Climate Change Response (Moderated Emissions Trading) Amendment Bill

Hon Dr NICK SMITH Link to this

Oh, excuse me! I raise a point of order, Mr Chairperson. I am more than happy to tolerate interjections but I think swear words of that sort are quite inappropriate, and I ask you to take some action.

Hon Dr NICK SMITH Link to this

First we said we would align the scheme more closely with Australia’s, and we are doing that.

The second thing we said, in respect of our changes to the scheme, is that we did not see an emissions trading scheme as some means for the Government to grab great wealth from the private sector, and from families and homes. We said we wanted a scheme that would provide a financial incentive for fewer emissions but would not simply export industry offshore. So in aligning this bill with Australia’s scheme, we are saying we want to do our fair share on climate change. It is true that the changes we are making do not result in the Government’s making billions of dollars. That is true. Does it involve a cost to the taxpayer? No, it does not.

Hon Dr NICK SMITH Link to this

Mr Hodgson claims that it does. Let us be clear about Treasury’s projections. I know that members opposite have become very excited about the $110 billion figure. Let us be clear, though, and honest with the public about what Labour is saying. First up, Treasury is saying that $50 billion more revenue would come to the Government under the previous Labour Government’s emissions trading scheme to 2050 than under National’s scheme. Well, that is true, but it relies on a faster abatement rate than that of our proposal to align with Australia’s scheme. So if members opposite want to get up and say that our scheme would take $50 billion more from New Zealanders than Labour’s scheme would have done, they are right and they should be upfront about that. But that is quite different to describing a cost.

How do they get to that $110 billion? They say that every year—

Hon Dr NICK SMITH Link to this

I say to Mr Hodgson that it is about being honest about what Treasury is saying, not misinterpreting it.

The second point members opposite make is that if we invest the money from the emissions trading scheme—those super-profits—and compound the interest, we can add that up to $110 billion. Well, hang on a moment! When the previous Labour Government announced its emissions trading scheme it said that the Government would not bank the super-profits of the scheme but would reinvest them in climate change policy. So my response to members opposite is that they cannot say, on the one hand, that Labour would spend that money on climate change and, on the other hand, that it would claim the interest at the same time. That is not consistent.

The members opposite are misleading on a third point. With their rhetoric they say that this is a big subsidy for those big ugly international corporates. Do members opposite know that the advice is that 80 percent of the allocation that we are debating is those big ugly corporates—those 32,000 New Zealand farmers? Why not call them what they are? Members opposite are really saying that they want to incur on New Zealand farmers $40 billion more in costs. That is what they are really saying, and they should be honest with the electorate and say that that was the advice. But this Government is saying that we do not want to make those super-profits from an emissions trading scheme.

We said a third thing to the electorate, and we were quite upfront about it in our policy. We said that we wanted to take an intensity-based approach. This is very interesting. The Emissions Trading Scheme Review Committee sought advice from two of New Zealand’s most important economic analysts—that is, Infometrics and the New Zealand Institute of Economic Research. How many times have I heard those two firms, and their advice, quoted in this Parliament? In my career here I would say I have heard it hundreds if not thousands of times. I have heard the Opposition quote both those firms over and over again. What did the New Zealand Institute of Economic Research and Infometrics advise the special select committee? The first thing they said is that in the short term it was actually a pretty even argument between a carbon tax and an emissions trading scheme but, on balance, they thought we were best to progress with an emissions trading scheme. The second thing they said was that the best way to avoid the problems of carbon leakage—that is, just exporting industries offshore—was to take an intensity-based approach. The intensity-based approach is what is in the Carbon Pollution Reduction Scheme in Australia, and that is another strong reason for that approach.

These amendments are a sensible way forward for New Zealand on one of the most complex areas of public policy.

Hon Dr NICK SMITH Link to this

The member interjects about the process. First I point out that a year ago, when Labour had its climate change legislation before the House, it introduced not just one Supplementary Order Paper—I have introduced one—but four Supplementary Order Papers. No briefing was provided, as I provided to members on mine, and they were passed into law on the same day.

Hon Dr NICK SMITH Link to this

I put an issue to the member who is interjecting. I invite her to remember that when I was having discussions with the Labour Opposition about an agreement that we might be able to reach, I said to them that I was running into a real deadline. I needed to get an amendment bill through the House before 1 January because there were problems with the legislation that would come into effect. I said to them that we really needed to conclude those discussions quickly because I was running out of legislative time and the bill had to go to the select committee. Do members of the Committee know what Labour members said to me? They said that if I agreed with them, they would support the bill not needing to go to the select committee.

Hon Dr NICK SMITH Link to this

Let us be clear. If we get an agreement with the Labour Party, the bill does not have to go to the select committee, but if we get an agreement with the Māori Party, the Labour Party has a completely different standard! That is why I say to Labour members that I will test them on their rhetoric every way in this debate, because in this bill we have a sensible way forward on climate change.

The last point I make is that we accepted an agreement reached in good faith with the Māori Party, and the moment that agreement was announced I said that I remained as committed as I was the day before I reached agreement with the Māori Party to continuing discussions with Labour, because it is my view that for all the rhetoric that will occur in the Chamber over the next couple of days, there is actually a very high level of agreement about the sensible way forward. There is a very high level of agreement. We agree that an emissions trading scheme is the best way forward. We agree that we need to have allocations. We agree that we need to have transitional measures. We agree that the science is such that we need to take action. So it is my view that this bill is the responsible and right thing to do on this complex issue.

I am really looking forward to a detailed debate in this Chamber. We might get away with sound bites, rhetoric, and spinning outside, but in this Chamber we will scrutinise every single one of the false claims that are being made by Labour on this scheme. The scheme is the sensible way forward, and I am looking forward to that debate.

CHARLES CHAUVEL Link to this

But the select committee process—which Jo Goodhew did not appear in at all, I think, but other members opposite did—that we have just been through shows how important it is that we should have this proper independent level of analysis. It shows that complaints about its absence are quite justified.

The other part of this Supplementary Order Paper would establish an advisory committee on climate change. It would be an independent Crown entity, it would provide advice to Ministers, and it would promote an informed public debate on the public policy response to climate change. The committee would be required to consult all affected parties before it tendered its advice to the Minister. If the Minister is serious about the pious words that he uttered while on his feet earlier, he will have his party consider this Supplementary Order Paper with great care, and determine the position that National ought to take on it. It is my submission that this is the sort of legislation that we ought to see in this area if we are serious about wanting a consensus in this country.

I will now talk to the structure of the Supplementary Order Paper. It would make two changes to the existing administrative provisions of the principal Act, the Climate Change Response Act, to increase transparency in policy making. First of all, there would be a requirement on the chief executive of the Ministry for the Environment, which is the inventory agency under the legislation, to produce an annual long-term forecast of emissions and removals of greenhouse gases. The suggestion in the Supplementary Order Paper is for a 50-year range of projections. The Supplementary Order Paper would provide that in preparing that forecast, the chief executive would have to act independently from the Minister and apply his or her best professional judgment to the task.

Just to make sure that the process was transparent, the chief executive would be required to consult with the advisory committee, which would be set up under the second part of the Supplementary Order Paper, on the methodology that he or she proposed to use, and then publish the committee’s views as a result of that consultative process. Then, the Supplementary Order Paper would require the Minister and the chief executive to seek and consider the advice of the advisory committee before any regulations or Orders in Council were made under the legislation. Again, for the sake of transparency, all that advice would be laid on the table of the House of Representatives; all members would be able to see it. If regulations or orders were made that contained provisions different from the advice, the Minister would be required to present a statement to the House setting out the Minister’s reasons for not agreeing with the advice. Those are the two things that I am hoping to see.

As far as targets are concerned, the Supplementary Order Paper would insert a new part 6 into the principal Act. It would set national greenhouse gas emissions reductions targets. The proposal is that we would aim in the legislation for a 50 percent reduction in net emissions from 1990 levels by 2050. I have deliberately put the National Government’s target in there, because I want to test whether National is serious about this sort of legislation. If Labour were in office, it would be bolder. But in the hope that the Government might support the amendment if it actually puts in place its own target, I have left that one there. Let us see whether the Government is willing to stand by that target by agreeing to legislate it.

