Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill

Hon Dr NICK SMITH (Minister for Climate Change Issues) Link to this

I seek leave of the House for the first and second parts and the title of the bill to be taken as one question.

STUART NASH (Labour) Link to this

The title of the bill is the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill. I suggest that it should perhaps be the “Climate Change Lack of Response (Emissions Trading Forestry Sector) Amendment Bill”. The one thing about this bill, and I alluded to this in my speech on the second reading, is that the forestry industry was ready for this bill. The only party that was not ready for this was the National Government. If I look through the bill, I see that the major changes have been made, as we all know, to the dates. The thing about this bill is the Labour Party had sat down and consulted the industry. There were changes that the forestry industry wanted; there were changes that the previous Labour Government wanted. They sat around a table, which was made of wood, to talk about the changes. The table was probably native wood, it could have been radiata pine, but it does not really matter. It was New Zealand - grown wood that had not been farmed for carbon, because it had been cut down. There were many of these meetings because one of the things the previous Labour Government did the whole time was consult back and forth with the industry. It came up with a bill that was perfect. It fitted the expectations and the aspirations of the forest industry, and it fitted the expectations and the aspirations of the previous Labour Government’s emissions trading scheme. It was going brilliantly. It was ready. The forest industry was ready to get out there and start marketing this. The forest industry had all these seedlings ready to plant. We had international investors.

But let us get back to the bill. If we look at Part 1, clause 4, we see that it says that we are changing the date to 1 July 2010—2010! That is a delay of 365 days. For those who do not know much about forestry, I say that 365 days is a growing year. There are four seasons in a growing year, and that constitutes one growth ring. In fact, when we are talking about a cycle of 30 years, every year is important because one does not know what is going to happen in the industry. But the most important thing that this bill does is delay the potential investment in this industry.

As I have said, I support this bill. The reason I support it is that it provides certainty. I support the recommendations based on the fact that it provides certainty. Let us look at some of the other clauses. Clause 5 is called “Applications for exemption of land holdings of less than 50 hectares of pre-1990 forest land”. Where does “50 hectares” come from? I mean, it is an arbitrary amount. It is a good amount, but it takes it out to July 2010 again. What is it with 2010? Why could we not just go ahead with it straight away? This is the really disappointing thing for me as a past forester, for the forest industry, for the investment community—in fact, for everyone who is passionate about emissions trading.

Nikki Kaye, I heard you wax on in Ethiopia, where you gave a very impassioned speech about the importance of climate change. It was a wonderful speech, and we all sat up and applauded. I come back and stand in this Chamber, which is an amazing, wood-lined hall—members should look at this fantastic wood—and I hear you speak about delaying this bill. It says here it will be delayed until 2010. You are delaying it!

CRAIG FOSS (National—Tukituki) Link to this

Before I speak on the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill I acknowledge the officials who have been part of it. It is a small bill, but, of course, they have been part of the greater review of all things emissions trading. I pick up from the previous speaker, Stuart Nash, who has a master’s degree in forestry or something, and shared with us that foresters plant trees. I thought it was very interesting that it took 4 years of studying to learn that, whereas one of my colleagues here actually planted trees, so perhaps he may know a fair bit more. I note that the bill had its first reading on Tuesday, 23 June, and went to the Emissions Trading Scheme Review Committee on 25 June. I acknowledge the fact that members considered and deliberated on the bill on the same day, which needed a lot of cooperation and leave applied for and granted from the members of the select committee, to allow it to report back to the House to get us to this stage. As I noted previously—it is right in the Committee stage to acknowledge all those who have helped get us to this point—we may well go through all stages of the bill tonight, or perhaps this afternoon.

