Climate Change (Emissions Trading and Renewable Preference) Bill

Hon Dr NICK SMITH (National—Nelson) Link to this

This afternoon we are being asked to continue the reckless and irresponsible fast-track process being made by this Clark-Peters Government on this very complex emissions trading legislation. I want the Committee to note that last Tuesday the Government tabled 785 amendments to this bill and passed them on the same day. I would bet that not a single member of this Committee would understand the implications of those 785 changes. The Minister responsible for Climate Change Issues has said: “Trust me. Trust me and my officials. This is all OK.” The problem is that only the week before in this Parliament, in response to questions, the Minister said that the bill did not need any further amendment and that the Government had it all right. We knew after the 1,000 changes the Government tabled only 3 days before we deliberated on the bill that the bill had many errors, and now we know it again.

I will just give a couple of examples of where there are serious mistakes in this bill. The first is in respect of cogeneration. One of the good things that has happened over the last decade is that as people look to a more intelligent use of energy, there has been a real growth of cogeneration—more growth in cogeneration than in any other area of the energy equation. Yet, when we look further through the bill at the detailed clauses of clause 37 and other clauses, cogeneration has been left out. If we go back to the Finance and Expenditure Committee report, we see that when it comes to the determination of allocations for industry, the clear intent of the select committee was to include cogeneration. Members opposite say that this is a minor technical issue and that it is only a word, and they ask why we would be bothered with a single word. Well, that single word will cost New Zealand’s single biggest company, Fonterra, $13.5 million—$13.5 million every year. That is just the cost for Fonterra, let alone the cost for the other industries. So I ask members opposite why we are picking on cogeneration and why we are discriminating against that particular form of energy.

Let me give another example. When industries are meeting their obligations in this emissions trading scheme, they are able to opt in and take responsibility for their emissions. But the bill, again because of a drafting error, does not allow gas or coal that has gone through a wholesaler to be included. Again, people may say that that is all a bit complicated and ask what it means. For five of New Zealand’s major companies, it means that they are not able to manage all of their emissions, which is the very purpose of being able to opt in. Again we have a serious mistake that will cost industry millions of dollars.

So I say to the Minister in the chair, the Hon Pete Hodgson, and to the Government that this is reckless and irresponsible lawmaking. As the Dominion Post editorial asked so well yesterday: why is the Government wanting to ram through this legislation when it is absolutely obvious that it has significant and serious errors that need to be worked through? There is only one reason. The Government has been in office for 9 years. Its climate change record is awful. We have the biggest growth in emissions of almost any country in the OECD. Every single element of climate change policy has turned to pickle. I would have hoped the Government might learn from the experience—that this stuff is difficult and complicated. And what we are doing is exactly the same as we did on the matter of electoral finance, and I fear that Parliament is again making serious errors—errors for which New Zealand will pay dearly.

CHRIS TREMAIN (National—Napier) Link to this

National has consistently advocated a well-designed, carefully balanced emissions trading scheme as being the best tool to efficiently reduce emissions. In 1999 the National Cabinet decided that an emissions trading scheme was the right way forward on climate change policy, and the National Party expressed concern when the emissions trading scheme was dropped in favour of a carbon tax after the current Government initially took office. Nick Smith promoted an emissions trading scheme in National’s A Bluegreen Vision for New Zealand document in 2006. Last year we supported the Government’s decision in principle in favour of an emissions trading scheme and voted for the first reading of the bill.

Hon DAVID CARTER (National) Link to this

I want to pick up on the comment just made by my colleague Chris Tremain. I agree with him that the Climate Change (Emissions Trading and Renewable Preference) Bill is the most far-reaching legislation this Parliament has considered for 20 years. It is therefore the most far-reaching legislation that nearly every member of the House has considered. I do not think that Parliament has done justice to the process of this bill, either in the Finance and Expenditure Committee or in the Minister last week tabling close to 800 amendments.

The reason this legislation is so far-reaching is that the costs that will be imposed on our economy are huge. We know that. The real difficulty is in being able to accurately measure those costs. I looked back through the submissions that were made to the select committee, and the documentation we received from officials gave a carbon price starting at $15 a tonne. They acknowledged that it could be $25 a tonne, and they gave the odd example of the international carbon price being at $50 a tonne. The Reserve Bank of New Zealand, I know, has recently done some work and assumed it would be $21 a tonne. But I have just managed to find out that the current price is actually $45 a tonne. With that sort of price per tonne of carbon, electricity for household consumers will go up by 20 percent. But the particular area that I am interested in is agriculture, and according to the information presented to us at the Finance and Expenditure Committee, that price will cause a drop in farmer output prices of around 30 percent.