To provide greater certainty for the pathway toward the target, the Supplementary Order Paper would also require the Governor-General in Council to set a series of intermediate targets, which would apply for 5-yearly periods, commencing in 2013. Although the amendment would allow for some flexibility around the intermediate targets, the suggestion is that the intermediate target for one period must not be higher than the target in the immediately preceding period. Net emissions in 2020 must be at least 10 percent lower than the 1990 baseline. Net emissions in 2050 would have to be 50 percent lower than the 1990 baseline. To increase the possibility of political consensus, the Supplementary Order Paper would require any order setting a target to be confirmed by an Act of Parliament by 1 July in the year after it was made.

We are trying to set in place a transparent process of consultation. Under the Supplementary Order Paper, the Minister would have to publish a draft target together with a statement explaining why that particular target had been chosen. Public submissions would be made to the expert advisory committee. It would have to consider the Minister’s reasons in any submissions received, and report back to the Minister before the target was set. The committee’s advice would then be presented to the House. If the target that was finally set contained provisions that were different from the advice in the committee, the Minister—again in a mirror provision to the provision on expert advice—would have to explain to the House in a statement why it was that that difference occurred.

As well as setting national targets, the Supplementary Order Paper would require the Minister to develop proposals and policies that the Minister considered would enable the targets to be met. We would not just have those figures plucked out of the air; we would have genuine, open, transparent processes by which we would see what policies would achieve the emissions reduction targets that the Government adopted. Whenever a new target was set on an intermediate basis, the Minister for Climate Change would have to present a report to the House on the proposals about how to reach those intermediate targets and also how they would contribute to the ultimate reaching of the final 2050 target.

I mentioned earlier that the Supplementary Order Paper also aims to establish an advisory committee on climate change. It would be an independent Crown entity. Its principal objectives would be to provide independent advice to the Minister on matters relating to the public policy response to climate change and to increase the effectiveness of public participation in the making of policies and laws in this area. One of the problems we have in this whole policy area is that it is all too hard. People’s eyes glaze over when we talk about emissions trading. We would try to have an open expert body proceeding in a way that contributed—[Interruption] I will finish the call shortly—

CHARLES CHAUVEL Link to this

I thought that under the leave provided that requirement had been waived for this debate. Am I wrong in that?

CHARLES CHAUVEL Link to this

Yes.

CHARLES CHAUVEL Link to this

I appreciate the indulgence. I will try to conclude in relatively short order. I was just making the point that the committee would help to increase public involvement in the debate, which is something that I think we all agree is needed if we are going to have enduring climate change policy.

In relation to its advice, the committee would have to report to the Minister by 1 December 2011 on whether the national emissions reduction target of 50 percent in net emissions below 1990 baselines needed to be altered. This report would be timed to allow the committee to have regard to the outcome of the current round of international negotiations on climate change. The committee would be required to provide advice to the Minister on the intermediate target to apply in every 5-year period commencing in 2013. Before providing advice the committee would have to consult with affected parties in an open and transparent manner. There would be annual reporting by the committee on the progress being made in meeting New Zealand’s emissions reduction targets.

In conclusion, as it is currently worded, the principal Act requires the Minister to establish a panel anyway, to review the emissions trading scheme established by the Act. The Minister has to do that every 5 years. My Supplementary Order Paper would amend those provisions to require that review to be conducted by this expert standing committee. The committee would be given more independence than the panel in setting its terms of reference in respect of any review, although the Minister would be empowered to require that the committee would have to consider specified matters as they arose in the international negotiations or otherwise. The bill would require the committee to consult with the public during its review. Once the review was completed the Minister would be required to present the committee’s report and the Minister’s response to the House.

This Supplementary Order Paper is an attempt to set up a transparent process for reaching targets, enshrine the Government’s own 2050 target into law, and put in place structures designed to facilitate a national consensus around climate change policy that is badly needed. I hope it receives the support of the Committee.

Hon DAVID PARKER Link to this

Before the dinner adjournment I was describing how the level of free permit allocation is so excessive and lasts too long. I explained that under the existing Labour Party scheme, which is already in law, major emitters get a very generous rate of free allocation, which is capped at 90 percent of the rate of their 2005 emissions. They get that free for 10 years, then after that 10-year period their free allocation abates at the rate of 8 percent per annum, so that by 2030 they have to pay for their emission rights, just as all other members of the public have to pay for their emission rights, their electricity, and their petrol. At least by 2030, then, we would have equality across the economy, and by that time companies would have had 18 years to adjust to emission pricing, which seems a pretty fair transitional period.

In contrast, the National Party scheme has an uncapped allocation, so that emissions can grow. Indeed, I challenge the Minister to answer the questions that Brian Fallow posed in the New Zealand Herald, which the Minister refused to answer at question time. The questions are: because there is so much more generous free allocation, how much do emissions go up? How much later do they peak? How much extra is the bill as a consequence? Anyway, we came down from the general proposition to an example, in respect of Rio Tinto, of the annual cost of a subsidy estimated by the Parliamentary Commissioner for the Environment—in the only study that has had the involvement of Treasury; I think it was involved in a study for the Climate Change Leadership Forum—to be $100,000 per employee, per annum.

The other example I will use is one that we referred to in our minority report; it is Methanex. Methanex uses gas to convert it into methanol. The company has come to New Zealand because New Zealand’s gas price, even now, is lower than the average gas price around the world. Before Methanex came to reopen its factory in New Zealand, it came to the then Minister responsible for Climate Change Issues and Minister of Energy and asked what the effect would be on emissions pricing. I happen to know very well what happened at that meeting, because at the time I held those portfolios. I told Methanex that under our emissions trading scheme it would face the cost for its increasing emissions. Methanex understood that, and it invested on that basis. Its free allocation under the model we had, which is currently the law, gave it $9.5 million worth of free allocation under the existing scheme. As of tonight, that will increase to a minimum of $15.1 million per annum and possibly go as high as $80 million, which is an increase of over $70 million per annum.

The question I have for the Minister is why New Zealand has not seen one bit of analysis as to why that increase is justified. We have not seen how much that will cost per employee. If it goes to $80.9 million per annum, the cost may well be close to $1 million per employee per annum, and it is just not wise. We have not seen one bit of analysis from the Government, on the part of Treasury or anyone else, that analyses why that is necessary. In reality, if that were not given to Methanex, it would do as it would otherwise have done: it would pay for gas, and it would probably share the cost of emissions with the gas producer. It would continue in business, but the taxpayer would not be poorer to the tune of up to $80 million per annum, which could well be a subsidy per job of close to $1 million per employee per annum. That is just absolute nonsense.

CRAIG FOSS Link to this

Quite simplistic? It will not be as simplistic as that member’s history as a Minister, but we will not go there at the moment. I cannot recall seeing that member at the select committee; maybe she was there.

Why is the free allocation there? We have got the 1.3 percent per annum phase-out rate in this bill. We must remember that agriculture alone has had an efficiency gain of about 1.5 percent per annum for the last 10 to 15 years, or maybe for even longer. People in the sector are doing it anyway.

My point is, quite simply, that we should acknowledge what is in place already. Yes, there are these crazy headlines that other members are talking about, but the free allocation is about saving New Zealand jobs, holding on to what we have, and growing our economy. It is as simple as that. I cannot quite see why other members get up to try to argue that point. I am yet to be convinced. Let us have a debate about what this particular bill is putting in place, without, as some members are doing, ignoring what is in place now. Thank you.

Hon DAVID CUNLIFFE Link to this

My colleague remarks: “Only”, because that is a 50 with a lot of zeroes after it—$50 thousand million by 2050. The Government has, as recently as this morning, reconfirmed one of the two great assumptions upon which that mid-range Treasury estimate stands, and there is now consensus in this House on the price path for carbon that the Government is using as the basis for its estimates. There is now a shared understanding that that price is $25 a tonne until 2013, and $50 a tonne thereafter, which is fairly parallel to the estimates made by the Australian Government. Of course, this Government is giving, in addition to the $25 short-term price, a two-for-one, 50 percent, “buy now, get one free” discount, which is kind of like Noel Leeming on steroids, but I leave that aside.

