This presentation was made by Murray Petrie, New Zealand, at the Introductory Workshop on Green Budgeting Tools held at the OECD, Paris, on 29 April 2019

1. Environmental outcomes and
fiscal policy in NZ:
need for increased transparency
and accountability
Murray Petrie
IGPS Senior Research Associate
Paris Collaborative on Green Budgeting,
2nd Green Budgeting Experts Meeting
OECD, Monday 29 April, 2019

2. Overview
I. Problem definition
II. Environmental reporting
III. Comparative policy governance
IV. Integrating environmental stewardship into
fiscal strategy and the budget process.
V. Concluding observations
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3. I. Problem definition
i. Degradation of natural capital
ii. Limits to economic growth model
iii. Policy weaknesses: environmental
externalities; setting and
implementation of environmental
regulations
iv. Weak policy governance:
• Weaknesses in national environmental
reporting.
• Lack of requirements for government to set ex
ante environmental targets and to report
progress ex post
• Weak integration in fiscal strategy and budget
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4. II. Environmental Reporting
in NZ and Australia
i. NZ: Environmental Reporting Act 2015:
i. A domain report every 6 months, synthesis report every 3
years
ii. Published by MfE and Stats NZ
iii. Pressure/State/Impact (PSI) framework
iv. National data lacking geographic breakdowns
v. Parliamentary Commissioner for Environment prepares
independent commentaries
vi. No formal government response to the reports
ii. Australia:
i. One comprehensive report every 5 years
ii. Drivers and Responses in addition to PSI (DPSIR)
iii. Also forward-looking: resilience, risks, outlooks 4

5. II. Proposed changes to the
Environmental Reporting Act 2015
i. Review report design, timing: better balance of frequency, effectiveness.
ii. Introduce full DPSIR framework.
iii. Require geographical breakdowns for indicators.
iv. Require forward-looking information on resilience, emerging risks,
and environmental outlooks.
v. Require formal government response within specified time to each
Synthesis Report stating government’s assessment, its medium and
long-term strategies, priority environmental outcomes with interim targets
and milestones, and reports on progress in previous period.
vi. Change the timing of Synthesis Reports so that each report is published,
in the normal course of events, a specific number of months
prior to each general election.
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6. III. Comparative policy governance
Parameter
NZ Public
Finance Act
NZ Reserve
Bank Act
NZ
environmental
governance
Swedish
environmental
governance
Legislated outcome
targets
No Yes No [Yes]
Targets required Yes Yes No Yes
Milestones required Yes Yes No Yes
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7. III. Comparing governance frameworks
i. Compared to fiscal and monetary policy, for environmental
policy there is a lack of legislative requirements for
transparency of goals and targets and independent reporting
against them.
ii. Recognize that environmental outcomes extremely complex,
not under government control; central, regional and local
governments all play roles; there are formidable measurement
difficulties.
iii. However, a good case for requiring government to respond to
3-yearly Environment Reports, stating its assessment,
strategies, priority outcome targets in short, medium and long
term, and to report regularly on progress.
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8. IV. Embedding environmental stewardship
in fiscal strategy and the budget process
Why use the annual budget cycle to achieve better integration of
environmental stewardship with government strategy setting?
i. No regulatory policy cycle.
ii. The budget is government’s key policy instrument.
iii. Important interactions between fiscal policy and the
environment.
iv. Important interactions between fiscal policy and regulation in
achieving environmental goals
e.g. the adequacy of funding of environmental regulatory functions,
and of environmental data collection, monitoring, evaluation and research;
- revenue potential of cap and trade schemes, foregone revenues
from differential treatment of sectors
- interactions between fiscal and regulatory instruments
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9. IV. Embedding environmental stewardship
in fiscal strategy
Incorporate in the strategic phase of the budget:
i. Latest data on trends in key environmental indicators,
resilience and risks, and policy implications.
ii. Current government environmental strategies, targets, recent
performance, focusing on critical environmental outcomes.
iii. The consistency of government’s environmental targets and
announced targets in other policy domains.
iv. A discussion of the levels of short to medium term risks around
environmental outcomes in the context of fiscal strategy.
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10. IV. Outline of proposed new budget document:
Fiscal Policy and the Environment
i. Evidence on environmental impacts of fiscal policies, potential
for fiscal policies to improve environmental outcomes.
ii. The anticipated positive and negative environmental impacts of
the forthcoming budget.
iii. An assessment and, to extent feasible, quantification of
economic impact of recent degradation of ecosystem services
at the margin in selected priority sector, and estimated cost of
restoration.
iv. The interactions between fiscal and regulatory policies in terms
of environmental outcomes.
v. A performance budget report on the environmental sector
(outputs, programs, short term and intermediate outcomes).
vi. Priorities for addressing gaps in data and monitoring systems.
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11. IV Framework for environmental accountability
and green budgeting
Domestic Accountability Framework
Legal requirement to state top priority environmental goals,
strategy, targets, report progress
Environmental
Reporting
• Regular technically
independent
reporting (DPSIR
framework)
• Outlooks and risk
assessment
• Mandated
government
response
• Timing aligned with
electoral cycle
Medium-Term Government
Strategy Statement
Covers economic, fiscal, social, environmental
outcomes, complementarties and trade-offs
Periodic Supplementary
Reports
• Green Fiscal Sustainability Report
• Green Balance Sheet
• Green M + E Report
Annual Budget Documents
• Green Budget Statement
• Green Budget Benchmarks
• Green Performance Budget Report
• Green Budget Baseline Analysis
• Tax Decarbonisation Scan
• Fiscal/environmental regulation interface

12. V. Concluding observations:
avoid system overload
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13. V. Concluding observations
i. Proposals draw on the full array of budgetary governance
tools
to lay out a long term framework.
ii. Would require long period of phased implementation.
iii. Importance of environmental outcomes data.
iv. Significant resource and institutional implications.
v. Analytical challenges.
vi. Proposed approach based on transparency to increase
accountability and change incentives on decision makers, an
approach that has proven durable in other domains.
vii. Is intended to be an evolution of the approach to fiscal
transparency over last two decades.
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14. References
Boston, J. (2018). Investing in New Zealand’s Future Well-being: protecting and enhancing our natural capital.
Policy Quarterly, Volume 14, Issue 1, February 2018.
Brown, M., R. Stephens, R. Peart and B. Fedder, (2015), Vanishing Nature: facing NZ’s Bio-Diversity Crisis,
Auckland: Environmental Defence Society Incorporated.
Department of the Environment and Energy, 2016. Australia State of Environment 2016.
https://soe.environment.gov.au/
NZ Ministry for the Environment, 2015. Environment Aotearoa 2015.
NZ Ministry for the Environment, 2019. Environment Aotearoa 2019.
NZ Ministry for the Environment, 2017. Briefing to the Incoming Minister. November 2017.
OECD (2014). OECD Environmental Performance Reviews: Sweden, Paris: OECD.
OECD (2017). OECD Environmental Performance Reviews: New Zealand, Paris: OECD.
NZ Parliamentary Commissioner for the Environment. The State of New Zealand’s environment: Commentary
by the Parliamentary Commissioner for the Environment on Environment Aotearoa 2015, June 2016.
Petrie, M, (2018). Reversing the Degradation of New Zealand’s Environment through Greater Government
Transparency and Accountability. Policy Quarterly, Vol 14 No 2 (May 2018).
https://ojs.victoria.ac.nz/pq/article/view/5092
NZ Productivity Commission, 2017. Briefing to the Incoming Minister. November 2017.
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