TIM GROSER (National) Link to this

I suspect that most members know the phrase “the devil is in the detail” and what it means. My interpretation of it is that whether one looks at a contract, whether one looks at a bill, or whether one looks at an international economic agreement, the bold preambular language is all very nice and very attractive, but the bits that actually matter are usually highly technical provisions formally contained in footnotes and annexes that only high priests can understand. That is the general experience that people have in mind when they use this phrase. When we are presented, as legislators, with 785 amendments coming on top of a bill of unbelievable complexity there is a high chance of mistakes, and a high probability that this Parliament is passing this far-reaching legislation with little idea whatsoever about its effects.

My colleague Dr Nick Smith has just given one example—only one example that we have recently found out about—in respect of cogeneration. I want to drill down into another issue, which I suspect is far, far larger than the issue of cogeneration. It is a deeply technical point—but remember the phrase “the devil is in the detail—and it is the implication of what is called the greening of the assigned amount units. It is about the Russian hot air units. The underlying question is—and I did ask the Minister during the Committee stage to come up with an economic estimate, but even an approximate one would have been fine—what is the likely long-term impact to our economy of this so-called technical change in limiting access to the cheapest available assigned amount units? No answer was given, of course; not even an attempt at an answer.

Let me just try to explore this a little more deeply. As I understand it—and I am no expert in this; let me make this clear—inside the European Union there is a range of prices for carbon credits. They range roughly from around €9 to around €20—that is around US$21 and NZ$44 to NZ$45. The difference is very large when one multiplies it by the Government’s estimate of some 22 million tonnes of carbon dioxide - equivalent gases that we will actually have to pay for. It makes a vast difference to the bill as to which end of that price spectrum one goes into. Of course outside the European Union even lower prices are available on the international market, and some of them no doubt are rather dubious. But nevertheless the point is that this is an integral part of the Kyoto Protocol framework.

We all know that inside the more extreme parts of the green movement this is actually a very controversial issue. They do not particularly like the idea of Russian hot air units and like to put maximum pressure on people to avoid using them. But it is part of the political balance of Kyoto. Without it, Kyoto would not have been put together; without it, the Russians would not have come into the Kyoto agreement; without it, we would be looking at a much different deal. So it is part of the negotiating balance of the agreement.

Of course, the people on the extreme end of this view do not seek to get a balance between the economic and the environmental sides of this equation, so they are not interested in the underlying rationale for this, which is to drive this down as we put a price on carbon in the international economy at least cost. That is the whole structure. But the people who do not care about these costs want to make it as difficult as possible for countries to meet their obligations using the full tool kit of the Kyoto Protocol. So I want to know from Government members: what is the nature of the deal behind this? What is the price range in practice, as a consequence of this enabling legislation? It is my understanding that the actual regulation will have to be written later, but what is the economic impact of limiting New Zealand’s access to low-cost assigned amount units? As far as the rationale of quoting the European Union, which scorns the use of this, is concerned I find this to be hypocrisy on a giant scale. First of all, it ignores the fact that the European Union has limited the key issue in its own emissions rating.

Hon BILL ENGLISH (Deputy Leader—National) Link to this

The Climate Change (Emissions Trading and Renewable Preference) Bill has all the feel of legislation that is being passed by a Government that does not believe it will be around to implement it. It has the feel of legislation that is being passed purely for political and symbolic reasons. As, I think, any number of people have suggested, one of those political reasons is so that the Prime Minister can put it on her CV that she has implemented one of the world’s most comprehensive emissions trading systems, in order to help her to gain more international recognition, and possibly employment, should she stop being the Prime Minister of New Zealand. We think it has that feel because the Government has proceeded in such a reckless manner with such complex legislation.

My colleague Nick Smith has pointed out the problems that arise from the fact that the legislation overlooks what has been one of the more popular types of energy efficiency in New Zealand in recent years, and that is cogeneration. In this case that directly affects Fonterra and our largest export industry. How can a Government conceivably market itself as being interested in sustainability, when it appears to have no idea what actually happens with regard to our largest energy users, and when it rushes through Parliament legislation that effectively rules them out of the system it is creating?

I think the legislation has the same effect on one of the largest enterprises in my electorate: the Finnegan freezing works, now run by Silver Fern Farms. It has just implemented a large-scale cogeneration project that means that all the energy, except the lighting energy, for that freezing works, which employs 1,000 people, will be generated on site from waste products. I have no idea whether this measure cuts out that project, and we have a matter of maybe hours to sort that out. That is a high-profile, big step forward in energy efficiency from the agricultural sector, which the Greens in particular lambaste month after month. The Greens have gone along with the Government’s reckless process that essentially says to that sector: “We want to kick you for doing nothing, but when it comes to writing the rules, we don’t even know you are there.” That is one of the reasons—only one of dozens of reasons—why we have opposed this legislation.

As my colleagues have pointed out, the National Party has, for several years, indicated a strong level of goodwill towards an emissions trading system. We have supported it and have argued that if we are to do something about climate change, that is the best method of doing it. The Government has persisted, as it does in many ways, with its own self-serving, partisan agenda, which it has put ahead of the interests of New Zealand. The interests of New Zealand are best served by an emissions trading system. Therefore, the interests of this country are best served by a considered and measured process that deals with all the issues now raised by something like 1,400 amendments since the Finance and Expenditure Committee stopped considering this bill.