The key difference between the $50 billion, or 6 to 8 percent of GDP debt that was in the Cabinet paper of 21 September—which was the basis for the Government’s decision to proceed with this bill—and the $110 billion, or 14 to 17 percent of GDP that Treasury and the climate change working group officials briefed the Finance and Expenditure Committee on, is not in respect of the price path but in respect of whether it is fair to include the compounding effects of the charge. That is something akin to the time value of money, allowing a cost of capital, and, of course, there is a broad precedent for doing so in the Government accounts.

Every Government entity that has a capital asset pays a capital charge on that asset. It varies by premium on the Government’s cost of capital. It is in the range of 8 to 11 percent, depending on the entity. It is charged every year. It is an expense on that entity’s income statement, and it can be capitalised as a debt on the entity’s capital account. So that is part of Government accounting. I see no reason why we should depart from the process of including in the forward cost estimates some reasonable assumption around the cost of capital. Treasury’s version of that, as disclosed to the select committee, was that it gets the figure to around $110 billion cumulatively, including those capital charges or interest charges by 2050.

We are happy to have a reasonable debate about whether the result is $120 billion, $80 billion, or $90 billion, depending on what interest rate is used. Of course there will be variability, and that is why we asked the officials, when they were before the select committee, to show us the bell curve—the distribution of those costs depending on the various modelling assumptions that they had put into their analytics—but they could not. Both Treasury and the climate change working group could not explain what sensitivity testing, if any, they had done around those humungous estimates. That was of great concern around the committee table, although some were too polite to say. There is to this day, as far as we can tell, no bell curve of simulated probability distribution for those costs. We know that there are different variables that can be assumed. As Treasury’s regulatory impact assessment unit said, the bottom line is that the quality of the analysis here is just not appropriate for a bill of this magnitude. I mean no offence to officials, who have had an extremely difficult job and have been working under extreme time pressure to get this bill through.

So we are left with taking a most generous position. Let us assume away any need for sensitivity testing. Let us take the Government at its word that it will be only $50 thousand million by 2050 to ordinary Kiwis on their net tax position, not $110 thousand million by 2050. Let us give that one, for now, for the sake of argument, to the Government. What next? It is now common ground that the Cabinet paper of 21 September, the crucial Cabinet paper, was wrong. There was a typographical error in the text. It was not 6 to 8 percent of GDP but 14 to 17 percent of GDP equivalent. I hear people in TV-land or radioland asking themselves: “Does this matter?”. Let me put it in context. When the Government changed at the last election, the total amount of net Crown debt was a couple of percent. The total amount of gross Crown debt—that is, all the debt the Government owed around the world—was equal to about 18 percent of GDP. It had been down to 17 percent but it came up to around 18 percent before the election.

So what the Government is essentially buying into here is a doubling of the current level of gross Crown debt in terms of relative impact on the Government balance sheet. That is a big number. It gives the lie to the Government’s protestations that it cannot afford adult and community education, because that cost $13 million, not $50 thousand million. It puts the lie to the supposed blow-out on accident compensation, a supposed deficit of around $2 billion that is actually running at a cash surplus of around $1 billion positive. But, either way, that cannot matter so much, because the Government has just spent $50 thousand million of taxpayer money subsidising big polluters.

But even then, for the sake of argument, let us give the Government the benefit of the doubt. The next stage of the Government’s argument is this: it is not really real money. It is just play money—think Monopoly. There is a problem with that argument, because New Zealand, the Crown, has ratified an internationally binding treaty obligation under the Kyoto Protocol. We all, collectively, owe it to the United Nations if we run short of net carbon credits—period. Therefore, we will have a liability—

Hon DAVID CUNLIFFE Link to this

I said “net”, I say to the Minister in the chair. The Minister is welcome to explain that; I hope he will take two or three calls.

But even if it were Monopoly money, then the final stage of the Government’s argument is this: because this will not necessarily be negative from a zero-tax position, we do not necessarily “owe” it, but it might instead mean we are not spending it on something else, and there are two problems with that. Firstly, one cannot say in public accounting that this tax dollar goes to that expenditure. It all goes into one central pot, and it is incontrovertible, whether the number is $50 billion or $110 billion, that it goes out of that pot, and our net position will be that much worse off relative to where we would have been under the existing scheme.

It is then a second order discussion in terms of where we start from with our other fiscal assumptions. Any Government by 2050 will face hard choices. It will have a lot of retired people to support. It will have a huge need to invest in environmental technology and climate remediation and adaptation. All of that will have to be paid for, and that is part of the reason that we need fiscal flexibility at that point. That is very, very important.

So this is real money. It is a real trade-off. It is at least $50 thousand million by 2050, which is tens of thousands of dollars, at least, per man, woman, and child. It really matters, and it buys us—what? It buys us less than a 1 percent reduction in net emissions from agriculture and heavy industry—less than 1 percent.

The Parliamentary Commissioner for the Environment said that based on the analysis and the numbers, there is no way these provisions will achieve even the Government’s own paltry target. Even on the Government’s own analysis, even on the Government’s own design, even on the Government’s own target, by several independent authorities, it cannot and does not work. So why are we here on the eve of Copenhagen with great uncertainty still about Australia? Why are we passing this bill in urgency when it is a complete fiscal shambles? I will talk again later. The process has been a shambles.

Hon Dr NICK SMITH Link to this

Well, that is very interesting. Let us go back a year. Just 12 months ago the Green Party was criticising the previous Labour Government for the amount of allocation it was making to industry. Do members know what the then Minister, Mr Parker, said? He said that these allocations are not a subsidy. Well, that is interesting. I have the numbers here of just how many units are allocated under the existing law, so when Labour allocates 654 million units of carbon—that is what its law does—that is not a subsidy. But when a change of Government occurs and we do an allocation then it is a subsidy. I want a member to explain why it was that when Labour’s legislation provided for an allocation, Mr Parker very specifically said to the Greens that it was not a subsidy, but now it is. I think Labour members have to explain that.

The second point is that members have said there has been no analysis. Those were the specific words that Mr Cunliffe used. Well, I have a report from 20 May 2009 by the New Zealand Institute of Economic Research and Infometrics. This joint report very specifically recommends that the most economically efficient way to deal with the issue of leakage is a production or intensity basis. In all the debates around the economy that I have heard in my 20 years, I have heard those two firms quoted more often than any. In fact, we said that there was some contrary advice. Last year we had one report from the New Zealand Institute of Economic Research saying one thing and we had Infometrics saying another. We said that this was an important call and a really big decision. We wanted to get the best advice possible so we sought a joint report. So when members say that there has been no analysis, I say that they have to look at the detail of that report, which recommends exactly the approach that is being taken in this bill.

The third point is around the issue of allocation. The first point to understand is this: the costs, no matter what way we cut them, for the first 10 years of the emissions trading scheme under the existing scheme and the new scheme are no different. Let me go through this very specifically. We have a softer transition regime. The Government said that there is a recession and the last thing we want to do is for an emissions trading scheme to snuff out the fragile recovery. We said that in those first few years we do want to take a softer approach. That means that New Zealander’s petrol bills will go up by half the amount, rather than a bit over 7c a litre. It will be a bit over 3c or 3.5c a litre. In respect of power prices, rather than the price going up by 10 percent it goes up by 5 percent. There is a cost involved; that is quite true. The analysis shows that the cost of the change is $400 million.

For the next period from 2013 to 2018 this revised scheme costs less. Let me explain why. The members were very keen to quote Comalco earlier. When they talk about the phase-out rate, we should remember that in the current scheme there is zero percent phase-out of industry support from 2013 to 2018. So why is zero percent OK but suddenly then it is 8 percent? This scheme starts the phase-out at 1.3 percent per year and that does result in some savings. So over the first 10 years of the scheme there is absolutely no difference in terms of the balance.

The thing I find most interesting is this: I am pretty confident that this John Key - led Government will be in office for 10 years.