The bill is a good model. The previous member was talking of various clauses about delaying dates, changing dates, and things like that. That is the whole point of the bill: to provide certainty. It is not providing uncertainty. As I noted earlier, prior to the election National put out its expectations of the emissions trading scheme, which were to provide certainty and not put New Zealand’s economy at risk. This is actually part of those expectations. When we look at the clauses in the bill, we see that, quite simply, the rules are not changing. Yes, dates are changing, but the rules of afforestation and deforestation are not changing. The need to measure is not changing. The problem, as identified by the Minister for Climate Change Issues in his second reading speech earlier—and he acknowledged that even some ministries and Government agencies actually had not done their job as well as they could have—is to let those that are directly impacted by the existing legislation know what their obligations are, how they should be measured, when they should report, and how they should report. Of course, from that would come any allocation decisions, etc. But we have to do this bit first. The clauses in this bill that change dates, far from providing uncertainty and delay, actually provide a much more robust framework for not only forestry but also all of the other facets of the emissions trading scheme and the various climate change bills that have come through the House over the last year.

The preparation, I suppose, is everything. I want to talk to that uncertainty that the other member was talking about. There is so much uncertainty in and around implementation in other countries, where New Zealand is, where our friends and competitors in Australia are going to be, where the rest of the world is, as we march towards the Copenhagen conference. Well, this actually starts—with, I fully acknowledge, cross-party support so far—to get New Zealand as a country to be able to speak when we are at Copenhagen. We have been able to measure our smaller holdings. We have a facility in place and it is preparation for the emissions trading scheme, however it is finally implemented in this country, subject to the select committee review and where the Minister ends up with the various facets. This bill starts to put things through—not in a rush; it is pragmatic—and it takes a reality check. Right now not only is all the measurement not available quite yet, but also those who are financially and economically impacted, those who are doing the various measurements, for many reasons are not quite up to speed. So, quite simply, the clauses in this bill—yes, it is a small bill—simply change reporting dates, subject to the amendments from Mr Charles Chauvel, which, I acknowledge, were made at the select committee. Certainty is provided so that we can move on to at least put the larger discussions about how and when our climate change response and emissions trading scheme are implemented. This bill can sit with those discussions.

CHARLES CHAUVEL (Labour) Link to this

I take just a brief call in this compressed Committee stage. I comment first on some of what we have just heard from the previous speaker, Craig Foss. I think it is a long bow to draw to suggest that this amending bill is somehow the result of the design principles that were set out by the National Party in objection to the emissions trading scheme that was passed by the previous Government.

It is interesting to have a quick look at those design principles. The first one is that an emissions trading scheme “must strike a balance between New Zealand’s environmental and economic interests. It should not attempt to make New Zealand a world leader on climate change.” Well, the world has moved on. The latest news from the Australians today is the Liberal Party saying that it will propose constructive amendments in the Senate rather than simply trying to block the legislation, as it has done to date.

Legislation is about to go through some crucial stages in the United States Congress to set up a “cap and trade” scheme—the mirror image of the sort of scheme that was passed in our last Parliament. We have the European response mirrored in domestic legislation of member nations of the European Union, such as the UK, most notably for our purposes. There are also countries like Japan. No way could we be described as a world leader any more, even if that was an accurate description back in September last year, which I do not think it was.

We have the principle that the scheme should be fiscally neutral. Well, it was always Labour’s intention to recycle revenues gained from, for example, the auctioning of permits, to pay for the vital complementary measures that are the other equation in dealing with climate change. We have the emissions trading mechanism—the financial mechanism that puts a price on carbon at the margins, so that we do things like disincentivise people who put an inappropriate dairy development on a marginal land, and we incentivise them instead to afforest that land, which is much more in the national interest and is the logical consequence of putting a price on their pollution and their emissions, rather than having the taxpayer bear it. But we need those complementary measures as well, and it was certainly always going to be the case under Labour’s scheme that they would have been paid for from revenue from the scheme.

Then there is the principle that there should be close alignment with the Australian Carbon Pollution Reduction Scheme, with, where possible, common compliance regimes and tradability. Well, that outcome is entirely feasible as far as technical harmonisation is concerned, without waiting for Australia to develop every last detail of its scheme. It is feasible under the legislation as it is designed at the moment. In respect of the principle that technology should be encouraged to improve efficiency and reduce emissions’ intensity, nobody could argue with that; it is the motherhood and apple-pie principle that, again, is consistent with the scheme as it currently exists.