Parliament needs to be clear about this. The bill spent a number of months before the select committee. The Opposition took a considered and diligent approach to submissions. We listened to them all, we considered all the issues they raised, and the environment in the select committee was positive, with the Greens, in particular, contributing from their depth of knowledge—even New Zealand First contributed to the atmosphere of goodwill. Since we stopped considering the bill maturely as a Parliament, the Government has wheeled out over 1,400 amendments and that is reckless. That flies in the face of the goodwill that the Opposition and all the other parties in Parliament—which are, I think, all represented on that select committee—applied to this legislation. The Government has decided to proceed regardless of the consequences. We can only presume that is because it does not believe it will be in office to implement the legislation. Of course, the consequences of this legislation are many and they are very complex. This legislation has, to me, the feel of the original fishing quota legislation.

SHANE ARDERN (National—Taranaki-King Country) Link to this

It is an honour to follow my colleague Bill English in this debate and to oppose the Climate Change (Emissions Trading and Renewable Preference) Bill. I do so on a number of grounds. First of all, I have all of the Supplementary Order Papers—that I know of—that have been tabled in the House. When we look at those Supplementary Order Papers we have to ask serious questions about the process of this legislation. Given the long select committee process and the arguments put forward by National throughout that whole process that this legislation needed time—and we certainly had not got it right at that stage—when we look at the 785 amendments and listen to all of the answers from the Government that National is just buying time to try to put off the inevitable and to protest against it again, we see that the only conclusion anyone can come to is that the process has been a mess and it has been shonky. It would be great if any Minister would take a call to explain to us why at this stage we have had over 1,000 amendments to this legislation since it came out of the Finance and Expenditure Committee.

I also have some photographs with me that I am sure the Minister would be interested in. In this photograph we have the beautiful Pūnehu Stream and Mount Taranaki in the background, and we also have a riparian margin of pine trees and native plantation. That is not a carbon sink under this legislation. Those pine trees are not a carbon sink; they do not take carbon out of the atmosphere according to this legislation. I have another photograph of the same farm with similar trees—Pinus radiata, well known to New Zealand—planted at the same time, in the same year, post-1990, and they are carbon sinks. The trees in one photograph are carbon sinks, and the ones in the other are not—same trees, same farm.

By using the Global Positioning System (GPS) we are able to measure, down to the nearest 20 centimetres, the area of each of these plantations. Most territorial authorities are using that technology for building and other resource consent applications, so this is not something the Government had to invent; it is already available. We know exactly how many trees there are and where they are, but the trees in one photograph are carbon sinks, and the trees in the other one are not. That is a bizarre and ill-conceived policy.

I would love the Minister to take a call to tell us what analysis was done in terms of the cost of establishing an area. An arbitrary figure of 1 hectare has somehow come out of the process. Arguably, I guess, it is easier to measure 1 hectare if we are measuring it with a tape measure, or perhaps we are back in the days of having surveyors out there with their chains—the 22-yard length chains—measuring the area. Instead, as I say, we could measure it by using GPS or satellite measurement, so we know the exact measurement using modern technology. Unfortunately, that is not able to be done in this legislation.

We also know that during the whole period from 1951 through to 2006, 1.9 million hectares of trees were built up—a massive asset, a massive forest in this country. Trees are the issue that is argued about most, and certainly there are special clauses relating to trees in this legislation. I note that last year 13,600 hectares of trees were cut down, with no intention of replanting them. Quite aside from the environmental debate, the economic argument that could be mounted around that issue is something that this Government should at least take a call on. The Government should explain to those who may be listening to this debate why it has come to the conclusion that the policies it has had up until now have brought about this absolute devastation to the forestry sector, but that the policies under this legislation are somehow going to turn that around and we are going to see reforestation again going forward as a result of this wad of paper.

Hon PETE HODGSON (Minister for Economic Development) Link to this

We are about half an hour into the debate now, and it is probably worthwhile taking a call in order to make just a couple of points. In response to the member who has just resumed his seat, Shane Ardern, I say—and I am sure this does not need to be said—that the Kyoto Protocol was put together with the idea that 1990 was year zero. It was done a long time ago. It was signed in 1987. It was signed by the National Party. That was 11 years ago, and that is why trees are counted differently. Secondly, on the issue of cogeneration, I say that that decision was made by the Finance and Expenditure Committee. Most of the members who have been speaking in the debate are on that select committee, so I will not address that point, but other members may wish to do so.

