Hon Dr NICK SMITH (Minister for Climate Change Issues) Link to this
I am in no doubt that we are about to start a pretty important debate for New Zealand about how it responds to the challenge of climate change.
The first point I make, having been a member of Parliament now for 19 years, is that the debate about a pricing instrument to constrain emissions has gone round and round in circles. I will just recite the history. Back in the time of the previous National Government we originally proposed a low-level carbon tax. A Cabinet decision was made in 1999 that we should get officials to work on an emissions trading scheme. The last Labour Government came to office in 1999 and said that it did not want to do an emissions trading scheme; it wanted to do a carbon tax. We had officials beavering away for 5 or 6 years on a carbon tax and then they came back to a conclusion of an emissions trading scheme. So my first point is that this debate has gone on for a very long time. There have been over eight different public consultation documents. There have been three rounds of select committee hearings. There have been over 2,000 submissions. I say to the Committee that there comes a point, on an issue as big as climate change, where we need to make progress.
At the last general election National had a very comprehensive policy around emissions trading. I will go through what we said to the electorate. First we said to the electorate that we wanted to align New Zealand’s emissions trading scheme more closely with Australia’s scheme. Every member of this Committee would know that New Zealand and Australia have very closely integrated economies, and that it makes good sense, on a global issue like climate change, for us to work closely with Australia. I challenge those members who have been quite strong with their rhetoric around the weaknesses that they see in this modified emissions trading scheme. Every single criticism they make they can make also of their Australian Labor Party colleagues, who are putting a bill through their Parliament that is actually slightly softer than this one.
So if members want to make criticisms of this bill—for instance, to argue that it does nothing for climate change—they need to argue that the Australian scheme also does nothing for climate change. If they want to argue that it costs billions of dollars, they need equally to say that that cost would apply to Australia. I think that point just exposes the extreme rhetoric that we have heard from Labour members over this bill. We said to the electorate that we would align the scheme more closely with Australia’s, and we are doing just that.
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.
The CHAIRPERSON (Eric Roy) Link to this
I have to say that I did not hear what the member said, but—
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 Pete HodgsonHon 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 (Labour) Link to this
It falls to me to begin the debate on behalf of Labour in the Committee stage on this legislation. I want to speak to one of the Supplementary Order Papers that has been lodged in my name, Supplementary Order Paper 94. If the Minister for Climate Change Issues truly wants the debate that he has called for—and I have to say that history belies that intention, but let us give him the benefit of the doubt for the moment—then we will have a proper consideration of the Supplementary Order Papers that lie on the table. The Supplementary Order Papers that have been tabled by the Greens and Labour reflect, by and large, the recommendations from independent authorities such as the Parliamentary Commissioner for the Environment and other independent experts who appeared before the Finance and Expenditure Committee, and who gave us the benefit of their advice about how we could improve what is a bill that is lacking in general analytical integrity.
Supplementary Order Paper 94 does two things: it deals with national targets and it deals with the advisory committee on climate change that we are keen to see. In relation to national targets, it is clear that we are obliged under our Kyoto obligations to make a nationally appropriate contribution to international efforts to reduce greenhouse gas concentrations in the atmosphere. That is a treaty obligation to avoid the worst consequence of human-induced climate change. In the current round of negotiations, as members of the House will know, New Zealand under the National Government has made a conditional offer of what is called a responsibility target. The greenhouse gas emissions reductions that that target calls for are between 10 and 20 percent below 1990 levels by 2020, if there is a comprehensive global agreement at Copenhagen. New Zealand has also made a unilateral unconditional offer of a 50 percent reduction in emissions to below 1990 levels by 2050.
Labour has reflected on those targets. It does not think that they are bold enough. They should be considerably stronger. But having said that, I say that Labour does not want the targets to simply be statements of good intention. So the first thing that this Supplementary Order Paper does is enshrine the targets in the law, and it requires the Minister to take steps to ensure that those targets are met.
The second key substantive thing this Supplementary Order Paper would do, if the Committee supported it, would be to try to avoid some of the controversy in the development of climate change policy that the Minister alluded to in his speech just now. It is true that there is not a cross-party consensus as there is in Europe on some of the key issues at stake. We have all experienced hearing from the many stakeholders in the debate about the insufficient level of independent analysis of the costs and benefits of climate change policy initiatives. I found myself in the rare position in the second reading debate of agreeing with everything that Rodney Hide said on that topic in his speech, which was a good one.
Jo GoodhewBut 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—
The CHAIRPERSON (Eric Roy) Link to this
I know that I have given the member the call, but I think the House has taken an instruction that no member will take more than two consecutive calls.
I thought that under the leave provided that requirement had been waived for this debate. Am I wrong in that?
Hon Dr Nick Smith Link to this
The Government would be happy for the member to seek leave just for this individual call.
The CHAIRPERSON (Eric Roy) Link to this
My mistake. We had better do this properly. Will you seek leave?
The CHAIRPERSON (Eric Roy) Link to this
Leave is sought. Is there anyone opposed to that course of action? There is not. Leave has been granted just for this one call.