Hon Dr NICK SMITH Link to this

I am quite confident of that.

Hon Dr NICK SMITH Link to this

My colleague Mr Carter says it will be more than that. But it is interesting that the most controversial point in this bill is not about what the rules are for the next 10 years but what they are after that period. There is not much controversy about the next 10 years. Where are all the members’ debates about what we are doing incorrect in that first 10 years? [ Interruption] Mr Chairman?

Hon DAVID CUNLIFFE Link to this

So, for example, you correctly ignored my plea for a third consecutive call during my last intervention, but that does not preclude me from taking a subsequent call during this part.

JOHN BOSCAWEN Link to this

I do have new material. I was interested in that leave, as well, so I took the trouble of visiting the Clerk, Mary Harris, in her office late this afternoon. She advised me that the leave meant that members had unlimited calls, but, subject to the ruling of the Chair, the Chair would allow no more than two calls taken together. In essence, she was saying that we could give as many 10-minute speeches as we wanted and as the Chair would allow. We were not restricted to one double call or two double calls. As long as we had new material, and it was a useful debate, and the Chair allowed the debate to continue, we could take as many double calls as we wanted, and the Minister could take as many double calls as he chose. That was from Mary Harris, the Clerk of the House, this afternoon.

MOANA MACKEY Link to this

David Carter has just asked what this has to do with the emissions trading scheme. That is unbelievable. The Minister of Agriculture does not know that we are changing, under this legislation, the way we provide free allocation to the fishing sector.

MOANA MACKEY Link to this

That is what I am talking about. I ask Mr Carter, please, to listen.

MOANA MACKEY Link to this

Oh, dear Lord! Someone who did not even realise that this provision is part of the emissions trading scheme might do well to listen, rather than yell at me across the Chamber.

The fact is that under the legislation there is a change by which the free allocation goes from the vessel operator to the quota holder. If fishers fish a stock that is not in the quota management system, they now get nothing. Under the previous legislation they did get compensation. I ask Mr Carter whether that is fair. That is fair? So if someone fishes a stock—

MOANA MACKEY Link to this

That is right. For the big end of town it is fair, I say to Mr Carter. Fishers who are fishing something that is not in the quota management system face the same emissions trading scheme cost on their liquid fossil fuels as someone who fishes inside the quota management system, but they get nothing. Yet the person working inside the quota management system gets free allocation.

It is not only that, but aquaculture gets nothing. I ask Mr Carter whether that is fair. There we go—Mr Carter thinks that is fair. Not only that—

MOANA MACKEY Link to this

I ask Mr Carter to listen, because this is an important fact. Quota holders do not have even to fish their quotas to get the free allocation. So here is a free allocation that has been given to compensate those operators for an upfront cost of liquid fossil fuels, but if that quota is not fished and that cost is not even incurred, they still get the money. Oh, members opposite have gone very quiet now—Mr Carter is now reading a very important document that he has in front of him—because that is indefensible. If we believe that the fisheries sector needs free allocation, is trade-exposed, and deserves that free allocation, why would we not give it to the vessel operator, the person who is facing the upfront costs?

The argument we heard was that it damages the quota value. That was the reason to give it to the quota holder. But we can also address that by giving that subsidy for the liquid fossil fuel up front and thereby protecting the quota value. We can do that either way, and the officials told us that—that it was one way or the other. But the way the Government has chosen excludes people who fish outside the quota management system, including those in aquaculture. I do not understand why the Government is giving it to people regardless of whether they fish their quota. They are not facing a cost, yet they get the money. I really want an explanation from the Minister on this matter. I believe it is much fairer to give that money to the person who is facing that cost, because that it is what it is for. It is there to compensate for any increase in liquid fossil fuels that the vessel operator may face, so why is it not given to them? It can be said that it will be passed on, but there is no guarantee that it will be passed on. I know a whole lot of people in the fishing industry who would say: “You’re dreaming if you think this is going to be passed on to us.”

In some cases the quota holder and the fishing vessel operator are the same person, so that will not be such a big issue. But if this is a deal that the Minister had to do just to get support, then he should just tell us that, and I will sit down and never mention it again, because I know that this is not about defending one argument or another. I do give that promise; I say to Mr Carter that I will not mention it again. But if that is what it was, he should just tell me.

MOANA MACKEY Link to this

Yeah, right—that is probably true. I cannot understand why the free allocation would not be given to the people facing the upfront costs, which also protects that quota value. We do everything that the officials told us they were trying to achieve in giving it to the quota holder, but it seems to me that this protects the big end of town; this does not protect the little single-operator fisherman who is trying to keep afloat, and who was facing a cost with the emissions trading scheme under the previous bill—

MOANA MACKEY Link to this

Yes, that is right—leasing of quota. He thought he was going to get some help under the previous bill. To be fair, that was put in late in the piece, and we acknowledge that. We were very much swayed by the very good submissions we heard at the Finance and Expenditure Committee—and the Minister responded.

MOANA MACKEY Link to this

No, we were. Why would it not be given to them? We heard some very impassioned submissions at the select committee from people who could just not understand. Everything the Minister wants to achieve could be achieved by giving the free allocation to vessel operators, and then everyone would be included. Then we would not shut out aquaculture, and we would not shut out people fishing non - quota management system stocks. More than that, it would be given to people who are facing the upfront costs. We are actually paying for a cost, as opposed to just handing over a cheque for millions of dollars with absolutely no requirement for quota holders even to fish those quotas. This is a genuine question, and I would appreciate the Minister’s response.

Hon Dr NICK SMITH Link to this

That is a very good question. The news release from New Zealand First said that in its negotiations with Labour it secured 50 percent allocation for the fishing industry. Is not that interesting? When Labour does agreements with other parties, as it did with New Zealand First to provide the 50 percent for the fishing industry, that is just what one does in Government! But now Labour is in Opposition, there have been all sorts of quite appalling accusations, and that illustrates the double standards.

We now come to the second question. My colleagues and I campaigned on a policy of increasing the allocation to 90 percent. The debate is whether it should go to quota holders or to vessel operators. The advice we had is that it is a relatively balanced call. Let me tell members the strong view of the Māori Party. The Māori Party did contribute to the debate. They said that in New Zealand about 50 percent of the fish are caught by foreign fishing vessels. The Māori Party had a strong nationalistic view—I think that would be a fair way to express it, I say to Mr Te Ururoa Flavell—that to give half of this allocation to fishers who come and catch that fish, mainly annual catch entitlement coming in, was not the support that the Māori Party wanted to provide, and it did make that strong submission.

There is also quite a strong and more principled argument beyond just that issue. The compensation for fishers is around a loss of asset value. I will tell members why. There is no choice about whether the fish is caught in New Zealand’s exclusive economic zone. It is not like an issue like aluminium, which might be manufactured offshore. It is not like the issue of New Zealand Steel, where it might be offshore and there are competitive, at-risk issues. What we have here is an issue where the fish can be caught only in New Zealand areas. It is a loss of that property right, so in my view that is quite a sensible provision in this bill. But I just say again that it is a bit rich of Labour to be arguing about the level of support to the fishing industry—

Hon Dr NICK SMITH Link to this

—when the record, I say to Mr Cunliffe, is that Labour was proposing in its bill to provide absolutely zip, zero, for the fishing industry.

JOHN BOSCAWEN Link to this

Mr Smith says that we are giving it to forestry. Is that not interesting, because the Federation of Māori Authorities came to the select committee and said that the emissions trading scheme represents the biggest confiscation of Māori wealth since the 1800s. [ Interruption] Shame—exactly.

Let us talk about the fishing industry; Mr Smith took a query on the fishing industry. He talked about the fact that Labour members were johnny-come-latelys to the fishing industry and that the industry was not going to have any subsidy whatsoever, and that is absolutely true. I understand that at the select committee for the last bill the decision to put in a 50 percent allocation was a last-minute decision, and the fishing industry was to get a 50 percent allocation for the 3 years up to 1 January 2013. National has trumped that with a 90 percent allocation. What happens on 1 January 2013? It goes to zero.