Then there are the final two principles. First, with regard to the principle that we need to recognise the importance of small and medium enterprise to New Zealand, again, no one would argue with that, but the Minister needs to get on and decide issues like thresholds, so that small and medium sized businesses know where they sit in the scheme and what their allocation regimes will be. Second, in respect of the need to have flexibility to respond to progress in international negotiations, the scheme is designed to do exactly that. It is basically a set of broad legislative principles that allow the Minister and his officials to get on and fill out the detail. As far as the international developments are concerned, it is a ground for review under the existing scheme. Those principles have to be treated with a great degree of caution, and I would remind the previous speaker, Craig Foss, of that.

The other thing I will say is that there was a comment in the second reading speech made by the Green member Jeanette Fitzsimons. I think she made some assumptions about what Labour might or might not be willing to do in respect of dates and compromise for other sectors coming into this scheme. All I would say in response is that we have been scrupulous about not discussing in public our talks with the Minister, and I intend to continue that course. The member should not speculate—neither should anybody else—on what we might or might not be willing to agree with the Minister.

I wonder, in the time remaining, whether I could ask the Minister in the chair, the Hon Dr Nick Smith, to respond to two quick questions: one relates to clause 4; the other relates to clause 5(2). The amendments to the clauses are recommended in the committee’s report to the House. The questions are simply these: given that the committee has recommended firm deadlines, as opposed to dates, to be set by Order in Council for the doing of things that are required under those paragraphs, I ask whether there is a prospect, in his view, that those things might be done sooner than the statutory deadlines, which are set out in both cases on 1 July 2010. If so, I ask whether he has a view as to when those things might be done on an earlier date than 1 July 2010, and I ask what the conditions are under which those things might occur. These are my questions, and I would be very grateful if the Minister took the opportunity to address them. Those are my comments at this point.

Hon Dr NICK SMITH (Minister for Climate Change Issues) Link to this

Firstly, I thank both sides of the House for their contributions to, and consideration of, the bill. I will quickly respond to the fair question raised by the Labour spokesperson on climate change, Charles Chauvel, in respect of clauses 4 and 5, and on whether there are any potential scenarios where we might bring forward dates prior to the deadline that has been set at 1 July 2010. I acknowledge the initiative Mr Chauvel has taken in putting that firm date of 1 July 2010 into clauses 4 and 5 to require the two actions to be taken by then. I think that is a reasonable time frame, I think the debate is moving on, and I think a mood is developing across Parliament that, for New Zealand’s sake, we need to resolve the key features of the emissions trading scheme in a practical way that can move forward.

I think the key question here is firstly in respect of the allocation plan, and whether there is a process by which the date for that could conceivably be brought forward. One of the factors we would want to take into account is the fact that these units are expected to be traded, but, as a number of speakers have noted, we cannot have a market unless we have buyers and sellers. At the moment we have only sellers, and there is not much of a market. In relation to the point of obligation for those sectors that have liabilities, I note in passing—and I am sure previous Ministers found this—that there is a great deal of enthusiasm from those people who are to receive credits to get a market up and going, but there is not quite the same level of enthusiasm from those people who are paying. Even in the forestry sector where there are both payers and sellers, I know that that view applies. I think it would be helpful—and I particularly note this in respect of the central North Island forestry settlement, in which there is a very substantive allocation for the allocation plan—there may be merits in bringing that date forward to provide some liquidity to the market. So, yes, I do see a scenario where that would be conceivable.

In respect of the exemption provision, I want to be quite upfront with Parliament in saying that there is a huge number of small forest owners in New Zealand, and that the exemption provision is really, in my view, aimed at those thousands of forest owners who own small blocks. I think—and it was in the Budget—that substantial funds were provided for the implementation of the emissions trading scheme. To bring forward that date prior to 1 July 2010, in my view, we would have to run quite a substantive information and advertising campaign to inform people out there to do that. There will be left just the pragmatic question for me as to what is a good timetable to do that.