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 (Labour) Link to this
I will talk about the ridiculous rate and length of time that free allocation is given to major emitters under this Climate Change Response (Moderated Emissions Trading) Amendment Bill. The legislation that we currently have in New Zealand is already generous in its allocation to major emitters. There is good reason for that. If major emitters are exposed to competition in countries that are not pricing emissions, and we were to force upon them the cost of all of their emissions, overnight, then that would break some of those businesses. They would move offshore in the short term and probably never come back, yet in the medium term, when other countries were properly pricing emissions, they would be able to compete. So that is why we have free allocation. That is why we say to a company like Rio Tinto, which produces aluminium in Bluff, that we will pay for a lot of its carbon emissions for a transitional period.
But that does not come cheaply. In the case of Rio Tinto, the calculation that was relied upon by the Parliamentary Commissioner for the Environment showed that the cost per employee, per annum, of that free allocation is $100,000. The cost of its free allocation of carbon emission rights is $100,000 per worker, per year. Another submitter said that that amount is an under-estimate, and that it is closer to $200,000 per annum; in my speech I will accept for the purposes of this argument that $100,000 per annum is the right figure. It is notable that we had no advice to the select committee that disproved those figures. The only advice we had, in terms of cost in the case of Rio Tinto, was that of about $100,000 per annum, which came from the Parliamentary Commissioner for the Environment, and which was relying on a study that had been done for the Climate Change Leadership Forum last year, in consultation with Government officials, including officials from Treasury. So $100,000 is a good estimate.
But a $100,000 cost per annum, per worker, is something that we cannot continue forever, because it comes at enormous cost to other things that we could do with that money. We could pay for an Inland Revenue Department tax credit. We could retire debt. We could actually reduce New Zealand’s Government debt very significantly—by $100,000 per Rio Tinto worker per annum—if we did not have that free allocation.
The Government has changed that free allocation, from being phased out completely by 2030 to phasing out at 1.3 percent per annum. Under the current legislation—and we do have a good emissions trading scheme already in law in New Zealand—[Interruption] We do, and indeed the free allocation under that existing legislation has already been criticised by Dr Suzi Kerr as being too generous. She says that it is already too generous at an 8 percent per annum phase-out after 2018. We gave people 10 years, from the start of the scheme, when they would have a free allocation of 90 percent of 2005 emissions, and that rate would not abate at all until after 2018—10 years later—which is when we said it would abate at 8 percent per annum. An economist like Dr Suzi Kerr says that, if anything, that is too generous to emitters because it comes at too high a cost to the economy: other taxpayers, effectively, are paying that cost. If anything, the existing framework is too generous.
In respect of the National Government’s changes here, I say that the Government is phasing the free allocations out on the never-never. They will virtually never be phased out. In 2050 major emitters will still get more than one half of that figure—that is, $50,000 per employee, per annum, subsidy. That rate of $50,000 per annum by 2050 is plainly unsustainable for our economy. That is why Treasury warned us that by 2050 Government debt will go up by $110 billion, compared with the status quo under the existing legislation. Government members might decry those figures now because they do not suit them, but that is the forecast from Treasury. The reality is that if those free emission charges were being auctioned to emitters, that money would come back to the Crown, and the Crown would have $50 billion extra, plus interest, which would make $110 billion by 2050.
We heard Dr Smith say that what the Labour Party had proposed was ridiculous. Well, I tell Dr Smith to look at the minority report, and look at the graph there, which is reproduced from the United States legislation, the Waxman-Markey Bill. I have a copy of it here, which I will seek leave to table at the end of this contribution. It shows a rate of phase-out of free allocation. It is very close to what is in the current Labour legislation, which is already good law in New Zealand. It is very, very similar. It has most free allocation being phased out by 2030. By then, free allocation will be down by about 66 percent, according to that graph, whereas in New Zealand we will get out to 2050 and major emitters will still get free allocation of more than half of their emission rights. It will be free to them, but it is not free to the country; it is paid by other taxpayers. Other businesses that are not getting free allocation will pick up the bill.
Dr Smith said in the House today that most of the free allocation will be going to agriculture, as if that is a sufficient answer. Why? The theory that underlies free allocation is that without it we would lose production, which would go overseas.
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.
Dr RUSSEL NORMAN (Co-Leader—Green) Link to this
For those who are listening from outside this Chamber, I say that tonight we are debating the Government’s proposed changes to the emissions trading scheme. The Government’s proposed changes to the emissions trading scheme are, fundamentally, about weakening the emissions trading scheme and reducing the price signal that the emissions trading scheme sends through to the economy. I think it is an extraordinary night to be discussing the Climate Change Response (Moderated Emissions Trading) Amendment Bill, given the news that has come through tonight that the Liberal Party in Australia is currently tucked away in a caucus meeting of all of its MPs, who are looking at some proposals from the Australian Labor Party to give $8 billion to greenhouse gas polluters in Australia. The Australian Labor Party Government—the Federal Government—has put a proposal to the Australian Liberal Party that would dramatically weaken its scheme. Tonight we are also looking at a proposal from the Government to weaken the price signal and emissions trading scheme dramatically in New Zealand.