Let us have a look at what the National minority report said on Labour’s emissions trading scheme last year—and I am told it was written by the current Minister. If that is so, the Minister wrote, on page 6: “New Zealand’s fishing industry exports 92 percent of its output, earning $1.3 billion per annum.” It is an energy-intensive sector, I say to Mr Smith, with fuel making around 40 percent of the operating costs of vehicles. The bill provides an allocation of units to sectors such as meat, dairy, cement, steel, forest, and aluminium but excludes the fishing industry. This arbitrary exclusion does not seem well justified.

I wonder what Mr Smith says to his constituents in Nelson. I was in Nelson last Friday, as he very well knows, and I saw the Sealord factory. I saw that it employs 400 people. I was told that the processing that the factory does could just as easily be shipped off to China, as has happened at so many other processing factories that have been closed down, and he has the audacity to stand up here and say that this is an issue of property values. It is actually an issue of keeping the people employed at that Sealord factory.

But I move on, because I have allowed myself to be distracted in responding to Mr Smith’s comments. I would like to pay a special tribute to two people on the select committee, and I hope they hear my comments. The first person is the committee chair, Mr Craig Foss, because Mr Foss was given a hospital pass. He was given the job of doing the Minister’s bidding and I feel very sorry for Mr Foss because I suspect I caused him a few problems. But Mr Foss was given his riding instructions and he was told to have this bill back in the House on 16 November, come what may, and that it did not matter if the committee report was not ready, or if the revision-tracked bill had turned up. I know that Mr Foss will hear my comments, so I pay tribute to him because he was given a hospital pass.

The other person I pay tribute to is Rahui Katene, because I would suggest that, probably, the overwhelming amount of what I know about this emissions trading scheme I have learnt in the last 6 weeks. It was interesting that the Hon David Cunliffe and Amy Adams both acknowledged that they had not previously sat on select committees. The reason I acknowledge Rahui Katene is that she had the courage and the wisdom to vote with the Labour Party, the Green Party, and me to allow submissions to be heard. Jeanette Fitzsimons is nodding her head. Jeanette Fitzsimons stood in on that select committee.

Dr PAUL HUTCHISON Link to this

—and he asks why. It is because, indeed, it is exactly that. It is a very, very practical response to the previous Labour Government’s legislation, which was totally impractical and out of this world.

It was a little rich to hear the Hon David Cunliffe going on about Treasury’s prediction of $100 billion. He was trying to verify that figure in as many ways as he could, twisting and turning and thinking that people would believe him. That is a bit rich, because it was the previous Labour Government that, back in 2005 and 2006, campaigned and said a billion dollars would come New Zealand’s way if we took on its emissions trading system. What happened? We were a billion dollars in deficit. Labour’s track record is one of that sort of predictability.

Dr PAUL HUTCHISON Link to this

Mr Cunliffe knows very, very well that this scheme will be reviewed at 5-yearly intervals and will be constantly monitored. He knows very well that there will be changes internationally that we cannot predict right now.

In this excellent Part 1, which we are debating today, we are introducing the absolutely practical and appropriate amendments that have come on Supplementary Order Paper 98 in the name of the Hon Nick Smith, and the amendments introduced by Rahui Katene of the Māori Party. I say to Mr John Boscawen that he was right; Craig Foss made an excellent job of chairing the Finance and Expenditure Committee, under very, very difficult conditions. Indeed, he was right to say Rahui Katene and the Māori Party have been quite appropriate in their response to ensure that New Zealand ends up with a practical and realistic emissions trading system.

Earlier on this afternoon I recall that the Hon David Cunliffe made a comment that was a bit appalling. He said something about this generation of New Zealand’s children entering its twilight phase. That epitomises the pessimism of the Labour Party under this scenario; it absolutely epitomises the conspiracy theories that Labour members are manufacturing and say might occur. Those theories are similar to the $110 billion figure, which is just absolutely unrealistic. The other thing that he said, which worried me greatly, when he was talking about Copenhagen is that Mr Charles Chauvel will be there as well, undermining the extraordinary leadership we have from the Hon Tim Groser in putting New Zealand’s position. He will be there undermining and sabotaging it, and that is totally, totally unpatriotic to New Zealand.

There is no doubt that Part 1 implements exactly what the Hon Nick Smith mentioned earlier this afternoon: a workable, affordable emissions trading system. It will align New Zealand’s scheme with the Australian scheme. I challenge Charles Chauvel, the Hon David Cunliffe, and the Hon Pete Hodgson to come into my electorate of Hunua, which I very proudly represent, to speak to my farmers, my growers, the people who work in glasshouses, the people in New Zealand Steel who employ a thousand workers, and to tell them how the previous Labour Government’s emissions trading scheme would affect them. Those people are the backbone of the New Zealand economy. I challenge those members to come into the electorate that I very proudly represent and find out for themselves how unrealistic the Labour emissions trading scheme is. Those members would be thrown out on their ears. Those people in my electorate work for New Zealand and are the backbone of our economy, yet the Labour scheme would cut them off at the knees. Those Labour members do not go out of their urban safety and security to find out what it is really like for those people, and to find out how small, medium, and large businesses would be affected by Labour’s emissions trading scheme.

There is no doubt that we can be very, very proud of National’s emissions trading scheme, which we will progress in the next few hours, because it does indeed balance New Zealand’s environmental responsibilities with the economic realities of the day. I see a snide smile on the face of David Cunliffe, and again I say to him that he should come into my electorate and tell my constituents that Labour would double the expenses for their businesses. That is totally unacceptable. A little while ago I was over in Canada, and we see the situation there where that country is just not prepared to introduce an emissions trading system, yet here in New Zealand, under a National Government and its coalition partner, the Māori Party, we are bringing in a highly realistic scheme. It is excellent that Part 1 balances things that will be acceptable to the majority of New Zealanders, and will keep viable the majority of New Zealanders’ businesses. Indeed our scheme will be a leader over in Copenhagen, as New Zealand becomes only the second country that has actually implemented an emissions trading system—second to Europe.

JACINDA ARDERN Link to this

And there is the petroleum strategy, as my colleague rightly points out.

All of that would be fine and good if the impact was isolated to the Government alone, and if this shambles reflected just on Cabinet, but it is not. The impact of this bill, which is primarily set out in Part 1, will affect two key areas. The first is New Zealand households and Kiwi families, whom this Government claims to protect via this legislation. The second is, ultimately, the environment. In every point that I have looked at, the legislation comes out on the negative on those two key areas.

Let me break it down for members. We have heard a lot of debate about whether we trust the figure of $110 billion that we estimate this bill will cost. If we translate that into a percentage of GDP we are looking at 15 to 17 percent of GDP by 2050. This is a crucial point of differentiation between Labour’s scheme and National’s scheme. Ultimately, Kiwis will pay. Kiwi households will pay and Kiwi families will pay, and they will be subsidising heavy polluters because of a lack of a cap and because of the ongoing subsidisation of those heavy polluters. Those are key points of differentiation between the two schemes. Does any of that matter? If we are ticking the boxes that were apparently set out for us as part of our obligations, does any of that matter? I think it is a very cynical view that says that the idea of our overall emissions and our overall contribution to climate change does not matter. Well, it does. This is not just about ticking boxes.

We have had clear indications not only from the New Zealand Labour Party but also from the Greens that this scheme creates no incentive for polluters to reduce their emissions. In fact, the New Zealand Business Council for Sustainable Development stated: “Overall, this proposed policy appears to greatly reduce incentives to heavy emitters to reduce emissions, increase costs of subsidies to them, slows down the timetable for reducing emissions and allows them to be increased in the meantime, by allowing production to rise (at a set carbon content per unit) without any clear cap on this.” Again, that is a key point of difference. “The more production rises, the more the taxpayer must step in to pay for the additional emissions.” Where is the incentive? Not only that, but where is the signal that New Zealand is taking its obligations seriously and not merely ticking the boxes? Those boxes are expensive and ultimately they will come back to haunt us.