It seems to me that so far there is really only one question, asked by the member Tim Groser, which probably does need a bit of exploration. I remind the member of his question—and perhaps I am using slightly different language from that which he used—which is that given that the Russian hot air units are off limits, what does that do to price? The answer right now is that they do not alter the price at all, because they are not on the market. Of course, there is the possibility that they will come on the market, but then again, they are able to be used for wash-up purposes at the end of the quinquennium. At that point, although one cannot make a prediction because one does not know how many are coming on the market, one can predict that the price change may not be zero but it will be either very low or zero.

JEANETTE FITZSIMONS (Co-Leader—Green) Link to this

I would like to speak to clause 2, but just before I do that I point out to the National Party that the issue it has been going on about in respect of industrial heat is in the officials’ report to the Finance and Expenditure Committee, on pages 32 and 33, and then on pages 235 and 236. Several National members sat on that select committee, received that report, and did not raise the issue at the time. So to claim that it was an error, as National members were doing recently, and that the Government did not know that it had forgotten about industrial heat, is certainly contradicted by the evidence.

To return to the provisions relating to the transport sector coming into force, I say that this is the very heart of the obligations in the Climate Change (Emissions Trading and Renewable Preference) Bill, because until the sector has entered the scheme, nothing happens. The bill as introduced had the transport sector entering the scheme in January next year, so transport was going to cover its emissions for 4 years out of the 5 for which New Zealand is responsible. An announcement was made by the Prime Minister, in around April or May, that because petrol prices were so high, the entry of the transport sector would be delayed for 2 years, meaning that transport would cover its emissions for only 2 out of the 5 years for which New Zealand had to pay. The reasons given were high petrol prices, which were inflationary, and the fact that households would find it difficult to cope. The extraordinary idea was put forward that it would somehow be easier to add 6c a litre to the price of petrol in 2011 than it would be to do so in 2009. That seems to ignore the fact that 2011 is another election year, and that the long-term trend for fuel prices is up. Well, today petrol prices are 11c a litre less than they were when the Prime Minister made that announcement, which meant that the 6c could have come in and petrol prices would still have gone down, compared with what they were when the announcement was made. I think it would take a very brave person to predict that in 2011 prices for petrol will still be down. It seems very likely, in fact, that they will be considerably higher than they were even when the Prime Minister made this announcement. The timing was changed at the select committee, not because the select committee chose to do that but because it was a Government announcement and it was passed by majority at the committee. So that is what the bill now says. I predict that whoever is the Government in 2011, with an election coming up, will find it very difficult to add 6c a litre to the price of petrol, given where oil is going, and I fear that we may leave transport out for even longer.

I was also very interested to notice, when some Cabinet papers were released through the Official Information Act, that Treasury had advised the Government to bring transport in gradually, perhaps over 3 years or so—a little each year—so that there would not be such a sudden hit on either the motorists’ pockets or on inflation. That is exactly what the Green Party proposed, and has been proposing throughout the year. It is a matter that needs to go up in lights when the Green Party agrees with Treasury’s advice—it does not happen very often, but sometimes we agree. It is unfortunate that the Government chose not to take that advice, and that transport emissions will be allowed to grow because they are not covering the full cost that they cause to the country in terms of their greenhouse emissions. When the petrol levy comes in in 2011 we can expect that transport emissions will be even higher than they are now, and that therefore the hit on the motorists will be even worse. The important thing is that we need to start getting those alternatives into place, and until there is a proper price on carbon that will not happen.

CRAIG FOSS (National—Tukituki) Link to this

First, let me acknowledge the officials. It has been hard work going through the Climate Change (Emissions Trading and Renewable Preference) Bill, with all its various changes. The officials have been sitting in the Chamber until late every day, and I appreciate what they have been doing.

Huge thanks must go to the members of the public who submitted on the first version of this bill. They did a very good job. The members of the Finance and Expenditure Committee travelled up and down the country to listen to them. There were very considered and in-depth analyses all over the place. But those people are due an apology from this Parliament, because the bill that they submitted on is awfully different from the one we have before us now. They submitted on the bill before a thousand amendments were made to it just before it arrived in the House, and as my colleague Shane Ardern, who spoke earlier, said, there are 785 amendments before the Committee.

Why is this legislation being rushed through the House right now? Why is it being rushed through before our competitors have introduced similar legislation? Why is New Zealand taking the bleeding edge on the emissions trading system? There is acknowledgment out there of climate change, so why is this Government trying to push the bill through with a majority of fewer than two or three votes? The Green Party is not 100 percent happy with what we have here, yet it is still voting for it. Many parties on the other side of the Chamber are very unsure about this emissions trading scheme, yet they are still voting for it. Why put the issue at risk? If those who want to remedy the problem of climate change want the process to have any integrity whatsoever, surely they want the bills that are passed by this Parliament to have integrity by way of cross-party support across this House, rather than their being passed with a majority of just two or three votes, and just before an election. To sneak such legislation through the House before an election is an incredible admission of defeat on the part of those who are pushing it through. It is an incredible admission that they do not expect to be here in a few months’ time to do further work on this legislation. The bill in its current form should go back to the select committee, given that 1,785 amendments are being made to it after people had submitted on it, after they had spent so much time and resource on it.