It is an amazing night for another reason. Only today we were looking at a study in Nature Geoscience that looked at what is happening in Antarctica at the moment. One of the issues around climate change is sea level rise. Sea level rise is driven in part by the melting of ice sheets, particularly in Greenland and Antarctica. For quite some time there has been concern about the West Antarctic ice sheet. At the moment it looks like the West Antarctic ice sheet is dumping about 132 billion tonnes of ice per year, on average, into the ocean as a result of human-induced climate change and global warming, which is warming the ocean around Antarctica and resulting in a warming in Antarctica. At the same time as we are looking at a significant shift in our knowledge about what is happening with the Antarctic ice sheet, in this bill tonight we are looking at a proposal to weaken the price signal around greenhouse gases so that greenhouse emissions coming out of New Zealand will increase. It is extraordinary that on the very night that we discover that the evidence around human-induced climate change is building, we have a Government proposal to weaken the emissions trading scheme even further.
I will also talk about a few Supplementary Order Papers. The Green Party is putting up a number of different Supplementary Order Papers, or amendments, to this bill tonight. A series of those amendments are in relation to increased transparency. Those amendments are important because under the Government’s proposed changes there will be a dramatic increase in the free allocations given away to big polluters. There will be a very significant increase in the allocations given to big polluters so that they can produce greenhouse gases for free and the taxpayer picks up the bill. Within the Kyoto framework New Zealand is responsible for the increase in emissions and will have to buy carbon credits internationally, so any increase in emissions coming out of New Zealand will result in the New Zealand taxpayer being liable to buy those carbon credits.
It will be a very significant increase. Of the Treasury estimates that were given to the select committee—there were various Treasury estimates; they changed rapidly because Treasury did not have enough time to prepare properly—one estimate was that Government debt would increase by $110 billion by 2050 as a result of the changes in this emissions trading scheme. That is, the increase in emissions would be so significant, and hence also would be the increase in carbon credits allocated to big polluters, that the taxpayer would have to cover the difference, and the difference by 2050, including interest, would be around $110 billion. Obviously that would add a significant amount of money to Government debt. Of course, this was from a Government that tells us day and night that there is not enough money to spend on the different kinds of social and environmental programmes that are essential to our country, but at the same time was willing to take on a massive increase in debt, according to Treasury, in order to weaken the emissions trading scheme, increase our greenhouse emissions, and increase our total debt on the Government.
The problem is that, as part of the allocation of these free emissions, nobody really knows exactly whom these credits are going to. One of the changes the Government is making is decreasing the transparency around the allocation of all these free carbon credits. So it is giving away our money—around $110 billion of it by mid-century—to its mates, who are the big polluters, in the form of free carbon allocations, but it wants to decrease the transparency around the allocation of this taxpayer money. That is what the bill does. It makes those changes, so the Green Party is putting forward a series of amendments in order to increase transparency.
When we think about it, we see that it is interesting that at the same time as we are proposing in this bill to decrease transparency around the allocation of taxpayers’ money to big polluters, we have a system of donations to political parties that is fundamentally not transparent. Basically, it is very difficult to know who is funding political parties. On the one hand, big polluters will be making large donations to political parties that will, at some point or another, occupy Government benches. At the same time we are pulling the cloak over the allocation of free carbon credits from the Government to big polluters. There is clearly a transparency risk in these two things combined. It is unacceptable in our country that we do not know which big polluters will be making donations to governing parties at the same time as those governing parties have control over the allocation of free carbon credits to big polluters. We are setting up a strategic risk of corruption.
The Green Party thinks that there is no reason to set up this fundamental risk of corruption. Why should we? New Zealand currently rates as the No. 1 least corrupt country in the world, and that is a great thing and something that we should be proud of. Why would we put in legislation a set of rules that opens us up to the risk of corruption when there is no need to? In fact, why do we not have a set of rules so that there is transparency in donations to political parties and, in this bill, make sure that there is transparency of allocation to polluters? If one is receiving support from the Government in the form of free allocations—and this legislation allows it, as did the previous legislation—then one should be transparent about it. What is wrong with having transparency around allocations? For that reason, the Green Party is moving a series of amendments in order to increase transparency around the allocation to big polluters of what is effectively taxpayer money. We think that if we are to have this terrible scheme of subsidising pollution, which this bill exaggerates even more than the last one did, then the public has a right to know who is being subsidised. To us, that seems a fundamental principle, and for that reason we will be moving a series of amendments around transparency.
Finally, I touch on the process around all of this legislation coming together. The Minister in the chair, the Hon Dr Nick Smith, has made the comment that that $110 billion should not be relied on, and there is some contest as to what the $110 billion really means. I point out that in the select committee Treasury officials were so confused about the real impacts of this bill that we had to take a 20-minute break in proceedings so that they could go away and try to figure out whether they were wrong by $50 billion. We had to face a $50 billion mistake in the select committee. The bill had been so rushed through and had had so little proper consideration that Treasury officials had to request a 20-minute break from the select committee so that they could go and figure out whether they were out by $50 billion. My question is whether this is an acceptable way to make Government policy. I ask whether this could possibly be an acceptable way to make Government policy, and the answer, of course, is no. That is why the Government should take this bill away and get the work done properly, rather than rely on 20-minute consultations between Treasury officials and others to figure out whether they have made a $50 billion mistake, increasing liability on the taxpayer.
I ask the Government to support our amendments to increase transparency in order to protect the reputation of the New Zealand Government as a non-corrupt Government. I ask the Government to consider the true fiscal and environmental implications of this bill.