Who exactly will they come back to haunt? This point has been mentioned briefly. Who exactly will the 15 to 17 percent of GDP that we are talking about by 2050 fall on? In 2050 who exactly will pay the 55 percent of emissions from high-emissions-intensive industries that the Government will be subsiding, and the 37 percent from medium-emissions-intensive industries that the Government will be subsiding? Ultimately, it will not be Mr Foss and it will not be Dr Nick Smith. In fact, it will not be any of us in this House. I am the youngest member of this Parliament, and in 2050 I will be 70 years of age. I most certainly will not be here. I will not be here, but our country will still be paying the bill. The tab will be picked up not by us but by our children and our grandchildren.

JACINDA ARDERN Link to this

I am quite willing to make a hypothetical point because to me, the fact that I am not a parent does not mean that I will neglect the responsibility that this House has to the generations who are not here yet. Members on the other side of the Chamber may trivialise that point, but I challenge them to go out and talk to the younger people who will come through, and who will one day be their constituents. They will surpass them one day, but they will ultimately pick up the tab that those members are leaving. This system is not a user-pays system; it is a vote now, pay later system. It is cynical. The fact that I am willing to take into account those who are not voting yet does not mean that the argument is any less valid.

Hon Dr NICK SMITH Link to this

No, it did not. It did not. I can quote Jeanette Fitzsimons’ repeated criticisms of the previous Government’s scheme for not having a cap.

The second double standard is really interesting. It again illustrates the double standards and cynicism of Labour. Labour members say that this scheme provides big subsidies for industry, right? In this bill they are termed allocations, and all the way through the debate Labour has been calling them a subsidy. I am pleased that Mr Parker is to contribute to the debate, because when Jeanette Fitzsimons challenged him on the amount of allocations in his bill, she referred to them as a subsidy. She said that Mr Parker’s bill—the previous Government’s bill—which provided 654 million tonnes of allocations, had a subsidy. The Minister Responsible for Climate Change Issues at the time, Mr David Parker, said that it was not a subsidy; it was an allocation. My question for Mr Parker is why, when he is in Government and he makes an allocation, it is not a subsidy, but when National makes an allocation, it is a subsidy? That sounds a tad cynical to me, to quote Jacinda Ardern.

Then Jacinda Ardern said that this Government had done nothing practical about climate change. Let me give her a couple of examples. Over the course of the previous Labour Government, which was 9 long years, let us look at how many homes it managed to insulate during that period. Do members know that in one brief year we have insulated more homes—10 times as many homes in 1 year—as did Labour in 9 years? Is that not an extraordinary, positive, practical achievement by this Government?

I can give another example of a practical area, in respect of solar water heating. I think that it is a good thing; I have a solar water heater in my home. Do members know how many solar water heaters have been installed during the first 12 months of this Government compared with the number installed during the 9 years of the previous Government? It is eight times the number. Hang on, eight times the number of solar water heaters have been installed in 12 months under National compared with what Labour achieved in 9 years, yet Labour members come down to the Chamber and say that the Government is not making any practical effort on climate change. I challenge Jacinda Ardern to a debate anywhere in New Zealand to talk about the positive things that this Government has done.

Let me take another area of cynicism. She said that the National Government, as per its commitments, removed the thermal ban, and that that would put up emissions.

Hon Dr NICK SMITH Link to this

That is right. So I went to the officials and asked them for an estimate of the consequences of removing the thermal ban, and I asked how much that would change New Zealand’s emissions profile. Do members know what the officials said?

Hon Dr NICK SMITH Link to this

They said that it would not make any difference at all, because it was so ineffective, so conditionalised. Again, we see that sort of cynicism from members opposite.

The last point I will make is about biofuels. Again, it shows the cynicism of Jacinda Ardern, because on most things Labour members tell only half the truth. They tell only half the truth. The bit she got right is that this Government removed the compulsion for fuel companies to provide biofuels. However, we replaced it with an excise advantage so that we could encourage biofuels. But Jacinda Ardern refused to pick that up, and right at this very moment, a new biofuel plant is being built in Auckland because of that scheme.

Hon Dr NICK SMITH Link to this

The member asked how much. Well, let us ask this question: how many litres of biofuel were provided for in Labour’s 9 years?

HEKIA PARATA Link to this

My apologies to the Committee and to yourself for doing that.

I move on from congratulating the general courage of the Māori Party to the particular and specific contribution that the honourable member Rahui Katene has made in tabling an amendment that would add new clause 5B to Part 1. I congratulate her because the amendment reflects a very detailed and considered approach. It advances the development of Treaty clauses that we have hitherto seen, in its specificity and in its application to particular parts of this legislation. It reflects the commitment moreover of iwi to work with the Government to ensure that the law can be fairly applied. So rather than talk about iwi involvement, this Government, together with its coalition partner, has been prepared to legislate for iwi involvement, to see the value that they have to contribute, and to understand that they want to be included partners in the designing and negotiating of what is best for our country, and not to be left, as the previous Government often left them, in litigious situations, arguing to the Government that their case be heard. So I congratulate Rahui Katene on that amendment and on the other amendments she has tabled.

The member’s amendments also provide for the involvement of iwi and Māori organisations where they are likely to have an interest. Those interests range from the developing of Orders in Council to consulting on the pre-1990 forest land allocation plan to the fishing allocation plan. The amendments describe how a review panel is constituted and provide for membership by someone who is knowledgable about, and experienced in, the application of tikanga and the Treaty of Waitangi. They talk about the need for the terms of reference for those reviews also to pay heed to the Treaty of Waitangi. They talk about regulation-making powers in relation to eligible agricultural activities. Iwi and Māori organisations have an interest in all of those issues. They are committed to developing their own wealth, as I was saying previously, before I was stopped in the full flow of my passion for this endeavour on behalf of iwi and Māori.

The legislation generally, and these amendments in particular, pave the way for something new in New Zealand. They pave the way for the possibility of having an authentic Aotearoa New Zealand, in that these provisions allow for iwi and Māori to be involved in the application of regulations and legislation to the particular activities that give iwi and Māori the potential of having a base that will, in turn, allow them to look after their own people.

Finally, I reiterate that this legislation, and these amendments in particular, reflect this Government’s willingness to work with its coalition partner. Ngā mihi ki te Pāti Māori, ki a koutou katoa, e tū tautoko ana, e whai kaha ana ngā tikanga e pā ana ki a tātou te iwi Māori, arā, ngā iwi Māori. I thank the Māori Party for being prepared to support iwi and Māori in having their voice heard, in being participants in the making of laws that seek to put the best process and advice in place, that in turn, we believe, will lead to the best outcomes, and that recognise that iwi and Māori have a part to play in the navigation of this country and are not simply passengers and victims. We are interested in navigation, and we will continue to oppose the Opposition, which does not see that as being a valuable and viable part for iwi and Māori to play. Hoi anō rā, tēnā koutou, kia ora tātou katoa.

Hon Dr NICK SMITH Link to this

No, let us be clear. To get an allocation one had to meet the competitiveness test that one is industry-exposed, and one had an absolute to meet. A number of companies that were expecting to receive an allocation under the existing scheme whose intensity—that figure of 800 tonnes per $1 million and 1,600 tonnes—meets neither of those, and that under the existing scheme would get an allocation, would not get one under this scheme. It is also true that a number of companies—a substantial number—that would have got a 90 percent allocation under the existing scheme will get 60 percent under this scheme.

Hon Dr NICK SMITH Link to this

They have been lobbying me very, very heavily to try to get in. In fact, the actual number of allocations, according to the estimates determined by our officials, is actually the total allocations to industry and are less under this scheme than what they are in the existing scheme.

The fourth point I would make is with regard to the issue of tree weeds. I think we have made in this bill an improvement for the environment by not discouraging the removal of tree weeds.

Hon Dr NICK SMITH Link to this

Well, the member said there is not a single provision in this bill that is good for the environment. That provision is good for the environment, and that absolute statement is not true.

