GREEN FINANCE FOR BLUE WATERS: A GLOBAL OVERVIEW OF INNOVATIVE ECONOMIC INSTRUMENTS AND INCENTIVES

B.Tiller (Tonkin + Taylor)

ABSTRACT

Recent climatic events and political changes in Aotearoa New Zealand have underscored the unpredictable nature of today's world. Challenges such as flooding exacerbated by underinvestment in drainage networks, short-sighted catchment planning, and externalisation of land use effects onto downstream users has become commonplace. To overcome these challenges this paper proposes a need to enable investment through innovative economic instruments and incentives that promote water sensitive urban design (WSUD) and sustainable land use in rural areas.

While New Zealand aims to lead the world in stormwater management through indigenous values set out under the concept of Te Mana o te Wai, this paper aims to examine our financial innovation and incentives relative to other forward-thinking nations. It explores whether the stormwater sector in particular is dynamic, innovative and courageous enough to address challenges such as increased storm severity and frequency; historic funding deficits and policy changes, while simultaneously increasing resilience against floods and mitigating further water quality degradation.

This paper critically examines the evolving landscape of stormwater management in the context of recent governmental changes, including the repeal of the Natural and Built Environment and Spatial Planning Acts, and the proposed replacement of the National Policy Statement and Environmental Standards for Freshwater. With the new Government proposing a step change in economic growth, expansion of urban property development, and intensification of rural land to grow food and fibre, the need to protect urban waterways, lowland rivers, and lakes is now more critical than ever.

The paper delves into economic instruments and market-based mechanisms used by national and local governments to incentivise WSUD for favorable outcomes, (or disincentivise unfavorable approaches). Examples include:

• A stormwater utility charge: An equitable assignment of cost to a property owner that is proportionate to the demand placed on the stormwater network from each property. An example is Germany’s impervious surface charge to disincentivise the use of sealed surfaces which leads to greater stormwater runoff.
• Water quality offsets: A financial contribution to an authority for regional water quality projects, undertaken elsewhere within the catchment to offset pollution loads not treated within the development. An example is Melbourne Waters’ Stormwater Quality Offsets Program.
• Environmental impact bonds: An outcomes-based financing model between a public entity and the private sector where repayment is based on measured impact. An example is DC Waters’ successful the retrofit of bioretention gardens, urban swales, permeable pavements, and infiltration basins across 200ha of impervious urban land in Washington DC.
• Green infrastructure incentives: These include co-funding (subsidies, grants, cost shares) and various types of fee or tax reductions (stormwater fee credits, property tax, or impact fee reductions) to motivate property owners to make investments that manage rainwater on their own properties. An example is the city of Portland, Oregon’s ‘Grey to Green’ roof program.
• Water trading clubs: A type of environmental market to allow the voluntary exchange of water takes to shift water from low-value to high-value uses or from areas with relative abundance to places of relative scarcity.

Positioned at the intersection of theory and practice, this paper draws on international case studies to highlight successful applications of stormwater runoff control policies, presenting the theoretical foundations and practical considerations. By examining successes and potential obstacles to implementation in New Zealand, the paper aims to inspire a proactive dialogue on the financial innovation necessary to safeguard the nation's waterways in the face of uncertainty. The findings from this paper will serve as an ideal educational tool for Councils to help facilitate a discussion with community about the benefits of innovative economic instruments and incentives to promote best practice.