CRAIG FOSS (National—Tukituki) Link to this
Firstly, I am quite offended by the implication and insinuation from the previous speaker, Dr Russel Norman, who said that this House may be opening itself up for corruption if this Climate Change Response (Moderated Emissions Trading) Amendment Bill is passed. I think that all members should take offence at that. I note that he was trying to word it carefully, but the implication was quite obvious. It might make good headlines, but I for one was quite offended by it. However, I let the member speak.
There is another point to note while we are talking about independent analysis, which a member opposite recently questioned in his speech. The Finance and Expenditure Committee—and any member of this Parliament, actually—has access to all the analysis, studies, submissions, and whatever one likes from the two select committees that looked at this issue previously. In 2007 the Finance and Expenditure Committee examined the emissions trading scheme bill, and a special committee reviewed the legislation earlier this year. In terms of the latter committee, the New Zealand Institute of Economic Research and Infometrics did some substantial, in-depth work on most of the issues that are before us right now. If members want to take a static snapshot of where we are now, then I guess they are technically correct—at least, the previous speaker was—but actually all the information is available. As we said constantly during the select committee process, this bill rests on the work of the members of those other committees and their advisers.
I shall now touch base on the allocation. The words “free allocation” were used by Dr Norman, and he talked about people’s money being given away as part of it. We have to remind ourselves that there is a whole lot of free allocation under the existing legislation. That message is getting a bit lost, with some members trying to put the word out there that some vast cheques are going to be written. It was interesting that during the select committee process some Labour members were getting up to speed on their own existing legislation, although they must have seen the Cabinet papers when they were in the previous administration.
We have to ask why the previous administration even considered and brought in free allocation, and why the current administration is continuing it. The arguments were about the execution of it, its timing, and some other points that other members have raised, to be fair. It is quite simply because, as an exporting nation, New Zealand is very exposed. We are trade-exposed, job-exposed, credit-exposed, or whatever one likes. Yes, the previous administration had ambitions to be carbon neutral and all sorts of things, and other members have canvassed those issues, but the point was to put in a framework to get New Zealand out of the starting blocks. We wanted to have in place a framework and a scheme, to have in place a price for carbon emissions—be it the marginal price, the full price, or whatever it is. Yes, we will be arguing for a wee while about the speed of it, but that is actually it. But the risks were also acknowledged. The risks were, quite simply, that if New Zealand was to do it without having some kind of compensation, or if the Crown was to keep all the units allocated to New Zealand, then if our major industries, our major employers, our major processing industries did not pack up and leave by the dozen, they would at least drive down or kill off their production lines. That is simple economics. Quite simply—and the previous administration also acknowledged this—we compete with Australia, mostly, with regard to most of what we produce, and if our competitors are not facing the same cost inputs that we are, they will be able to penetrate and sell to our markets at a lower price, or to take larger profits than we can. At the end of the day, who would be the loser? It would be “New Zealand Inc.” What is “New Zealand Inc.”? It is the Crown and the private sector, and, therefore, jobs would be lost.
The whole argument that we have heard today, and I am sure we will hear it again tonight, we will be quite—
Hon Maryan StreetQuite 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 (Labour—New Lynn) Link to this
I want to use this call to look more closely at some of the fiscal assumptions in the Climate Change Response (Moderated Emissions Trading) Amendment Bill. They are both huge and very much open to debate. Already in this debate tonight we have touched on some numbers that would boggle the minds of most New Zealanders and cause a great deal of concern and anxiety, because for every New Zealand man, woman, and child we are looking at thousands and thousands of dollars of potential tax liability arising from the change between the scheme proposed by the previous Government and the current scheme.
In respect of this part of the bill I will take a couple of minutes to examine some of the assumptions behind that argument. To some degree, I want to take the Government at its word and run some “even if” arguments—even if one accepts some of its presumptions, where does one get to?
The Government contends that the value of the carbon subsidies in this bill is only $50 billion.
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 (Minister for Climate Change Issues) Link to this
I want to expose for the Committee some of the double standards in the contributions that have been made by members. I start with Mr Cunliffe, who said that the allocations to industry are a subsidy. Did I hear him correctly?
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 David CarterHon 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?
The CHAIRPERSON (Eric Roy) Link to this
No. The Minister has had two consecutive calls. You get only one opportunity for that.
CHRIS TREMAIN (Senior Whip—National) Link to this
I raise a point of order, Mr Chairperson. Speaking to your decision, my understanding about the ruling on consecutive calls was that it was about consecutive calls in a row. So any member in the House may take two calls in a row, and may have a number of two consecutive calls following that, down the track.
The CHAIRPERSON (Eric Roy) Link to this
No. Let me read to you the leave that was sought. Well, the salient point is that members have an unlimited number of speeches of 5 minutes each, but not more than two consecutive speeches on each part or provision.
The CHAIRPERSON (Eric Roy) Link to this
Yes, on each part. So on the next part the slate is clean for members.
Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
I raise a point of order, Mr Chairperson. I seek your clarification. It is the understanding of the Labour Opposition that members may take more than two calls per part, but may not take more than two consecutive calls per part. Is that correct?
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.