I also make a point to the member on the issue of the national policy statement on biodiversity. It is an interesting history. Labour promised it in 1999, but did not deliver. It promised it in 2002, but did not deliver. It promised it again in 2005, but did not deliver. So for Ms Fitzsimons to be saying that Labour agreed, in the dying days of its Government, to a national policy statement on biodiversity is, I am sorry to say, a bit weak. We have been in Government for over 12 months. The very specific agreement we have with the Māori Party is that we will have a Cabinet paper to set up a formal process for establishing that national policy statement in March of next year.

The last point I want to respond to Jeanette Fitzsimons on is the statement that Cabinet voting an additional $24 million for home insulation makes no difference. Well, I really think that is unfair and untrue. Let me explain exactly what the Government has done in its agreement with the Māori Party. The problem that the Minister in charge of the Energy Efficiency and Conservation Authority, Gerry Brownlee, has at the moment is that the uptake of the scheme is far faster than anybody projected. That is a good thing. We are getting more homes insulated earlier. But the difficulty is that at the moment we have fixed-year appropriations—the $323 million is a fixed amount per year. So the decision we made in Cabinet was to change that, so to have a fixed amount over 4 years—and with the agreement with the Māori Party—a further $24 million will be put into that fund over those 4 years. That is a commitment to an extra 8,000 homes, and I say that every member of this House should thank the Māori Party for that initiative.

Hon PETE HODGSON Link to this

Oh, indeed—that is our position. The point I am trying to make is that we do not have agreement across the House. I will spend the rest of the debate explaining why that is, but I am saying now that my colleague the honourable Charles Chauvel has put forward an idea that I think the Committee should look at. It is an idea that I think the Minister may want to respond to tonight, tomorrow, or whenever it might be, and while he is at it he might also want to respond to the Supplementary Order Paper in the name of the Greens regarding transparency of allocations.

The other comment that the Minister made in his introductory remarks, and he has made a lot of play about this, is that New Zealand is now a little closer to Australia on climate change issues than we used to be, and that as we speak Australia is contemplating putting legislation through the Senate, etc., that, the Minister said, is a little weaker than the New Zealand legislation that he has put in front of the House. The Minister challenged Labour members to say what they thought about that, given that that legislation is in the name of the Australian Labor Party. He asked whether we would dare criticise it. Well, we most certainly do, and here is the history behind that.

In the last decade Australia has been governed by a centre-right Government and New Zealand has been governed by a centre-left Government, which has had the Greens at its flank right through that time. As a result of that, after many, many attempts to get the numbers in the House, we finally got legislation through in the name of the Hon David Parker. It was an emissions trading scheme that was much stronger than the one we have now. I used to be involved in climate change negotiations internationally through the 1990s, and, without telling too many secrets or stories, I can tell members that what happened in the 1990s was that New Zealand was way ahead of Australia—way ahead. Australia is catching up from a low position. The Rudd Government is progressive, whereas this Government is moving back from a more advanced position and is, therefore, regressive. We are still ahead of Australia, but only just. That is a shame. What is more, because Australia negotiated a better deal at Kyoto in 1997, it is, in fact, not behind in its emissions record; we are. We have some things to do, and the reason why the Parker emissions trading scheme should remain on the books is that it comes into play earlier.

I acknowledge that the Minister has a problem, and I will read it out. The problem is a quote in Hansard from Rodney Hide about a year ago, and it goes like this: “that is, that the entire climate change and global warming hypothesis is a hoax, that the data and the hypothesis do not hold together, that Al Gore is a phoney and a fraud on this issue, and that the emissions trading scheme is a worldwide scam and a swindle.” That is from National’s coalition partner, that is why the Minister has been delayed by months because of the select committee process, and that is what drove the Minister into the arms of the Māori Party. I am sorry that there was not room between National and Labour to get a deal. We assert afresh that we negotiated in good faith. We were certainly prepared to move, but we were certainly not prepared to move as far as the legislation we have in front of us now.

However, I think there is agreement that the emissions trading scheme as a tool is the best way forward, and that is a point of agreement. That comes from someone who introduced a carbon tax into the policy mix en route to an emissions trading scheme, I would assert. That did not get the numbers finally in 2005, and I think that much of it might be something that is pretty much set in stone. From here on, however, things get bad. I will not have time to lay them out in the remainder of my 10-minute introductory remarks, but I will say that the one thing that disappoints me perhaps more than anything else about this legislation is that this Government has no confidence in our economy. It has no confidence in New Zealand business, it has no confidence in our renewable energy industries, it has no confidence in the innovation of our agritech sector, and it has no confidence in the high-tech end of the New Zealand economy. It is as if we must freeze our economy here and now in 2009, and tourism and dairying will do it for us. Well, they will not be sufficient.

The Kyoto Protocol is a significant driver for economic advantage. It is a significant driver for a phrase that the Government does not like, but here it is: economic transformation. We have taken the driver off. Michael Porter would say: “Don’t do that.” and many other growth economists would ask whether we were nuts, but we have done that. We have taken the driver off some of the smartest people in our country, and they are aghast because they were ready to take advantage of a tougher, bigger, better emissions trading scheme. It is not a point of view that is shared by the ACT Party. I acknowledge that, and I acknowledge those members’ consistency. I say, and it is not a one-liner that I trot out too often, that I think that ACT is consistently wrong. But I say to National, which does understand economic development, that it is making a very serious mistake because it is freeze-framing us. In my view, it is freeze-framing us in a way that I just do not think is tolerable.

In the case of agriculture, if we are improving our intensity by 1.5 percent without any drivers, why are we saying that just 1.3 percent from now on will do? I ask whether it is lost on National members that we have the finest agritech sector in the world. We know more about plant and animal breeding than any other country I know, with the possible exception of Australia, and we already had an ability to make those changes without any drivers. Yet, somehow or another, we are saying to people in the agriculture sector that they can forget about it. We are saying that it is fine and dandy and they can put the money in their pocket if they want to do it for productivity or food conversion efficiency reasons, but they should not worry about the environmental stuff.

That is not a tolerable position—1.3 percent is derisory. Making it 1.3 percent is saying to agriculture that it should just go backwards a little bit and that will be OK, but it is not. It is not OK for productivity reasons, it is not OK for environmental reasons, and it is not OK for reputational reasons. The food miles debate is not going away. Other countries will catch up with us sooner or later, and we will say that the emissions trading scheme that was passed in 2009 was part of the problem because it allowed us to take the pedal off the metal. That should never be allowed to happen. This country depends on primary production, good downstream processing, and selling into international markets.

TE URUROA FLAVELL Link to this

You will find out shortly, as long as you listen. Koinā te mate o te kore whakarongo.

[That is the problem with not listening.]

In 1975, the Treaty of Waitangi Act effectively incorporated Te Tiriti—

TE URUROA FLAVELL Link to this

In 1975 the Treaty of Waitangi Act effectively incorporated the Treaty—

TE URUROA FLAVELL Link to this

In 1975 the Treaty of Waitangi Act effectively incorporated the Treaty into legislation and delegated a role to the tribunal to determine the meaning of the Treaty and Treaty principles. Since that time, Parliament has included legislative references to the Treaty and provided some legislative guidance on the Treaty’s meaning. Our Supplementary Order Paper provides a key statement, and this is important, which states: “In order to recognise and respect the Crown’s responsibility to give effect to the principles of the Treaty of Waitangi.” I say again that our Supplementary Order Paper states: “In order to recognise and respect the Crown’s responsibility to give effect to the principles of the Treaty of Waitangi.” In doing so, it falls into the category classified by Matthew Palmer as the “recognise and respect category”, reflecting provisions that are often used in statute to ensure the Treaty is treated with the highest level of attention.

There is another element to our Supplementary Order Paper that leads us on to further discussion, and that is to do with the wording “to give effect”. Those in the House with a good knowledge of statute would be aware that this is found in section 4 of the Conservation Act, which states: “this Act shall be interpreted and administered as to give effect to the principles of the Treaty of Waitangi.” If members were to wander through legislation, they would see a huge colourful menu of clauses that effectively incorporate the Treaty. One objective of the Royal New Zealand Foundation of the Blind Act is the need “to give particular recognition to the Treaty principles”. The Resource Management Act asks that we take account of the Treaty principles. The Environment Act requires us to ensure full and balanced account of the Treaty principles, and the Crown Minerals Act recommends that we have regard for Treaty principles. Basically, there is a huge archive of legislative activity in relation to the Treaty that has helped to guide the appropriate interpretation of Treaty clauses in legislation.

