performance) note that there is need for "regional efforts" to coordinate and harmonise waste management (OECD, 1996, p.183). They gave three recommendations to central government. They should consider:
1. increasing assistance to regional and local authorities, particularly with regard to the assessment of environmental effects;
2. providing clear definitions for waste types and a comprehensive and coordinated system of monitoring both the causes and effects of waste generation; and
3. ensuring that environmental monitoring and reporting systems are tailored to the implementation needs of the RMA and are consistent throughout New Zealand (ibid.)
At a national level, MfE has provided some guidance for assessing total cost by preparing the the Environment 2010 Strategy (MfE, 1995), the Landfill Full Costing Guideline (MfE, 1996a), the State of New Zealand's Environment Report (MfE, 1997b), and the current Environmental Performance Indicators Programme. MfE has done little specific analysis on the issue of TCA and this is not a current priority (S. Baird pers. comm., 1998).
At a regional level, Canterbury Regional Council issued a Proposed Regional Policy Statement in 1995 which addresses waste issues. With respect to coordination and total cost assessment, policy 2 of the Proposed Regional Policy Statement states: "A coordinated approach to waste management should be developed and implemented" (CRC, 1995). Methods used or to be used to achieve this include "regional plans, advocacy, promotion and cooperation and information provision" (CRC, 1995). Canterbury Regional Council currently has no internal policy to address the assessment of total cost and does not have a strategy which specifically deals with waste issues. The Canterbury Waste Joint Standing Committee was established to deal with regional waste issues and at present, has a particular focus on hazardous waste issues and issues associated with developing a regional landfill (E. Park pers. comm., 1998). A discussion of issues associated with communication and coordination between regional and district/city councils is beyond the scope of this report. These are discussed in the McShane Report (McShane, 1998).
As outlined in section 1.2 and discussed in section 2.2, a system of assessing and reporting total cost has potential application for meeting the implementation needs of the RMA.
With respect to matters to be considered at a national level, there are currently no waste management activities which occur within a restricted coastal zone in Christchurch City. The Minister for the Environment has only exercised his call-in powers under the RMA on one occasion (Stratford Power Station Application) since its enactment in 1991 (Tim Bennetts pers. comm., 1998). National coordination of total cost assessment for the purpose of meeting implementation needs of the RMA is not a pressing requirement relative to regional and local requirements. This is discussed below.
At a regional and local level, CRC and CCC are required to ensure efficiency of their management plans, objectives, policies, rules or programmes, which requires the assessment of costs and benefits (s.32 RMA). Waste management activities in Christchurch City which effect the environment require a resource consent. An assessment of environmental effects must be included for any application, and their consideration is the responsibility of CCC and CRC. The respective functions and issues to be considered by each council are set out in sections 30 and 31 of the RMA. Given that some waste is imported from other districts within the Canterbury region and that the possibility of developing a regional landfill is currently being investigated (section 3.6), it would follow that assessment of costs and benefits is an issue which has considerable implications at a regional level.
As well as considering implementation needs of the RMA, there are a range of advantages and disadvantages of coordination which Christchurch City Council should consider. Discussion of specific issues is considered beyond the scope of our terms of reference, but general disadvantages and advantages associated with coordinating a system of total cost assessment and reporting are described as follows:
Christchurch City Council has primary responsibility for the management of waste in Christchurch City. Waste management requirements are unlikely to be the same for any two localities. Christchurch City Council therefore has a unique waste management process (and associated costs and benefits).
The following general disadvantages may be incurred as a result of coordinating the development of total cost assessment and/or reporting with other organisations. Cooperation with other organisations:
a) may lead to a framework for or methods of total cost assessment which do not specifically meet the needs of Christchurch waste management.
b) requires external communication. This may have an associated economic cost (eg., administration costs leading to a more complex development process (for example, accountability to senior public servants, committees or ministers) and may lead to loss of control over the development process).
c) requires agreement on a scale or rate of development which may not ideally suit Christchurch City Council.
The following general advantages may result from coordination with other organisations.
Sharing of resources may give rise to:
a) financial savings. These may be generated through pooling financial resources (to develop a framework or tools) where this meets common needs (eg., if a general TCA framework meets the needs of multiple organisations then the cost of developing the appropriate tools to operate the framework might be shared. Similarly, where research is required to develop tools for the assessment of effects, the associated financial costs may be shared between the organisations).
b) more expedient and effective development of TCA. This may occur where expertise can be pooled between organisations (eg., for the development of cost assessment methods and for monitoring).
The development of common system for assessment and reporting of environmental effects might provide for:
c) greater public understanding of the effects (costs and benefits) of waste management (ie. information is expressed in a consistent form and is therefore less confusing).
d) greater understanding by policy analysts and ability to meaningfully compare the effect of different policies (ie. the effects of policies will be expressed in a consistent form) and greater understanding of decision makers who are required to understand the effects of waste management (eg., for the granting of resource consents).
e) meaningful comparison of management practices, programmes and activities, ie. because effects are expressed in a consistent form (This would provide a clear basis for establishing best management practices, and a comprehensive basis for comparing the performance of competing service providors (eg., one landfill operator may provide a more efficient financial service than a competitor, but the `total cost' of that service may be higher)).
The Christchurch City Council's approach to coordination may affect a range of potential applications of a framework for total cost assessment and reporting. In addition, resource requirements, understandability of the framework and ability to compare waste management policies, programmes or activities may be affected by the chosen approach to coordination. We consider the choice of approach to be a political one, and have developed a TCA framework that allows for coordination at different stages and different levels.