The CHAIRPERSON (Eric Roy) Link to this
That is correct. I just make another point here. The Minister in the chair, Dr Nick Smith, has raised the point that normally these rules do not apply to Ministers in the chair, because they are able to take an unlimited number of calls to provide explanations. But I am bound by the leave granted, which is in front of me—
The CHAIRPERSON (Eric Roy) Link to this
What I need, then, to clarify this issue, is for some member to seek leave that the Minister have more calls—if that is the understanding.
CHRIS TREMAIN (Senior Whip—National) Link to this
I raise a point of order, Mr Chairperson. There is a clear ruling, which we need to abide by because the Leader of the House put it in place. I want to be clear about the Minister in the chair: by your ruling, has he had two lots of two consecutive calls?
The CHAIRPERSON (Eric Roy) Link to this
No, he has had one. I am abiding my interpretation of the leave, which is in front me. I had no part in passing it or even in its construction, so I am trying to interpret it. He had two calls initially, and because I do not have any other instruction I have applied a blanket interpretation.
CHRIS TREMAIN (Senior Whip—National) Link to this
I raise a point of order, Mr Chairperson. Taking up what the Hon David Cunliffe said, I think it is the understanding of both sides of the House—[ Interruption] Well, Mr Cunliffe just said that speakers are allowed two consecutive calls, and, after that, additional calls, but only one call at a time.
The CHAIRPERSON (Eric Roy) Link to this
That is correct. Members can take unlimited calls but they can have two consecutive calls only once per part.
Hon Dr NICK SMITH (Minister for Climate Change Issues) Link to this
I raise a point of order, Mr Chairperson. I am one who likes to engage in the debate in order to answer members’ questions. It has always been the convention that the Minister in the chair can take more than one call. When leave was sought by the Leader of the House, it was to allow other members to be able to have more calls in the debate. We want to have a really good, open debate about the bill. I find it a quite extraordinary ruling that when the House has granted leave to broaden the scope of members’ participation in the debate, you interpret it as overruling and constraining the convention about Ministers taking more than one call. When leave is sought, it is to extend the general rules that are there. I think it is a quite unusual ruling for you to imply that the attempt by the Government to extend the debating opportunities for members of the House also meant that the Minister’s speaking time was going to be constrained. If that was going to be the unusual interpretation, quite clearly, the Government would have not have agreed to leave on such a measure.
CHARLES CHAUVEL (Labour) Link to this
I just want to make it clear that, following a discussion internally amongst Labour members, we, with respect, think you have got the ruling right. I am not saying that because I am trying to make any sort of petty point against the Minister; I am saying it because I think the Minister, in his explanation of why you ought to take a different course, has misunderstood the reason for which leave was sought and granted. Leave was sought and granted for a relaxation of the rules in this case because there was recognition that there had not been proper scrutiny at the select committee of a big bill, that a big Supplementary Order Paper had been tabled on the day that—
The CHAIRPERSON (Eric Roy) Link to this
Thank you for that, but I do not actually need it. I have in front of me some words, and I am making my best possible attempt to interpret them. Can I just say to the Committee that leave was sought to depart from the convention. All I can operate from is what is in front of me. I am simply interpreting verbatim what is in front of me. Members may need to consider that on future occasions, but I have an instruction from the House.
The CHAIRPERSON (Eric Roy) Link to this
I do not know that I need any further assistance. I have made a ruling based on my interpretation of the leave. Does the member have new material?
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.
The CHAIRPERSON (Eric Roy) Link to this
With respect, that is not what the leave says, and I have interpreted it as clearly as I can. I am doing my best. I will take a further call from some other member.
Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
I raise a point of order, Mr Chairperson. I understand that you want to advance the debate, and I wonder whether you might, to clarify what is clearly a range of understandings of your ruling, be kind enough to read out the words again and repeat your interpretation so that we can all be of common mind.
The CHAIRPERSON (Eric Roy) Link to this
That is fine. I am happy to do that. The Leader of the House sought leave: “I seek leave that for the Committee stage of the Climate Change Response (Moderated Emissions Trading) Amendment Bill members have unlimited number of speeches of 5 minutes each but not more than two consecutive speeches on each part or provision in the provision.” Members may be aware that I have a little system here in which I record down the side of this paper when members have taken two calls, because I am trying to obey the leave that was granted. I am doing my best.
MOANA MACKEY (Labour) Link to this
I am happy to take my first of what I hope will be many calls in this very important Committee stage. I endorse the question that was put to the Minister in the chair, the Hon Nick Smith, by my colleague, and I also look forward to the Minister engaging in this debate. We appreciate the engagement that the Minister shows the Committee in this debate.
I will raise one issue first, because it is an issue about which we had a number of questions at the select committee. It might be seen to concern one of the less high-profile matters within this emissions trading scheme amendment bill, but it is about the changes for allocations to the fisheries sector. Members who were involved during the last Parliament in the emissions trading scheme that the previous Labour Government put through, will remember—[Interruption] That is right; for some of us this is the third iteration of this debate. At the select committee we were swayed by arguments from the fisheries sector that despite the fact that no other sector would be compensated for liquid fossil fuel use, and because of the trade-exposed nature of the industry and the situation it was in, the industry was looking for the kind of assistance that other industries were receiving. The select committee listened to that argument; when the bill was eventually passed, there was provision for the fisheries sector.