It was announced that one of the parties supporting the bill had received in return a one-off payment of $150 for each household, to be delivered, apparently, via Working for Families, to compensate for the increased energy charges. From the way that the bill is written, yes, every household will get a one-off payment, but the increased charges will be there forever. The cost of being in New Zealand and the cost of doing business in New Zealand will be higher than the same kinds of costs of our competitors. Our costs will be higher than the same kinds of costs in the places where 80,000 New Zealanders move every year. Our costs will be higher than the same kinds of costs are where 45,000 New Zealanders move every year—Australia. Why are we taking the lead, ahead of those countries? We cannot afford to do so.

If this bill and what comes out of it do not have integrity, they will fail. New Zealand will end up paying twice, because the rest of the world is moving at a different pace from us, and we will end up having to adopt what they design, what they do, and what their time frames are, rather than our doing what the current administration thinks is gold-plated. It is not gold-plated. Nothing from this House can be gold-plated unless it has cross-party support. Climate change is bigger than one, two, or three parties in this Parliament. Sustainability is bigger than a few parties in this Parliament. It affects all of us. It affects our generation, the next generation, and the next generation after that. For what people say on the hustings about climate change and emissions trading to have any integrity, this bill must go back to the select committee to have further work done to it.

I challenge Labour members on the other side of the Chamber. I notice that the Minister in the chair, the Hon Pete Hodgson, was in Hawke’s Bay the other day. I challenge him to go to the processing plants in Hawke’s Bay, where 2,000 jobs are projected to be lost, and tell those people where the replacement jobs are. You should front up and tell them. Where is the engineers union on this issue? It is forecast that 22,000 to 50,000 jobs across the country will be lost because of the bill being in the form that it is now in. You should front up to the door, front up at smoko, and tell those people where those jobs will come from. I challenge members on the other side of the Chamber who are voting for this bill to do that.

I tell you what: at the very least it is—to put it kindly—misleading to not say upfront what the solutions are and where new jobs will be found to replace the jobs that will be lost. Those people’s livelihoods come from our agricultural-based economy, and you are putting them at risk. You are putting Fonterra at risk. You get up and talk about Fonterra, yet you are signing up to, and voting for, a bill that will cost it $30 million right now. The officials acknowledge that. How can you stand up and do that? The bill should be sent back to the select committee.

The CHAIRPERSON (Hon Marian Hobbs) Link to this

Just before I give the call to anyone, I ask members, please, not to bring the Chair into the debate by using the second person.

Dr PAUL HUTCHISON (National—Port Waikato) Link to this

Thank you, Madam Chair, for the opportunity to speak on the very important Climate Change (Emissions Trading and Renewable Preference) Bill. National was pleased to support this bill in the first reading in good faith, in the belief that the Government would make every effort possible to ensure this extremely important bill was thoroughly and properly considered, because of its long-term effects. Indeed, it would have been ideal to work towards a consensus between the parties, because such a consensus would have been enduring.

Of course, as it has transpired, the select committee process in the Finance and Expenditure Committee was rushed. The process was flagrantly abused by the Labour Government, with little hearing time given to some of the most important submitters, and now the Labour Government is literally ramming through some of the most important legislation of this century. At the last minute, just prior to the select committee’s deliberation, there were a thousand extra unconsidered amendments. To make matters worse, at the beginning of this Committee stage there were 785 further new unconsidered amendments—amendments that the people out there in the sector have simply not had time to consider. This was, as the Hon Dr Nick Smith labelled it, an example of absolutely reckless irresponsibility by the Labour Government.

This afternoon I looked at the 2002 Climate Change Response Bill. I noted that the Labour Government has consistently been wrong over many of the issues around climate change. In the first reading version of that bill, the Labour Government had planned to send carbon police into the farms and businesses of New Zealand, with the right to arrest people if they considered it appropriate. That is how ill-considered and zealous the Labour Government was just a few years ago. That was described by Professor Joseph of Canterbury University as State-sanctioned trespass.

I will come back to the bill—it is absolutely appropriate that I do so. Last week, I also spoke to the chief executive officer of New Zealand Steel. He said that by rushing through this bill, a $1 billion investment in that very strategically important plant for New Zealand would be put at risk. Part of that investment is a $200 million investment in a vanadium extraction plant, and already $12 million has been spent on it. But as we sit here this afternoon, that development is being wound down. That has to be a huge tragedy. The chief executive officer reminded me that New Zealand Steel cogenerates 60 percent of its energy needs through its own processing plant, and that many plants around the world do not have cogeneration. But here in New Zealand we have a steel mill that has been verified by benchmark studies as being one of the most efficient in the world.