Given the fact that we will be dealing with a substantial emissions trading scheme amendment bill, my hope would be that we can have that completed prior to the Copenhagen negotiations. That would, in my view, be a credit for this Parliament and for New Zealand. But it would keep the systems of Government pretty busy, and I do not see any advantage in running an advertising campaign around the exemptions, or that campaign resolving that long-term issue. Perhaps 1 March next year might be a possibility, and I think that having the flexibility of the special select committee that considered the bill was a worthwhile provision.

So, yes, there are scenarios where those dates could be brought forward; there are issues of liquidity and issues of getting an advertising campaign up and running. I will want to work with officials, and I will be happy to consult with the Opposition, around what is the shortest conceivable but practical time frame in which we can get on with that important work.

NIKKI KAYE (National—Auckland Central) Link to this

I am a little bit gutted that Mr Nash has left the Chamber, because I wanted to respond to a number of things that he said.

Hon PETE HODGSON (Labour—Dunedin North) Link to this

I was not going to take part in this debate but I do not think that that contribution can go unanswered. I am going to do so gently, but I am going to do so firmly. Nikki Kaye got up and told us how, during the Labour Government, emissions went up, and she is right. She told us how Labour was not very effective on climate change, and she is wrong. The member is a new member; the member does not understand, I do not think, the history of climate change policy in this country. She does not understand it. For the last 15 or 16 years—

HEKIA PARATA (National) Link to this

Tēnā koe e te Heamana. Huri noa i tō tātou Whare i tēnei pō, tēnā koutou, kia ora tātou katoa.

[Greetings to you, Mr Chairman, and to you throughout our House this evening, greetings to us all.]

I am delighted to seek a call to speak in support of the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill. I am a new member of this House; I am, therefore, a new member on the special Emissions Trading Scheme Review Committee that has been put together to look at the wider issues on climate change and the emissions trading scheme.

I acknowledge the extreme complexity of this area and the very steep learning curve that has probably been vertical, if not backwards, for me in getting to grips with the vast range of issues that bear on this topic and the numerous organisations and people who maintain a very strong interest in this area. I acknowledge that our present is built on the past and on those who have contributed to it in order that we can have a strong future. I am delighted to be a part of that select committee and to acknowledge the hard work of the people on it and the learning that I have received from many of them who have been engaged in this area of work for some time, and certainly for a lot longer than I have been. I have become very sensitive to how sensitive the range of factors and variables are that need to be balanced in order for us, as a small country, to navigate our way forward from this point, knowing that what we do impacts not only on those of us here today but also on the generations that come after us, and knowing that we are a part player in the greater global community and that what we do and what they do will form the history and herstory of what we confronted and what we did about it.

I acknowledge the colleagues from whom I have learnt in the select committee. In considering the bill that is here before us here today, I acknowledge my colleague Mr Chauvel for the amendment he brought to the committee.

The forestry sector is an extremely important part of the New Zealand economy. It is important that we provide certainty to it while acknowledging that its role is part of a greater picture. This bill, which is a technical bill, allows us to defer the time line by which considerations occur, and Mr Chauvel’s amendment has established the date of 1 July 2010. But decisions have to be made by that date, and we have heard our Minister in the chair, the Hon Dr Nick Smith, respond to the question put to him in the Committee tonight on whether there might be an opportunity for these decisions to be made somewhat earlier. In his response he has indicated that that might be possible but that a number of factors would need to be considered before it was finalised.

This bill gives to the forestry sector not only certainty of the date by which these considerations will occur but also an indication that it might be possible for them to occur earlier. It has also indicated to those many thousands, or perhaps hundreds, of small forest owners that they will have the opportunity to hear in more detail the information that will be necessary for them to be able to play their part in this very complicated chess game, I suppose, that New Zealand is engaged in not only within our own country and the number of sectors that contribute to it but also in terms of what we need to be balancing in terms of our contribution to the wider world.

