Urgent Debates

Madam SPEAKER Link to this

I have received a letter from Jeannette Fitzsimons seeking to debate under Standing Order 380 the Government’s announcement of a framework for the emissions trading scheme. The announcement is a particular case of recent occurrence involving ministerial responsibility. Given the importance of the policy issues involved, I consider it a matter that justifies the immediate attention of the House. I am therefore prepared to accept the application.

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

I move, That the House take note of a matter of urgent public importance. Ten years ago this year, New Zealand helped to negotiate an international agreement to reduce climate change emissions in all developed countries. We took a binding target ourselves to reduce our emissions back to our 1990 levels. That agreement gave countries a 10-year opportunity—a 10-year transitional time—to put in place economic instruments, stabilise their emissions, and work with their sectors to find ways to meet this agreement.

In just 3 months’ time those emissions begin to count. They count in real dollars. In 2012 the New Zealand taxpayer is liable for real dollars for all of our emissions that are above 1990 levels from 1 January next year. Today, 3 months before that time, a proposal is before us to put a price on carbon through an emissions trading scheme—a scheme that will not be legislated for until after the first Kyoto Protocol period is under way, and will not come fully into force until that period is over.

The Labour Government’s emissions trading scheme is soundly structured and its principles are good. I have to give the scheme credit for that. If it had happened 10 years ago it would have really made a difference to New Zealand’s compliance with Kyoto and to New Zealand’s long-term emissions track. But compared with what we need to do today, it is rather tepid. And National must take as much responsibility for that as Labour, because for 9 years after signing the United Nations Framework Convention on Climate Change in 1990 it did nothing either.

Rob Storey went to the conference in Rio de Janeiro in 1992 and made a promise that New Zealand would reduce its emissions by 20 percent by 2000. Well, he had that knocked out of him pretty fast after he got back. Simon Upton negotiated the Kyoto agreement and started a consultation programme about whether we should have emissions trading or a carbon charge. Lots of New Zealanders participated in that process. A good summary was written, but Simon could not get either of the options through his Cabinet. The whole idea lapsed, and New Zealand went back to sleep.

Consequently, New Zealand’s emissions have the highest rate of growth of those in the developed world since 1990, and they are now 25 percent above what they were in 1990. Back in 1993—before Kyoto was even developed—on the basis of the framework convention, the Green Party proposed that there should be a price put on carbon across the economy. We proposed to do it through a carbon emissions charge, and to recycle the money into tax cuts. That ought to gladden the hearts of people who are constantly calling for those. But they would have been tax cuts to the bottom band of income that all taxpayers pay, not to the top band. Unfortunately, we were not in a position to implement that proposal. We can only reflect on what New Zealand’s emissions might have been like today if it had come to pass in 1993.

I give credit to the Government for the sound structural elements in its emissions trading scheme. It includes all sectors and all gases—but some of them very slowly. We will be trading in Kyoto-compliant units rather than some Monopoly money New Zealand unit, which some people were worried might be the case. That means that our units will be linked to the world market, and our price will be the world price. In terms of efficiency across the globe, that is very important.

The points of obligation—in other words, the entities that will have to purchase credits and remit to the Government—are roughly the same as the Greens proposed in our policy last March. They will be oil companies, electricity companies, and, probably, agricultural processors like Fonterra rather than farms. That is certainly the most efficient way to do it.

The scheme will reduce deforestation somewhat. The Greens proposed a replanting incentive for old forests that are becoming mature and being deforested at a fast rate. That is effectively what the Government is doing, by allocating them some free credits that they lose if they deforest. But instead of funding it out of the Kyoto credits that New Zealand earns for its forests, as we proposed, it is being funded by the taxpayer. So there is a large taxpayer payment to those old pre-1990 forests. That is because the Government has caved in to the very vocal post-1990 foresters who have been claiming that they have a property right to the credits that New Zealand earns. We absolutely reject that argument. We wanted them to receive a carbon payment for the carbon they had stored, but not the whole credit. That could have been done easily with the Government sharing the Kyoto forest credits among the post-1990 and pre-1990 forests, but, instead, the taxpayer will face a bill for $825 million as a subsidy to those old forests. It has to be done to stop them from being cut down, but there was a better way to do it.