The Labour Government in its last set of amendments, which it did not consult widely with the sector over, has changed the rules again. That will significantly affect the trade-exposed industries, whereby credits are given only for the part of trade that is overseas. European mills, of course, are exempt. If Labour were to run the New Zealand Steel mill out of the country, two things are likely to happen. Firstly, New Zealand would have to import our steel, and with that would be all the carbon miles implied because of the huge distances that steel would have to be imported over. Secondly, an offshore replacement mill is highly likely to be much less efficient than one in New Zealand, and it would gush out far more greenhouse gases into the atmosphere than our mill does. It is almost as though this Labour Government wants there to be a loss for New Zealand and a perverse increase in emissions by passing this legislation so inappropriately.

CHARLES CHAUVEL (Labour) Link to this

We have heard yet another speaker—in this case one who was not even on the Finance and Expenditure Committee hearing the public submissions—bring up the shibboleth just now about the move overseas of a polluting plant to a jurisdiction that does not have any restrictions on carbon, as if somehow all New Zealand industry will be at risk when this legislation is passed. The member conveniently ignores—as do so many members on the Opposition side of the Chamber—the fundamental truth that the entire world will ultimately face a cost of carbon regime. Some form of emissions trading regime or a carbon tax is likely, at some point, to be a requisite for every country. So it is not as if there will be some great division of the planet between those nations that face costs of carbon and those that do not. It is time to stop peddling that myth. The evidence heard before the select committee backs up exactly what I have just said, even though it is not convenient for members opposite because it does not fit with their spurious arguments in opposition to this legislation.

The fact is that the bill as reported back from the select committee, and as it will be amended by the Supplementary Order Paper that is under debate now, has not changed in terms of the core design principles of the emissions trading scheme.

Hon Dr NICK SMITH (National—Nelson) Link to this

The chair of the Finance and Expenditure Committee has told the Committee of the whole House that the select committee carefully considered all of the amendments. Let me tell this Committee what actually happened. The Government strolled in on the last day—the day on which we were to deliberate—with a thousand amendments. There were a thousand amendments, I say to Mr Chauvel, and if he believes that any single member of the select committee had time to consider their implications, then he really is pulling a very long straw.

I put this very simple question to the member opposite, and I could put hundreds of such questions—

TIM GROSER (National) Link to this

I wonder whether New Zealanders listening to this debate would have fully taken on board that the last Government speaker, Mr Chauvel, was none other than the chairman of the Finance and Expenditure Committee, charged with the awesome responsibility of steering this legislation through it. It has been described by many people from many different perspectives of New Zealand life as the most important regulatory framework to be introduced into New Zealand since the 1990s. I wonder whether they would have truly understood that he is the man who had that responsibility.

Let me make this clear. In some respects, I am not sure whether we should be very harsh on Mr Chauvel, because he is a new member of the Government; he joined the Government only in the last 18 months to 2 years. I think we all understand the position that he was put in, which was: “You make sure that this bill is rammed through in the life of this Parliament, or your career is on the line.” We will never find a piece of paper saying that, but I think it is widely understood in this House that that was the case. So my comments are not personal, for that reason.

Putting that aside, I say he is living in a parallel universe. First, in describing a process that he had the constitutional responsibility of leading, he praised it as some sort of perfect process in which everybody had time to put his or her case, was heard carefully, and was given due consideration. I did not have the privilege of sitting on the Finance and Expenditure Committee, but even I know that scores of submitters came out of that select committee that he was responsible for bitterly complaining that they had been given 5 minutes or 3 minutes to put their case, when the whole future of their companies was at stake. Goodness knows what universe Mr Chauvel is living in! Of course, I think we understand why he was forced to conduct the inquiry at that pace, with so little regard for the views put forward by companies and by people who have put skin in the game.

But, of course, those people and their views are dismissed as special pleading. One of the things that amazes me about the political debate that I have heard from the Government side is the sort of view that there is this thing called the Government sector, and there is this not particularly pleasant thing called the private sector, and when the private sector talks it is special pleading. We could not have the Government sector, which is supposedly completely detached from the people who actually create wealth, bear any cost, because the bad polluters in the private sector would then get away with whatever they are meant to be getting away with. There is a complete lack of understanding that the Government does not have money of its own; the Government gets taxes from the people, and they are telling this Government: “Do this at your peril.” The Government gets the money to provide public services from the productive sector, and that sector is telling us time after time that this measure is a bridge too far.

We had another one today. It is a relatively small organisation but one I personally have a lot of time for, and that is the—what is the horticulture industry organisation called? Horticulture New Zealand is the new term for it.

Hon JUDITH TIZARD (Minister of Consumer Affairs) Link to this

I move, That the question be now put.

