Cost and benefits

Go back to Section 32 - Methods of implementation

Examples of costs:

Administrative costs - how much the policy/method costs the council to administer (including implementation and enforcement)

Compliance costs - how much it costs the resource user to comply

Broader economic costs - such as may result from constrained production, sub-optimal allocation of resources across the economy and reduced innovation may result from inflexible and/or highly prescriptive regulation.

Social costs - such as effects on recreational opportunities (for example, reduced recreational space in the coastal marine area as a result of the development of marine farms)

Environmental costs - an adverse effect on the environment that may result from, for example, allowing an activity that would not otherwise be allowed if not for the methods / rule. (For example, the loss of nutrients available to marine ecosystems as a result of further marine farms.)

Costs councils might face:

• implementation - developing a plan provision, getting approval, dealing with enquiries, setting up grant systems
• information and education
• monitoring and enforcement
• potential for increased costs associated with the Environment Court.

Costs resource users might face:

• lost opportunities from the use of a resource
• direct costs of modifying activities to meet new requirements
• compliance costs of obtaining and processing information, applying for resource consents, and undertaking monitoring
• downstream costs of challenging a provision, losing production or income, making financial contributions and paying charges, and economic uncertainty
• potential increased need to challenge decisions of councils in the Environment Court.

Costs the community might face:

• reduced employment and reduced economic efficiency
• deterioration of relationships with resources
• increased community workload in the Environment Court.

Examples of benefits:

• environmental benefits - such as the protection of a particular habitat.

Social and economic benefits that might be associated with the attainment of the objective (such as retention of a rural school or other services as a result of greater subdivision and settlement).

Example of a table or matrix to help evaluate costs and benefits

 

	Environmental		Social		Economic
	Cost	Benefit	Benefit	Cost	Cost	Benefit
Council
Resource user
Wider community

 

Symmetry of risk

An example of determining the symmetry of risk can be demonstrated through a proposed change to a district plan to enable the development of a major infrastructural asset like a power station. say, the issue is that there is demand for a power station in the vicinity and the electricity it would produce is needed to maintain the region 's and New Zealand 's security of electricity supply.

While there may be uncertainty about whether the power station proponents could successfully use existing provisions in the plan to secure necessary resource consents, there might also be uncertainty about whether the electricity generation is really required. However, the risk of not acting is high: a delay to the development of the power station (or even the possibility that the current plan provisions might lead to a decision to decline such a project) might lead to the region or the country facing a crisis in electricity security of supply and hence significant economic loss.

Therefore, the consequence of not acting is very high even if the probability might be relatively low. The risk of acting is, by comparison, low since the cost of getting plan provisions in place is comparatively low - even if the probability is high that those costs would occur. The analysis would also need to consider whether the provisions would mean that the environment would face a greater or lesser cost. This could be deemed to be an asymmetric risk: the risk of acting is low whereas the risk of not acting is very high.

Again, the level of potential cost and probabilities of those costs occurring (and therefore the risk) will seldom be quantifiable. However, one means of assessing the relative risk is to use the conceptual framework outlined below. If the level of risk of not acting is assessed as being in the upper left-hand quadrant with the risk of acting being in any other quadrant, then the conclusion would support acting. Conversely, if the risk of not acting is assessed as being within the bottom right-hand quadrant while the risk of acting is within any other quadrant then the analysis would support not acting.

Risk is symmetrical when the cost of acting and the cost of not acting are located at precisely the same point of the matrix illustrated below. The further apart the risk of acting and the risk of not acting are plotted the greater the asymmetry of risk.