The Prime Minister said that the scheme will be effective and fair, and we agree that those are the two criteria by which it should be judged. Being effective means that our emissions have got to level off and then trend down permanently. There is no other way it can be effective for the climate. I want to repeat what I read at question time today from James Hansen, one of the most respected scientists from the National Aeronautics and Space Administration and the Intergovernmental Panel on Climate Change. He said that even continuing to increase emissions each year for just another 10 years guarantees dramatic climate changes, a different planet, no sea ice in the Arctic, worldwide repeated coastal tragedies associated with storms and a continuously rising sea level, and regional disruptions due to freshwater shortages and shifting climatic zones.

That was why I asked the Minister responsible for Climate Change Issues, David Parker, at question time how much our emissions would actually go down by 2012 compared with now. He said that they would go down. I repeated the question, because I could not believe the answer, and he said again that they would go down. I am very encouraged that the Minister believes that our emissions will go down by 2012, and that it is the purpose of the policy that they go down by 2012. But I cannot make the numbers reach that conclusion.

There is no way that our gross emissions will reduce by 2012. Transport is increasing by 3 percent a year—that is about 17 percent over the next 5 years—and it is stated in the documents that emissions trading will lower that by only 0.3 percent. So that is still a rise of 16.7 percent by 2012. Agriculture faces no price at all, so it will not be going down in the next 5 years; it will be going up. Electricity is growing by 2.7 percent a year, and for 2 of those 5 years it faces no price at all. So the Government must be counting on avoided deforestation to reach those numbers. It certainly cannot come from new plantings. After 5 years, new seedlings are so tiny that they absorb very little carbon, although they will be great in the future.

I cannot make the numbers for avoided deforestation add up to a big enough number to reduce our emissions over 5 years from where they are now. Then I hit on the answer. The Minister must be relying on the National Energy Efficiency and Conservation Strategy, which will be announced next month, and on measures not like trading but like changes to the building code and standards for appliances, more efficient vehicles, better public transport, and more renewable energy. That must be what he is relying on to meet his target by 2012. That is good because I have been working very hard on those issues over the last 2 years.

Even with those best projections, though, I have difficulty making the figures go down by 2012. If the Minister has other figures then I urge him to supply them to the House. We will welcome them.

The Prime Minister says the scheme will be fair. Well, the first way in which it is not fair is that the taxpayer will still be covering two-thirds of New Zealand’s bill in 2012, not the emitters. The taxpayer is particularly going to be subsidising New Zealand’s most profitable industry—the industry that has just received a windfall of, on average, $250,000 per farm in increased milk payouts—which is the dairy industry. The dairy industry is responsible, with the rest of the farming sector, for half our emissions and it will not be in the scheme at all until the Kyoto period is over.

In addition to that, huge subsidies will help the industry transition to what happens after 2012, and when it does finally come in it comes in at 5 percent above its 1990 emissions and does not have to pay for anything up to that point.

The particular unfairness with agriculture is that it competes for land use with forestry. Forestry will face the full deforestation liability on 1 January next year, but agriculture will not face anything for 5 years. That is what the forestry sector has been most angry about recently. It is being treated very different from farming and it should not be.

The hard decisions have been left until after the election. There will be no electricity price rises until after the election, and the allocation decisions for the competitiveness-at-risk industries are also being left until 2009. That means that the Government can say to industry that if its competitiveness is at risk it will be protected, without having to say which firms will be protected and by how much until after the election. When the squeals come, and some industries that think they should be helped are not—because if everybody is helped then it will not help our emissions, at all—that will not happen until 2009.

This proposal could be fixed. It is a good start. First, we need to review the memorandum of understanding with the agriculture sector. The Minister said at question time that it is not on track to reduce its emissions voluntarily by 20 percent. Therefore, the sector should be brought in in 2009, even if it gets a higher level of grandparenting.

We should bring forward the energy sector to 2009 even if we have to exempt the vulnerable industries for another year while an allocation is worked out. At the least, most energy users ought to be brought in earlier than 2010.

We should stop protecting export coal. Underground coalmining releases methane emissions from the coal seams. They count under Kyoto, and New Zealand pays for them, yet the documents indicate that the coalminer will not have to pay for them. That is easy to fix and should be fixed. It should cost the coal industry for the effects it has on the climate.

Finally, we should make sure no low-income families are still living in cold, damp homes by 2012. We should make sure we build enough public transport so that as many people as possible do not need to use their cars to get to work but can leave them at home. We should also invest properly in a society and an infrastructure that makes it possible to lower people’s power and fuel bills.

For the sake of the climate, for the sake of the next generation, and for the sake of vulnerable people today, we can make amendments to this proposal that would make it more effective and more fair. That is what the Green Party will be advocating.