SHANE ARDERN (National—Taranaki-King Country) Link to this

I shall start with some comments that are not repetitious. I was surprised to hear the chairman of the Finance and Expenditure Committee, Charles Chauvel, say that he had read all his papers and understood what he was doing. I know that member is reasonably honourable; he served for a brief period on the select committee that I myself chair, and I know that he does his research. I know also that he is a lawyer and that he practised law before he came into this Parliament. That brings me to this point: how could somebody with that amount of knowledge of the law, who chaired the select committee, and who, clearly, reads his papers, report back a bill that needed a thousand amendments on the last day of the select committee process, and needs the 785 amendments that are before the Committee today? I say to the member there is something that is worse than ignorance, and that is knowledge that one is doing the wrong thing, but doing it anyway. I ask that member to take another call to explain to us how he came to his conclusion.

My new material is this. Clause 6 of the bill defines what forest land is and what a forest species is. I will quote the definition of a forest species: “ ‘forest species’ means a tree species capable of reaching at least 5 metres in height at maturity in the place where it is located”. That is clear enough; I understand now. But I do not understand why a tree that grows like that is a carbon sink, yet a tree that does not grow like that is not a carbon sink. I would love it if the Minister in the chair, the Hon Pete Hodgson, would take a call to explain why. Where is the science—what science was presented to the select committee—that says that a forest species such as I have described is a carbon sink, yet, for example, mānuka, a native that grows over large tracts of New Zealand, is not? The Department of Conservation is encouraging mānuka, and it is growing more vigorously than it has done for a long time. It is being allowed to grow on forest land that has been cleared and probably will not be replanted in the exotics that were there. I ask why mānuka is not a carbon sink, yet a tree that grows in the way I described is one.

I also ask the Minister about the definition of “forest land”. It states “ ‘forest land’ means an area of land of at least 1 hectare that has, or is likely when the forest species reach maturity to have, tree crown cover from forest species of more than 30% in each hectare;”. Once again, the simple question is why that land is able to be calculated as a carbon sink, yet an area different from, or less than, that land, such as the area that can be seen in the photograph I have in my hand, is not. It is the same species of tree—Pinus radiata. One is a carbon sink under the legislation, and one is not.

I have further new material. Why do we have before us a suggestion made by some people who have done an enormous amount of work on this legislation that the introduction of these amendments will impose a cost of between $600 and $1,000 every year into the foreseeable future, for as far as we can see, on the average household? Why do we have that suggestion, given that National knows that, under the current proposal, the Government itself will be pocketing something like $700 million or $800 million from its own State-owned enterprises? I know that the Government is about to make announcements, or has made announcements, in terms of the deal that it has done with the Greens and New Zealand First in regard to trying to offset that cost, but the question that somebody needs to answer—a Minister, any Minister, someone who is here today—is why, at a time when New Zealand clearly is not competitive internationally, when 80,000 people a year are leaving the country, the Government thinks we should impose a cost of $600 to $1,000 per year on every household.

CRAIG FOSS (National—Tukituki) Link to this

I want to speak about something that has not been raised in recent speeches. In an earlier speech, I talked about the fungibility of the New Zealand system; the word was looked up and everyone knew what the word was. I will talk about the financial side of this legislation, because a previous speaker talked about how the rest of the world will suffer a carbon tax, or there will be one implemented in some way, shape, or form. Well, if that is true, it actually reinforces the point, because it is about the timing of New Zealand racing forward and doing what it is doing now under the form of this current legislation.

Let us say this bill goes through as designed here, given all these amendments and whatever else is about to be flopped on to the Table. We have to think about others who might want to do business in New Zealand. They will look at New Zealand’s supposed carbon neutrality, or Kyoto compliance, and at the balance sheets of New Zealand institutions—be they farms, businesses, or businesses possibly looking to migrate here and start up—and they will look at the cost of doing business in New Zealand. On some of those balance sheets they will see an item—a credit, or a liability—and then on those particular balance sheets they will see various items of New Zealand units, etc. Well, first, they will see those items and will ask their accountants what on earth that means. Then they will try to get someone to explain it, so that will cost them money to discover what the value will be of whatever it is that they are looking at to invest in New Zealand.

But then they will think: “OK, but is that bankable?”, which I spoke about in a previous speech. If I am buying a company in New Zealand or looking to invest into capital-deficient New Zealand, which is screaming out for foreign capital, which we need to build our future, then when I am pricing up something in New Zealand, I will see these carbon credits, or debits, or some units on a balance sheet. They may have been used with a bank to provide security—for example, if someone is buying a dairy farm. Members opposite keep saying that agriculture is not coming in until 2013, 2018, or whatever. However, they forget about the time value of money. The moment we know that something is coming in, in the future, we discount it back and look at the value today. So this legislation right here is impacting on balance sheets—today, right now.

