Why regulate the environment?

The NSW Independent Pricing and Regulatory Tribunal has been asked by the Premier to undertake a breathtakingly wide-ranging review of regulation in the State:

Review of the burden of existing regulation in New South Wales, identification of priority areas where regulatory reform could provide significant immediate gains to business and the community, and development of recommendations to improve the efficiency of Government regulation.

According to the terms of reference:

Well designed and targeted regulation is one of the central tools used by Government to deliver the social, environmental and economic goals of business and the broader community. However, regulation should only be used where it is needed, and efforts should be made to avoid inefficient regulation and minimise that which may be unnecessarily costly, excessive, or overly complex. Regulations that impose unnecessary burdens can impede competition, productivity, investment and innovation.

The purpose of the review is to:
1. identify areas of NSW Government regulation which are imposing a significant, unnecessary regulatory burden on business and the community; and indicate priority areas in which regulatory reforms could provide significant immediate gains to business and the community; and
2. develop recommendations for Government action to significantly improve the efficiency of regulation and reduce unnecessary regulatory burden on business and the community, including consideration of non-regulatory or incentive-based options for achieving this outcome.

The issues paper (PDF) contains some interesting discussion about the rationale for government regulation. The big ones:

• Monopolies: Counter tendency to raise prices and lower output.
• Natural monopolies: Facilitate competition, while harnessing benefits of economies of scale, by providing third party access to natural monopoly infrastructure.
• Externalities: Compel producer or consumer to bear full costs of production or consumption rather than pass on to third parties or society.
• Open-access externalities: Create property rights to promote conservation of scarce natural resources.
• Information inadequacies: Advise consumers to allow informed decisions (and hence the efficient functioning of the market).
• Continuity and availability of service: Ensure socially desired level of ‘essential’ service.
• Anti-competitive behaviour (eg, predatory pricing, collusion): Prevent anti-competitive behaviour and protect consumers from the ill-effects of market domination.
• Unequal bargaining power: Protect vulnerable interests where markets fail to provide for equal bargaining power.
• Scarcity and rationing: Public interest allocation of scarce resources.
  Distributional justice and social policy: Distribute according to public interest; prevent undesirable behaviour.
• Planning: Protect interests of future generations; coordinate altruistic intentions.

There's also some discussion of the impacts of regulation 'heavy-handed' and 'light-handed' regulation and alternatives to regulation, with some focus on market based instruments for environmental protection.

Well worth a read and if you've got something to say, you can make a submission up until 24 February. There'll be a draft report out at the end of March and a final report end of June.