Under the existing emissions trading scheme legislation, which the Labour Government passed, that allocation was given to vessel operators. That is to say, the allocation was given to the people who ran the fishing vessels, the fishermen and fisherwomen who were facing up front the costs of liquid fossil fuels and any increases that an emissions trading scheme might be imposing upon them. That seemed to be sensible. Indeed, from my recollection—and I could stand to be corrected—that is what most of the sector were arguing for. It seemed to be the easiest and most sensible way to arrange it. No one came to us or lobbied us after the fact to say that they believed that to be a bad way or the wrong way to do things. So we went ahead and did that.
Under the deal with the Māori Party, we note that the allocation to the fisheries sector has increased. But the big change—and this is the matter on which I would really appreciate some response from the Minister—is that the allocation now no longer goes to the vessel operators; it goes to the quota holders. That is a significant change for a number of reasons. I know there are pros and cons on both sides, but I am concerned about this change for a number of reasons. Firstly, not every person who fishes in New Zealand waters is under the quota management system. That means that if someone is fishing a stock that exists outside the quota management system, that fisher now gets nothing.
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.
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—
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—
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.
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—
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.
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 (Minister for Climate Change Issues) Link to this
In the spirit of the debate I want to respond to the points raised by Moana Mackey. The first thing that is amusing is the sudden love Labour has for the fishing industry. Let us just remember, when Labour introduced its emissions trading scheme bill, how much support it provided for the fishing industry. It was absolutely zip; absolutely zero—not for the quota holders, not for the vessel operators.
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 (ACT) Link to this
It is a pleasure to take ACT’s first call in the Committee stage debate. I suspect that this debate will continue for many, many hours. This is a very sad day for New Zealand. The Climate Change Response (Moderated Emissions Trading) Amendment Bill has implications for all New Zealanders, and it imposes a tax on all New Zealanders. The previous Labour Government passed its own emissions trading scheme last year, just before the general election, and that imposed massive new taxes on everyone in New Zealand. The National Government has an opportunity to amend that, to reverse the damage that it did. Although it has moved partially in that direction, it has lost a huge opportunity. The ACT Party strongly opposes this bill and will be voting against it.
I said that I expect this to be a long debate, and I hope to take many calls, subject to the Chair’s indulgence. I hope to talk about the fishing industry and the impact on that industry. I wish to talk about agriculture and farmers, and the impact on that industry. I want to talk about the impact on small and medium sized enterprises, which are the backbone of employers in this country. They get absolutely zilch, zero, nothing. There is no free allocation whatsoever for them. I wish to talk about the impact on heavy industry. I want to talk about the impact on families.
The ACT Party spoke widely earlier this year on New Zealand being a place of no second-class citizens—the haves and the have-nots. This bill will impose a cost of 10 percent extra on the electricity bill of every New Zealander. [Interruption] That is right. We are hearing 5 percent, absolutely. Labour was 10 percent. On 1 January 2013 the price of electricity will rise by 10 percent. Under this bill, National is putting up electricity by 10 percent. People have the audacity to come into this Chamber and talk about subsidies. Who are we subsidising? We are subsidising the owner of Genesis, we are subsidising the owner of Meridian Energy, we are subsidising the shareholders in TrustPower, and we are subsidising the shareholders in Contact Energy. From 1 January 2013 every single New Zealander will be paying 10 percent more for his or her electricity. If we want to talk about subsidies, we should talk about the cost to ordinary New Zealanders. We should talk about the people who are underprivileged; we should talk about the have-nots.
It is interesting that there has been discussion about Hone Harawira and whether he will rejoin the Māori Party. If Hone Harawira did not have an excuse to part company from the Māori Party previously, he has it with this bill. What do the people of Tai Tokerau get out of the Māori Party’s support? They get absolutely nothing. Ngāi Tahu walk away with 30,000 hectares of conservation land to plant trees on, and good on them. They are obviously very smart negotiators. But the people of Tai Tokerau, with the deepest respect, get absolutely nothing.
In subsequent speeches I want to talk about industry-based allocation. I want to talk about New Zealand’s potential emissions reduction target of 50 percent by 2050, and how flawed that is with our unique emissions profile. We have heard a lot from Mr Cunliffe this evening about the submission of the Parliamentary Commissioner for the Environment, and I want to talk about her submission. I want to talk about the science on which this bill is supposedly based. I want to talk about the level of inept regulatory investigation—the fact that there was no proper study. There are many issues that the ACT Party wishes to talk about, and I hope we are still talking about those issues this time tomorrow.
But before I proceed further I feel I need to remark on two comments made by the Minister. Mr Smith asked a rhetorical question of the Greens 15 minutes ago. He asked when was a subsidy not a subsidy—when Mr Parker can stand up and say what the Labour Government was doing was not a subsidy, but the Labour Party has the audacity to say it is a subsidy now. I say to Mr Smith that there is actually a difference. There is a difference between the Labour scheme and the National scheme, and he knows it well. Under the Labour scheme the free allocation reduced to 2030, and from 2030 the emissions trading scheme became a massive tax grab. There was no free allocation beyond 2030. National talks about its scheme being fiscally neutral and it talks about the value given to big emitters. We will talk about emitting, pollution, and carbon dioxide—and how I am polluting right now, it would seem, with carbon dioxide. Under the National scheme the big emitters essentially, we have been told, are fiscally neutral. So it is good enough for the fishers to go out with allocations from 2030, it is good enough for every single New Zealander to pay more for electricity, and the scheme is fiscally neutral. If we are taking from ordinary working families and we are fiscally neutral, I ask Mr Smith who we are we giving it to.