We need certainty. We have just had 780-odd amendments to the bill. That is uncertainty, which makes the value of doing business in New Zealand harder and the cost of investing in New Zealand less worthwhile. The larger financial institutions around the globe on the starting grid, in particular, I know are looking to see what will happen in New Zealand, and to see what opportunities there are for arbitrage down here, where things have been mispriced, legislation has been rushed through, and there are arbitrage opportunities. I know they are, and by racing this legislation through right now, and being in front of whatever the rest of the world designs, New Zealand is opening itself up to be gouged out, and we will be left with some businesses having some assets on one side of the balance sheet and some liabilities on the other, but not being able to be matched because offshore entities will not recognise them. They cannot be banked against, because no one knows—and I ask the Minister in the chair to define these—under what international financial banking agreements credits will be recognised. Will it be the International Swaps and Derivatives Association? Will it be the International Swaps and Derivatives Association master agreement between financial institutions? Will the credits be used as credit collateral? I ask the Minister, in this economic situation we have right now, whether I will be able to use my carbon credits to get further funds from my bank in the US, or from a bank in Europe. These are the kinds of questions that need to be asked, and answered, before this legislation is thrust upon New Zealand.

This is not party political; it is for the good of New Zealand to get this right, as I said previously. Issues environmental, issues of sustainability are bigger than one party. The arrogance of some to claim the matter is theirs speaks absolute volumes. If this legislation right in front of us here goes through as currently designed, I tell members that unless those issues have been explored and looked at from outside New Zealand—and remember New Zealand is a debtor nation; we borrow much money from offshore—and unless this stuff can be used as credit against what we already have, this legislation will put New Zealand on a hiding to nothing. Believe you me, we will not be at place No. 22 in the OECD for much longer; we are heading further south faster, unless the banking side of this has been agreed and unless the banking and financial sides have been investigated. Not one Labour speaker has got up to tell me how this will work in a macro sense. Not one Labour speaker has got up to tell us how this will work in a global financial sense, and in recognising New Zealand’s balance sheet.

Hon Dr NICK SMITH (National—Nelson) Link to this

I want to talk about an issue that goes to the heart of New Zealand’s economic success over the last 160-odd years of our nation’s history—that is, efficient land use. The reality is that the very core strength of our economy has been the capacity for land owners to be able to put their particular land to the use that will generate the most wealth possible. I recall the days of my grandad in Canterbury; he used to talk about all the dairy farms disappearing. And 80 years later we are seeing them reappear. In the Nelson region, which I represent, we have seen that areas that previously had been put into forests are now being converted back into pasture and other horticultural-type uses. So one of the key parts in the Climate Change (Emissions Trading and Renewable Preference) Bill that National has concern about is the way in which the legislation will stop flexible land use into the future.

The real nonsense in this bill is that even if people do things that are absolutely proper for the environment, there will be a restriction on the use of those things. I will explain. This bill says that if people own pre-1990 forests that cover over a million hectares of land, and those owners want to change the land use to dairying, horticulture, or some other use, then they need to pay for the carbon that is absorbed in those trees. But sensible people have asked “Well, why don’t I go and plants some trees in an area of highly eroding hill country, where the trees will not only absorb carbon out of the atmosphere but have the added advantage of addressing the huge problem of erosion we have?”. So I ask Mr Duynhoven in the chair, and members of the Government, why they do not allow that flexible land use. Why is the Government saying that if I harvest some of those trees and replant trees elsewhere, that is not to be allowed under this bill? I attempted to move an amendment to address this very point, and the Government voted against it. I ask how many Government speakers have addressed the point. Not a single member of the Government has addressed the issue. Is it important? Well, of course it is important.

As I have said, flexible land use has been at the heart of New Zealand’s economic success story. The very reason that we are an OECD country with a good standard of living is that landowners have had that flexibility. I cannot understand why the Government will not allow that perfectly simple, straightforward amendment. I remind members that there is absolutely no cost to the environment. The environment does not know whether a thousand hectares of trees have been planted on that block or another block. All it cares is that carbon dioxide is reabsorbed by those trees. National says that this is one of hundreds of issues—hundreds of issues—that have not been properly debated. The Government has just said: “Stuff you lot out there! We don’t give a heck about landowners who are screaming about this provision. It is just a minor detail.” Well, it is a minor detail that will cost New Zealand tens, if not hundreds, of millions of dollars. It is a minor detail that will cost an organisation like the Anglican Church Pension Board—hardly the Business Roundtable—over $20 million. We say to the Government that the forestry provisions of this bill will not work, and if there is any area of the climate change debate in which we need to get the detail right, it is the area in respect of forestry.

In concluding, I remind Parliament of this Government’s record around forestry. Australia is on target to meet its Kyoto obligations; New Zealand is not, and the key reason for that is the deforestation that has occurred here over the last 3 years at a huge pace. The provisions of this bill will not work for forestry, which means that this bill will not work for New Zealand, and that is a tragedy.

Hon HARRY DUYNHOVEN (Minister for Transport Safety) Link to this

I move, That the Committee divide the bill into the Climate Change Response (Emissions Trading) Amendment Bill and the Electricity (Renewable Preference) Amendment Bill, pursuant to Supplementary Order Paper 233.