Hon DAVID PARKER (Minister responsible for Climate Change Issues) Link to this

I just want to reply to Jeanette Fitzsimon’s question about why I think emissions will go down overall. I think there will be a decrease in electricity emissions. I think that deforestation emissions will go down very substantially after this year. They will peak this year, because it is natural—I am not saying it is good; but it is natural—that people will try to beat these rules. So there will be a spike in deforestation this year. We will have some extra sequestration as a consequence of more trees being planted, but the member is also right in saying that that will not be substantial during the first commitment period. The member is correct that it will take a few years before transport emissions will be on a downward track, although we are starting to bend the line in terms of trying to improve the efficiency of the vehicle fleet. So I expect transport emissions will be on an upward track. But I do hold out some hope that agriculture will start reducing its emissions, particularly through the widespread use of nitrification inhibitors, which we know—it has been proven scientifically—are efficient at reducing nitrous oxide emissions from fertiliser and from livestock urine and are probably the cheapest way of growing extra grass. I think that the most substantial of those reductions in emissions will be reduced deforestation emissions, which will peak this year.

I want to talk about climate change policy in general for a start. Climate change policy at its heart is very simple. That is, we have to reduce greenhouse gas emissions. There is no other way for the world to overcome this climate change challenge. I give credit—which is, I think, deserved—to those who have long held this view and have fought hard for it. I think of my predecessor Pete Hodgson, I think of Jeanette Fitzsimons, and I think of Simon Upton. But I would like to say that I think we also owe a debt of gratitude as a nation to our Prime Minister. The Prime Minister has taken a political risk here. She has put sustainability issues at the heart of the Government’s agenda, and she has said that we will be held accountable by what we do as a Government to reduce emissions, to turn downwards the upward track of emissions, which has been going up since industrialisation began in New Zealand.

I do think it is fair to reflect on the fact that APEC did have a good outcome this year. It was not a perfect outcome, but it certainly put APEC a long way ahead of where it was last year. I think it is fair to reflect on the fact that climate change was on the APEC agenda as a consequence of the previous year’s meeting only because our Prime Minister put it there. I think we should thank her for that.

To control climate change, we have to reduce emissions, of course. Today the focus is on emissions trading, but we ought not to forget that a lot of other Government policy will aid in reducing our emissions. Regulatory changes are improving building standards. As a consequence, a house built in accordance with the new building code will use 30 percent less energy than one built under the previous building code. That means 30 percent less energy will be used on space heating. That is a significant change.

We have promoted simple things like compact fluorescent bulbs. A few years ago there were very few of those in the country. Through schemes run by the Government, mainly through the Electricity Commission, and with good support from Kiwis who want to do their bit to improve things, we now have more than 10 million of those bulbs in our country. That will start to make a difference. The measures that are coming up in the National Energy Efficiency and Conservation Strategy, which Jeanette Fitzsimons has been instrumental in, will help in that regard too.

There are new rules on the way, which we have said we are developing in order to improve the efficiency of vehicles in the fleet. Once a vehicle enters the fleet, it will be used until the end of its natural life. It is important that we improve car efficiency at the point of entry into the fleet and improve the efficiency of the fleet as a whole as we go.

We are investing a lot more money into research and development in agriculture. In fact, I think that one of the things that deserves a lot of attention as a consequence of today’s announcements is the increased investment in low mitigation technologies in agriculture, including investment in things that have been promoted by environmentalists but have until now been seen as fringe. I refer to things like research into biochar, which is a potential way to store carbon and indeed could remove carbon from the atmosphere in a way that is even more effective and more long-term than trees do, because a tree comes to the end of its life sooner than biochar.

People ask how the emissions trading scheme works. An emissions trading scheme works to reduce emissions by encouraging businesses to lower their emissions. We all know that business is about money. That is not a bad thing, but an emissions trading scheme makes it worth businesses; while to reduce their emissions. More emissions cost more and lowering one’s emissions makes one a profit. So more use of renewables and less use of coal is the outcome. An emissions trading scheme is about protecting our environment and our economy by reducing emissions. It seems increasingly clear that there is a building consensus around the world that the world needs to reduce emissions. So if we let our emissions grow unchecked, we would be increasing the future cost to the economy of reducing emissions, because we would later have avoidably higher emissions.

We are not alone in introducing an emissions trading scheme. Emissions trading is the way the world is leaning. Europe already has it. We can say “Europe” pretty quickly, but, of course, Europe includes Germany, Italy, and the United Kingdom, which are all large economies. It includes the border States that were part of the Soviet Union and are now in the European Union. Similar things are happening in the Scandinavian countries, like Norway and Sweden. Emissions trading schemes are being developed in various states in the United States, the most significant of which is the Californian model. Interestingly, the Californian model is similar to the model here in New Zealand, in that it proposes a cap on emissions rather than having an intensity-based emissions trading scheme. That differs from what is currently proposed in Australia, although Australia itself is proposing an emissions trading scheme.