Current waste management can incur costs and benefits which are paid or received in the future. Likewise, past waste management can impact on current or future costs and benefits. An example is the contamination of sites in the future from current and closed landfills, causing future costs of cleaning up the sites.
Waste management can cause costs and benefits which will occur in the future. Although these future costs and benefits are not immediately incurred, they are part of the waste management system.
Future costs and benefits which are certain are costs and benefits for which both the occurrence and the value of the costs and benefits is certain (eg., a landfill will require monitoring after closure for 30 years at a predictable cost). Frequently people or organisations do not value costs and benefits which are incurred in the future as highly as costs and benefits which are immediately incurred. Economists refer to this devaluation as discounting and quantify the magnitude of devaluation as a discount rate (Pearce and Turner, 1990). Future certain costs and benefits can be calculated to their present monetary costs and benefits through discounting, if their monetary value in the future is known (ibid.).
The present value of future costs and benefits will depend on the discount rate selected. The appropriate discount rate to apply for the management of public amenities has been widely discussed in the literature (Brennan, 1995; Pearce and Turner, 1990, ch.6; Wright, 1990). High discount rates give rise to low present costs. Likewise, high discount rates lead to high present benefits. Pearce et al. (1989, p.151) state that the social discount rate tends to be lower than the private rate. This means, the rate of exploiting resources (and thus waste generation) is higher than socially desired and the future costs of waste management are valued lower than socially desired, while future benefits are valued higher than socially desired. Because the benefits of waste management (as defined in section 2.5) are usually lower than the costs, the advantages of a high discount rate with regard to benefits cannot counterbalance the disadvantages of a high rate with regard to costs. The application of a low discount rate for waste management could bring about a balance. However, in environmental areas where future benefits are more significant than future costs (eg., biodiversity protection), a high discount rate seems to be more appropriate. Overall, an adjustment of the (relative high) discount rate used in financial accounting to a lower discount rate when dealing with social and biophysical issues, is not of advantage because:
1. "calculating the appropriate rate is extremely difficult:
2. a lowering of the rate overall will result in more investment with its non-counter-productive results:
3. a selective lowering of the rate for environmental projects is inefficient and administratively cumbersome and difficult;
4. there are alternative ways of dealing with many of the environmental concerns that are probably more effective" (Pearce and Turner, 1990, ch.6).
The most important alternative way is (1) the careful identification of all costs and benefits, and their measurement (if appropriate), which is a main purpose of total cost assessment, combined with (2) policy making based on the total cost assessment. Additionally, a range of discount rates can be applied to obtain insight in its influence on the magnitude of changes in total costs.
Future costs and benefits are uncertain, if the timing or their occurrence is not known. There are two broad categories of uncertain cost and benefits: those which are certain to occur but for which their timing and magnitude are uncertain; and those for which timing, occurrence and magnitude is uncertain.
Where the costs and benefits will occur but the timing and magnitude is uncertain, procedures exist for modelling and estimating costs and benefits, ie. risk management (Gerrard, 1995, p.304). Where occurrence is uncertain as well, both the costs and benefits and their probability must be modelled and estimated without formal procedures. Cost and benefit modelling is directly linked to modelling of activities and effects. For some activities the nature of associated effects may be extremely uncertain and difficult to model. For others the range of potential effects may be significant and/or irreversible. Where either of these are the case the Environment 2010 Strategy (MfE, 1995) stipulates that the "Precautionary Principle" must be applied. This requires that where modelling of effects is extremely difficult (eg., where scientific information relating to effects is minimal or contradictory) they must be described in detail, providing best and worst case scenarios. Emphasis should be given to the worst case scenarios and activities with potential significant or irreversible effects should be avoided (Environment Court, Barry Wratten vs. Tasman District Council).
In summary, future costs and benefits are an integral part of total cost. An accurate total cost assessment needs to include all future biophysical, social, and financial costs and benefits, whether they stem from past or present waste management. The present value of future costs need to be quantified where possible or stated qualitatively if this is not possible. Commonly used discount rates in financial accounting should be applied, however a range of scenarios with varying discount rates and values of costs and benefits should be investigated (sensitivity analysis). In addition, where modelling of effects is extremely difficult, the framework should allow application of the precautionary principle.
Future costs and benefits can be allocated (ie. discounted) within a framework for TCA in various ways. For example, the future costs of monitoring the current landfill can be allocated to the current year's accounts, to the year in which the landfill is closed, to the years in which the monitoring occurs, or evenly distributed (ie. annualised) over the years between now and some time in the future. How allocation takes place is a political decision, however this decision needs to be reflected within a framework for TCA.
Future costs and benefits from present and past waste management are an important component of total cost. However, if TCA is used for establishing a charging structure, only those costs and benefits (present and future) which relate to present waste generation should be included. Including costs and benefits which relate to past or future waste generation within a charging structure would distort the socially desired incentives. According to the theory of `sunk costs' (Newman and Summer, 1962, p.306), past costs should be disregarded in thinking about which course of action to follow. For example, the inclusion of costs from cleaning up closed landfills into present charges would increase the charges, leading to a higher incentive to minimise waste, than if charges were based on present total costs. This would lead to a higher than socially desired investment in minimisation techniques, diminishing overall well-being. Funding for cleaning up closed landfills would therefore have to come from other sources (eg., general rates).
The discussions in this chapter have revealed a number of implications for a total cost framework. They are, in summary, as follows:
[2]The power to license private waste management contractors through by-laws is given in the Local Government Amendment Act No. 4 1996.
|
|
|
