New Zealand’s first National Adaptation Framework for managing natural hazard risks includes new approach to cost sharing

The framework sets out four key pillars – risk and response information sharing, roles and responsibilities, investment in risk reduction, and cost-sharing (pre- and post-event) – driven forward by sixteen actions. It prioritises nationally consistent hazard data, clearer mandates for councils, a focus on letting market signals guide adaptation, and a new approach to cost sharing that involves development levies payable by developers.

Taken together with earlier independent expert advice to the Government, the NAF gives rise to new considerations and requirements for many, including insurers and lenders, developers, local authorities, Māori, private companies and individuals.

The four pillars

Risk and response information sharing

It is not possible to make an informed decision without information. This is the premise ahead of a strong direction to prioritise natural hazard information that is readily available, regularly updated and nationally consistent. To accomplish this the Government intends to develop a National Flood Map by 2027 and new hazard datasets and risk standards. It also intends to update the Natural Hazards Portal, invest in high quality risk information and deliver science, innovation and technology reforms.
 
The overall effect is to level the playing field. Providing equal access to high quality information allows the Government, financial institutions, and insurers to develop clearly defined approaches to their risk management, while property owners and developers can make decisions based on their risk appetite.

Roles and responsibilities

While a strong information base is important, key stakeholders will also want to know how their responsibility is defined. Under the NAF, central government is to provide regulatory and institutional settings, local authorities are to lead local responses, and the private individual or company is left to manage their own risk.
 
Defining these roles and responsibilities will be achieved through:

• the establishment of a new national direction for natural hazards;
  
  
• the development of spatial plans to be delivered through the resource management system reforms;
  
  
• amendments to the Climate Change Response Act 2002 requiring local authorities to develop adaptation plans in priority areas; and
  
  
• investment into preparation and response to emergency with the Emergency Management Investment and Implementation Roadmap.

Investment in risk reduction

The focus of this pillar is to shift spending towards risk reduction before an event occurs. The NAF indicates that the key actions underlying this pillar fall within some existing policy developments. First, the Funding and Financing Framework is referenced as a decision-making guide which signals a focus on a beneficiary pays model and reduction of fiscal exposure. Second, the NZ$1.2 billion Regional Infrastructure Fund is actioned as a resource to help bolster regional resilience. Alongside these actions, the NAF also specifies that regulation to guide council decision-making in adaptation will be provided and Crown assets are to be proactively managed.

Cost-sharing pre- and post-event

One of the main questions around climate adaptation continues to be around cost: who is going to pay? The NAF trends further toward allowing the market to dictate adjustment to risk. One cost-sharing measure is actioned in the NAF – a new development levy system as part of Going for Housing Growth to ensure developers pay their fair share of infrastructure costs. In addition, the Government will deliver new tools to support recovery decisions following significant severe weather events.

Building on the Independent Reference Group on climate adaptation

The Ministry for the Environment established the Independent Reference Group (IRG) to support development of policy advice for the NAF. The IRG’s Proposed Approach for New Zealand’s Adaptation Framework (IRG Report), released in July, also featured four key “pillars”: risk and response information, roles and responsibilities, investment, and cost-sharing. Clearly the NAF echoes the language and priorities established by the IRG.
 
One flashpoint from the IRG Report was a recommended 20-year transition phase away from post-event Government buyouts. This has not been explicitly reiterated in the NAF. Nevertheless, looking across both the NAF and the IRG Report the policy direction appears to be underscored by clearer mandates for councils to plan, a beneficiary-pays orientation, a shift away from property-value-linked buyouts and towards enabling insurance and lending markets to price risk and reward reduction.

Implications for Stakeholders

The implications of climate adaptation are far-reaching and complex. Together, the NAF and IRG Report give rise to a handful of new key considerations:

• Insurers and lenders: priority is given to the market to guide adaptation. As some properties become uninsurable, insurers and lenders have discretion to push growth and development away from high-risk areas.
  
  
• Developers: one key point for developers is that the development levy system appears to be the key funding mechanism for resilience infrastructure, potentially creating a heavy financial burden.
  
  
• Local authorities: local authorities should expect a steady flow of centrally-led policy directives and, particularly in high-risk areas, an obligation to develop revised spatial and adaptation plans.
  
  
• Māori: although the IRG Report made references to prioritising ancestral whenua, no such priority was reiterated in the NAF.
  
  
• Individuals and private companies: should consider a shift toward managing their own risks and limiting their post-disaster fiscal exposure. 

What to expect from here

The NAF alludes to a number of policy developments and data updates. We will be monitoring the following developments:

• Phase Three of the Resource Management reforms. The Government is expected to introduce Bills in Parliament before the end of the year. The framework for the creation of spatial plans will be contained here.
  
  
• The first National Policy Statement for Natural Hazards as part of the national direction (programme alongside Phase Three reforms).
  
  
• The framework for the new development levies system.
  
  
• The first iteration of the National Flood Map by 2027.
  
  
• Regulations to ensure councils weighs up costs and benefits of climate adaptation options.
  
  
• Updates to hazard datasets and the Natural Hazards Portal.
  
  
• Amendments to the Climate Change Response Act requiring local authorities to develop adaptation plans.

The four pillars are intended construct a robust system, designed not only to help New Zealand endure the growing natural hazard risks but to withstand the changing tides of Government.
 
It seems likely that there will be consensus on the need for more robust information systems and improved policy around adaptation planning high-risk areas. Other topics, such as the notable omission of any discussion on managed retreat and a phase out of post-disaster Government buyouts, are likely to remain contentious.
 
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Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.