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.
The CHAIRPERSON (Eric Roy) Link to this
Before I call the next speaker I say that although I did not break up the member’s speech while he was speaking, we pay attention to try to get titles as correct as we can. It is Dr Smith, not Mr Smith. I did not break up the member’s speech. The next speaker will be Dr Hutchison.
Dr PAUL HUTCHISON (National—Hunua) Link to this
That is a great choice, Mr Chairperson. I too, like Mr John Boscawen, take great pleasure in speaking on this Climate Change Response (Moderated Emissions Trading) Amendment Bill—
Chris HipkinsDr 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 (Labour) Link to this
I am quite happy and pleased to follow on from the previous Government speaker, Paul Hutchison, and point out that he used two quite contradictory statements in his message to the Committee. On the one hand he had the audacity to refer to the Climate Change Response (Moderated Emissions Trading) Amendment Bill and the idea of environmental responsibility in the same breath. On the other hand, he said that the presence of Charles Chauvel at the talks in Copenhagen would undermine the Government’s position on its emissions trading scheme. That suggestion is ludicrous. If anything would undermine the Government’s position, it is the bill itself and the attempt it makes to address our environmental responsibilities as set out under the Kyoto Protocol.
In the same way, Craig Foss tried to say that we would potentially expose New Zealand industry if we did not get this scheme right. To a certain extent I accept that that is true, but I do not think that the Government, in pulling together this legislation, has taken seriously enough the other requirements that were put upon the Government to address our environmental obligations. In fact, this shambles has left New Zealand exposed as a whole—in particular, our reputation is exposed. That has been a cumulative process. I do not lay responsibility for our reputation solely at the feet of the Government or of the Minister for Climate Change Issues, and I do not say that our reputation has been undermined solely by this legislation. In fact, it began as soon as the Government was elected. In its first 100 days we saw not only its about-face on Labour’s emissions trading scheme but also the lifting of the moratorium on the production of any new coal-fired power stations and the removal of renewable preferences that the previous Labour Government had put in place. We saw the scrapping of Labour’s Biofuel Bill. That caused a loss of jobs that would have been generated in Waharoa, yet this Government claims to be all about generating jobs. Finally, we saw the removal of Labour’s emissions trading scheme. I hear Government members claiming their emissions trading scheme was the mandate that National was elected on. I would like to hear how many young people the National Party told that this bill was the one National would be presenting, and that it would be the landmark legislation on New Zealand’s response to climate change. I suggest that the Government has no mandate for this legislation from the next generation of voters.
But it does not stop there; it is not just about legislation. The next battle to come is the Government’s review of the Crown Minerals Act, and its complete opening up of schedule 4. But that is a debate for another day.
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.
Amy AdamsI 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 (Minister for Climate Change Issues) Link to this
The member who has just spoken, Jacinda Ardern, ended her speech by saying the word “cynical”. Let me tell her what cynical is, and talk about the sorts of double standards that she exhibited in her speech. The first thing she said was that this scheme is awful because it has no cap. Well, that is very interesting. I have searched all the way through Labour’s emissions trading scheme, and did it have a cap?
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?
Aaron GilmoreHon 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?
JEANETTE FITZSIMONS (Green) Link to this
In my first contribution on this bill, the Climate Change Response (Moderated Emissions Trading) Amendment Bill, which will weaken—in fact, largely destroy—New Zealand’s existing emissions trading scheme, I begin by running through a little bit of the fundamental logic.
The science tells us that climate change is accelerating at a rate so frightening that we need to take urgent action. The only thing that will prevent accelerated climate change is a reduction in emissions. The whole purpose of a price on carbon is to provide an economic incentive to reduce emissions; otherwise we would not do it. Therefore, it follows, surely without contest, that if we reduce that price we will produce more emissions, and that if we increase that price, we will produce fewer emissions.
This bill significantly reduces the price, initially for 2½ years, with the two-for-one and the price cap. For agriculture it removes it completely for a further 2 years, and, in the long term, it abates free allocation so slowly that no one will face the full marginal cost of emissions within the lifetime of anybody who lives today. I am therefore very puzzled and deeply disappointed that the Māori Party, which would not support last year’s emissions trading scheme because it was too weak—and that was a defensible position; we just about went there ourselves, but in the end we did not—is now prepared to support a scheme that will raise New Zealand’s emissions.
I am struggling to understand how that could come about. I will quote from some of the reports to this House, and some of the statements made in this House by my colleagues in the Māori Party. First of all, I will quote from their minority report on the review of the emissions trading scheme and related matters, which was reported a short time ago: “At a fundamental level, there was opposition to an ETS which allows sectors to pollute and trade up to the Kyoto target, but which does not include incremental emissions reduction targets in its design.”. Well, that is a description of this bill.