Within this context it is somewhat bizarre to think that some parties still question the need for a Treaty clause, or that they are overly concerned about the fact that we were working on the Treaty provisions right up until the hours leading up to the announcement yesterday. We understand there is a wide spectrum of knowledge around this Chamber about what the Treaty means in practice. That is clear from the many debates in this Chamber.

For the National Party and the Māori Party, the requirement to provide due cognisance of the Treaty analysis and interpretation is something that we both value to the extent that it is one of the first statements in our relationship agreement. Our agreement stipulates that “both the National Party and the Māori Party will act in accordance with Te Tiriti o Waitangi, the Treaty of Waitangi.” It has to be said that it has been a little bit disappointing that the National Party had some difficulty prior to this bill to living up to the clear aspiration to act in accordance with the Treaty. If there is ever an issue to which the Treaty principles should have been applied it would be the Local Government (Tamaki Makaurau Reorganisation) Act. The reorganisation of Auckland governance would have been an entirely appropriate mechanism to enhance Treaty responsiveness. The Government did not use the opportunity, and that certainly brassed us off. But that is another story.

The Climate Change Response (Moderated Emissions Training) Amendment Bill is a chance to set the record straight, to pursue an honourable course of Treaty jurisprudence. I want to make it clear that our intention in drafting the Treaty clause is to provide for the ongoing engagement of tangata whenua in the scheme, and to ensure that the distinct situation of iwi Māori, including rights and interest under the Treaty, is fairly accommodated in the implementation of the scheme.

I want to return to the notion of the Treaty principles and provide a lesson to all members across the Chamber, including some who might want to listen to this. In case there is any doubt, the Court of Appeal defines these principles as a relationship of fiduciary nature that reflects a partnership imposing a duty to act responsibly, reasonably, honourably, and in good faith. Secondly, the Government should make informed decisions. The Crown should remedy past grievances. There should be active protection of Māori interest by the Crown. The Crown has the right to govern. Māori retain rangatiratanga over their resources and taonga, and all of the rights and privileges of citizenship. If members are still unsure, they should consult the Waitangi Tribunal, which gives further clarity to the principles as partnership, fiduciary duties, reciprocity, the cession of Māori sovereignty in exchange for the protection of rangatiratanga, and mutual benefit leading to the duty to act reasonably, honourably, and in good faith. There should be redress for past grievances, and equal status for the Treaty parties. The Crown cannot evade its obligations by conferring authority to another body. There should be active protection of Māori interests by the Crown. There should be options, and there is the principle of choice.

I have gone on about some of these particular things, but if they are still not enough, there are always the principles proposed by the executive. They are the Government’s right to govern, the right of iwi to the self-management of their resources, redress for past grievances, equality—all New Zealanders are equal before the law—and reasonable cooperation by both parties.

I have gone to a bit of trouble to spell out these legislative references and descriptions of the Treaty principles, because it appears that some members in this House are still not aware of the meaning. The truth is that we have come a long way from 1878 and the case of Wi Parata v The Bishop of Wellington, which suggested that the Treaty was a simple nullity because Māori tribes were incapable of performing the basic rights of citizenship. We are in a new enlightened time—times that reflect the strength and survival of iwi who have advanced so significantly the debate on Treaty rights.

The Māori Party is extremely proud to have brought to this debate the crucial significance of the Treaty for emissions trading, and in particular the Treaty clauses about recognising our founding document and recognising that the Treaty is about joint responsibility and working together. The scheme also relies on regulations for much of its implementation. The Treaty clause will ensure that iwi and Māori are able to participate in the development of those rules. The amendments we have put forward clarify how the rights and interests of iwi under Te Tiriti o Waitangi, the Treaty of Waitangi, are to be incorporated in this legislation. They provide for consultation with iwi on matters under the Act. In closing, I point out that they breathe life into this legislation in terms of enacting the responsibilities of the Crown to incorporate the Treaty into legislation.

I thank my colleague Hekia Parata for her comments earlier with regard to the part played by the Māori Party. I thank the Minister for working with the Māori Party, and, indeed, my colleague Rahui Katene as we have attempted to forward our proposals specifically around the Treaty clause in the best interests of the nation.

Hon Dr NICK SMITH Link to this

I have just heard an interjection from Mr Chris Hipkins. Members will be interested in this. On Sunday Mr Chris Hipkins put out a press release saying that New Zealanders were paying too much for their power, and that we needed to do things to reduce the power price. That is what he said on Sunday. Then Labour members come to the Chamber to debate this emissions trading legislation and move a Supplementary Order Paper that will put the price of power up even more. That is the problem with the Labour Party: it is all over the place. It is a shambles. We do not know what Labour members stand for. They cannot have Chris Hipkins say on Sunday that power prices are too high and must go down, and on Tuesday introduce a Supplementary Order Paper that will actually put the power price up. At least Mr Chauvel is honest about that fact. That shows the sort of nonsense that we have heard in the Chamber. Mr Chauvel is more thoughtful than Mr Hipkins. I suggest that he is a bit cross about the press release that Mr Hipkins put out on Sunday, which is an embarrassment for the Labour Party in the very week we are debating emissions trading legislation.

Why has the Government said we need to soften the impact of the emissions trading scheme? It is very simple. In case members have not noticed, we are part of the biggest economic downturn since the Great Depression. This Government has gone to a huge amount of work to try to get us back on to a growth path. The last thing we want to do is to snuff out that recovery with an overly ambitious emissions trading scheme, so we have made quite a pragmatic decision not to introduce it in one hit, and instead to stage it to soften the impact on households. I say to Mr Hipkins that the advice from officials is very clear. The advice is that to vote for Mr Chauvel’s Supplementary Order Paper is to vote for a higher petrol price and a higher power price. Every member on the Government side of the Chamber will be watching the way Mr Chris Hipkins votes, because if he believes in his press statement of Sunday, he will vote against his own colleague’s Supplementary Order Paper.

KEVIN HAGUE Link to this

I am sorry; I forgot United Future. Those parties have effectively become hostage to the interests of big business, hostage to the interests of those whose planning horizon is no further than the immediate future. It is a planning horizon that sells our children and our grandchildren down the river. I will refer to the speech of Tariana Turia from 28 August 2008 on the emissions trading scheme bill of that year. She said: “how this nation curbs greenhouse gas emissions will define this moment in our history. Meeting our obligations under the Kyoto Protocol to reduce greenhouse gases is vitally important, but this issue is much more than one of compliance with the United Nations goals to cut emissions and to stabilise the climate system. It is far more simple than that. Reducing our emissions is about honouring our commitment to those who have passed on that we will leave this planet in a better state … for those who come after us.” In addition she said: “We are of the view that what is needed is a radical rethink of the whole approach. We are opposed to the concept of paying the polluters, of rewarding the corporate lobbyists with huge exemptions, and of the very nature of trading, rather than reducing, emissions.” She also said: “The last thing we want to suggest is that we are the authority on the emissions trading scheme”—I guess we would agree with that—“because clearly we are not. But we do care passionately about leaving this world in a better state”.

NICKY WAGNER Link to this

It is interesting that Mr Hipkins over there scoffs about jobs, but the key issue for New Zealanders right now is to make sure that they keep working.

Although New Zealanders are very aware of, and love, their natural environment, many of them have little capacity to financially contribute to managing climate change. Also, unlike Labour, we do not believe that the Government should profit at the expense of the people of New Zealand trying to do the right thing by the environment.

The new legislation will be fiscally neutral and absolutely focused on dealing with climate change. We will not be screwing windfall profits out of the ordinary New Zealander. For the first 3 years, the bill will halve the costs for businesses and households. Labour’s scheme put a price on households at approximately $6 per week; National’s scheme will cost householders about $3 per week. But, of course, the long-term motivation is to encourage all New Zealanders to embrace a low-carbon lifestyle and to modify their behaviour accordingly.