It is very technical. As we have learnt, not only is there a number of different kinds of forests but also there are different kinds of plantings, different times at which those plantings have occurred, and, therefore, different impacts upon them. We have heard about the aspiration for there to be a market established in which carbon credits can be traded, and we have heard that there is a preponderance of sellers and a very minimal number of buyers. Thus the notion of a market has been rendered—a notion at its best at the moment, although we hope that it will achieve some reality over time. In the meantime, we are looking to ensure that while the select committee continues its considerations, we are able to give some certainty to those members of the forestry sector.

LOUISE UPSTON (National—Taupō) Link to this

I rise to speak in the Committee stage of the Climate Change Response (Emissions Trading Forestry Sector) Amendment Bill, and I firstly acknowledge the work done by the members of the Emissions Trading Scheme Review Committee. I was not involved directly but I am aware of the hours that have been put in by the members of that select committee, so I start by acknowledging the hard work done by that committee.

In speaking to this bill, I reiterate the importance of forestry to the Taupō electorate. Over 1,000 people are employed in forestry in my electorate, and one of the concerns they have been speaking to me about for many months is the ongoing uncertainty around the emissions trading scheme and, in particular, around the date in the legislation. I know that foresters are very pleased that the Minister has taken a pragmatic approach, and that the select committee has been working hard to ensure a workable solution for them, because that date has been causing them a lot of angst.

One of the impacts of that, which I will spend a moment talking about, is the fact that there is wonderful fertile land in my electorate but it is doing nothing right now, because forestry owners have been unsure about what would happen and have not known whether to plant on it or put it into dairying. So it is sitting there doing nothing. As we are in a country that is in the grips of a recession, we cannot afford to have wonderful fertile land sitting doing nothing. So that is why I am really pleased that there has been a great deal of cooperation across the House on this particular bill, to make sure we provide some certainty for the forestry sector in making this technical change—of changing the dates on which requirements are made of the sector—so that it is able to get some certainty without things being rushed, or without having ongoing concerns about the future. We have been able to change what the current requirement is in terms of reporting deforestation, so small-block owners will get an extension. It is not a case of today being D-Day, and I know the sector will be extremely relieved about that.

What is really important, in terms of looking at this legislation, is having a pragmatic approach to something that is achievable. I know that I want to be part of a New Zealand that has ambitious environmental goals, but at the same time I do not want to set up my children and grandchildren to fail. I think that it is really important, on an issue like climate change, that we collectively as a Parliament come up with something that is achievable—not just for our generation but for our children and grandchildren. I sure as hell do not want to leave them with a debt, in terms of the environment, that they will not be proud of. What I think has to be at the heart of this debate is making sure that the changes we make in this legislation are enduring. We do not want to have a situation where we throw these changes out all of a sudden and put the industry into turmoil again because there is a change of Government. That is why it is really important that the work that has been done in the select committee has some consistency about it.

I know that the forestry companies in my electorate that I have been dealing with—and that the Minister and I have met with—want certainty. They want something that is workable; they want something that is achievable. They have great aspirations in terms of what they see they are able to do in forestry. I was excited this morning to meet with members of the Central North Island Iwi Collective, who of course have their agreement coming into effect tomorrow, 1 July. There are fantastic possibilities for forestry in that particular area, and we want to make sure there is certainty for those members in going forward, so that in terms of their setting big goals, they can get out there and achieve them. I do not see that as a Government we want to be getting in the way of organisations that see great potential in forestry, and that have great ambitions in terms of nurturing the environment so that it is there for generations to come. When we talk to iwi, we find that that is what they say time and time again. They want to protect their assets, they want to make sure they are there for their children and mokopuna, and that is what members on this side of the Chamber are interested in, as well. So it is really important that we provide that certainty.