The Māori Party’s minority view mentions “the subsidisation of the nation’s largest polluters at the cost of households and small-medium businesses.” But that describes this bill. The view goes on to state: “The Māori Party continues to oppose the introduction of an ETS on these grounds, and would do so more strongly if a replacement scheme were to be less effective”. Well, that describes this bill. It goes on: “We remain deeply concerned about protections in the form of intensity-based allocations and subsidies, which again distort the market model by allowing protected businesses to increase their emissions without penalty, and to be rewarded for it.” Well, that is the distinguishing feature of this bill. It continues: “the nation urgently needs to grapple with the notion of sustainability and the increasing challenge posed by a changing climate system and pending peak oil to think and live differently; to live sustainably.” Kia ora. It states: “The resources of Papatuanuku are finite.” Kia ora. It also states: “we need to be focused on decreasing domestic emissions.”
I now move on a few weeks to the first reading of this bill, and to a speech made by a member of the Māori Party. It states: “The Māori Party has consistently raised our call for an emissions trading scheme to be effective, fair, and transparent.”, and “no sectors will receive more free units than necessary”. It goes on: “We do not support subsidisation of the nation’s largest polluters at the cost of householders and small to medium businesses.”, and “its purpose must be to transform the economy”. It also states: “The nation urgently needs to grapple with the notion of sustainability and the increasing challenge made by a changing climate system and pending peak oil to think and live differently.” The Green Party strongly endorses all those statements by the Māori Party, and that is why we are puzzled and deeply saddened—we cannot figure out what changed their minds.
There is not a single measure in this bill that improves environmental outcomes, compared with the existing law, or that leads to lower emissions. There are a number of ways—three principal ways—in which this bill will lead to higher emissions. The first and most serious way is the intensity-based allocations, which means that no industry with any amount of free allocation will ever face the full marginal cost of carbon as it grows its business. The second reason is that the price cap for 2½ years and the two-for-one deal significantly reduces the cost and, therefore, will lead to higher emissions. The third reason is the much slower phase-out. We accept that it starts earlier, which is a good thing, but over the long term it is a very slow phase-out. We could argue a fourth reason—that agriculture is protected 100 percent for a further 2 years before it faces anything at all.
There is nothing in the bill that compensates for this environmental harm. So I looked at the agreement between the parties to see whether there was anything there to compensate for this environmental harm. There are four matters, but they are trivial compared with the harm that this bill does. There is another $24 million for the insulation of low-income houses, and that is great, but the existing insulation scheme has seen 75 percent of the money, so far, go into low-income, community service - card houses, and there is plenty more in the ring-fenced fund. So that $24 million will not make any difference to the number of the low-income houses insulated until year 4. In year 4 it will add to the total of $323 million, but in year 4 there will be another Budget appropriation anyway. So I think the Māori Party got a bit duped over that one.
The second thing is the partnership to plant forests. That is a great idea. The Green Party is working on a slightly expanded version of that idea, which will be announced shortly. It is an excellent idea to plant more native forests on conservation land, but we do not have to destroy the emissions trading scheme to do it, surely—it is a good idea anyway.
Thirdly, there is a national policy statement on biodiversity. What was it that the Green Party negotiated—and it was gazetted—last year with Labour as part of the emissions trading scheme agreement? It was a finite date for a national policy statement on biodiversity to be in place by—I ask Mr Parker whether it was February 2010 or February 2011. Anyway, I say to National that it is already gazetted.
The current Minister has said that he does not intend to do that. Now he does; now he has a new agreement that he will do it. That is good, but it is not progress. That is going back to the status quo—it is anti. Finally, there is a 6-month delay in the abolition of the funding for environmental education. Well, I do not think that will employ many teachers or train very many kids for very long.
For some years Green Party members have believed that we have common ground with the Māori Party in our commitment to Papatūanuku. So I am deeply sad that all these goals, all these fine words in the House, and all these fine words in the reports of select committees have been traded away for 30 pieces of silver and many promises of consultation.
HEKIA PARATA (National) Link to this
Tēnā koe e te Heamana, tēnā tātou huri noa i tō tātou Whare e hui komiti nei i tēnei wā. Good evening. I am delighted to take a call to speak on Part 1 of the Climate Change Response (Moderated Emissions Trading) Amendment Bill, and, in particular, in contrast to the previous speaker, Jeannette Fitzsimons, I would like to commend the Māori Party. I would like to congratulate and thank the Māori Party for being prepared to see that it needed to negotiate an outcome that was in the best long-term interests of Aotearoa New Zealand; that it was able to see that a balance needed to be struck between the environment and the economy, and that it understands that being in Government is a hard and difficult task and that we do have to negotiate the best possible outcomes out of a range of many difficult and complicated choices. So I congratulate the Māori Party, because it has been prepared to engage with the hard issues. It has been prepared to be open to a wider constituency, to listen to those people who voted it into Parliament, to hear what they have to say, and to represent those issues in its negotiations with the Government, which is what its responsibility as a coalition partner is.
The Māori Party has been far from race based. It has been concerned with the implications for all New Zealanders while taking particular account of concerns raised with them by iwi and Māori organisations. It is committed to the growth of the independent wealth of iwi and hapū, and, far from being interested in seeing the tax burden grow, the Māori Party wants to see iwi grow their own wealth so that they can contribute to the well-being of their own whānau and hapū. It is not prepared, as perhaps those on the other side of this Chamber are, to condemn Māori to perpetual dependency on the State. So, yes, the Māori Party has been prepared to step up. It has been prepared to see the long-term possibilities for iwi and Māori organisations to be engaged with the Government in making—
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