MICROECONOMIC REFORM
Microeconomic reform under the National Competition Policy (NCP) can help achieve
environmental goals in several ways.
- removing subsidies, structural rigidities, monopoly rights, anti-competitive behaviour
and barriers to entry. This encourages bodies with old, inefficient and environmentally
outdated technologies to move to newer, more efficient and environmentally better
technology, and create access for firms with better environmental technology or practices.
Greater competition within an industry can also lead firms to seek out lower cost
environmental solutions to maintain competitiveness.
- removing pricing arrangements or regulations that undervalue environmental resources and
amount to subsidies to natural resource use. By artificially lowering resource prices,
such subsidies promote higher, and thus possibly ecologically unsustainable, rates of
resource extraction and harvesting and their removal can therefore promote more
ecologically sustainable outcomes.
- providing the transparency that comes with corporatisation and competitive neutrality
changes. Transparency should ensure that the prices are right for non-environmental
aspects. This should then enable a clear view of environmental externalities and how these
can be addressed directly.
- allowing governments to impose environmental charges or regulation more easily on bodies
previously seen as part of government, as they become more at arm's length under the
framework of the NCP.
In these ways microeconomic reform processes are contributing to improved environmental
management in three key sectors: in the water sector, through the Council of Australian
Governments Water Reform Framework; in the forests sector through the National Forests
Policy Statement; and in the energy sector through the Energy Market Reform process.
Current developments on the environmental benefits of these reform processes are covered
in the relevant sector chapters.
Contact: Environment Australia, Portfolio Strategies Group -- 02 6274
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