So why are people pursuing emissions trading schemes around the world? The reason is that it is the right thing to do and it makes basic economic sense to do it that way. Just as it makes sense for businesses to be more efficient and waste less energy, we think it is the same for households. The Government is already helping people to lower their energy bills by efficiency measures, such as insulating homes and using more efficient light bulbs, appliances, and cars, and we intend to do more about this.

But we must not forget what lies underneath all of this ambition. We must not forget that the experts are telling us that climate change is serious. The cost of doing nothing is much higher than the costs that will flow to us, not just environmentally but also economically, if the situation gets much worse. We need just to look at the Australian droughts and the floods we had up north recently. The predictions are that if we do not get greenhouse gas emissions under control, we will get a lot more of this. What is currently a one-in-20-year drought event might be a one-in-5-year event. That would be very serious for the country.

And that is just the effects for New Zealand. The effects here are likely to be less directly severe than in other countries. We can see that people in countries like Bangladesh are pretty nervous at the moment. More people have drowned in Bangladesh since World War II as a consequence of flood events than died as a consequence of the Hiroshima and Nagasaki nuclear bombs in World War II. I always find that a pretty shocking statistic, because those two events are writ large in my memories of childhood as to what were the worst things in the world that ever happened. Nagasaki and Hiroshima seemed to be those. Yet, with current sea levels, more people have died in Bangladesh since World War II as a consequence of floods. That is how close people in that country are to drowning. That is the reality. I was at a meeting recently where we were negotiating post-2012 arrangements, and after a couple of days of slow-moving negotiations—they moved a bit faster than they normally move, actually, but they were still slow moving—the Bangladeshi Minister stood up and said: “Hey, you guys, get real!” Do members know that if sea levels rise by 1 metre it is estimated that 30 million people in Bangladesh will have to be moved? Thirty million people would have to be moved because they would not be able to live where they currently live, in what is already one of the most heavily populated countries in the world, if not the most heavily populated country. We can see that the consequences for those people would be absolutely dire. But to have 30 million people on the move means that the consequences for other people, including us, could be pretty dire, too.

We are a country that is reliant on growing things, and it is in our best interests that we get this under control. Agriculture, of course, is threatened by climate change perhaps more than any other sector in New Zealand. The sector is at the forefront of dealing with climate on a daily basis, so there is an increasing consensus amongst our leaders within the agricultural community that we need to do something about it.

What are we doing under this emissions trading scheme? Well, we are bringing sectors in sequentially. The first to come in is forestry. We are proposing full devolution in forestry—full devolution of all costs and benefits, full costs and benefits in both pre and post-1990 forests. It is sometimes forgotten in the forestry debate that because of a decision that I think might have been taken by the previous National Government, we have already protected the owners of pre-1990 forests against the cost of lessening levels of carbon. Those trees are getting close to being ready to be felled, and in the next few years that class of tree is actually decreasing in carbon content. Because of a decision that the then Government rightly made, those foresters are protected from those consequences of decreasing overall carbon levels during the first commitment period, but they are not protected if they do not replant. So if they turn a big tree into a little tree, that is fine; they do not have to count any carbon emissions. If they completely cut down their forests and do not replant at all, that causes the country a cost, and we are saying that some of that cost should flow through to that sector.

In respect of the rest of the forestry sector, which is accreting carbon, those forests will be real winners under this scheme. Indeed, in respect of those forests planted prior to 1990, if we allocate deforestation permits as we are proposing, most of those foresters will be winners too, because they will have a deforestation permit. It is an emissions permit that they can sell.

In terms of subsequent sectors, we have transport coming in next in 2009, followed by stationary energy in 2010, which is electricity, heating for industry, and process emissions for industry. After that we have agriculture coming in in 2013. In terms of allocation issues, the most important principle is that there ought to be no free allocation of units to those that can pass the cost on anyway. That was a mistake made in Europe, and we can learn from its mistakes. Although I say that Europe made mistakes, it is actually ahead of the rest of the world. So I am not critical of Europe, but we can learn from its lessons. That means no free allocation in transport and it means no free allocation in electricity generation.

In respect of other sectors that are facing competition in their exports from competitors overseas that are not exposed to the price of emissions, there are trade concerns, so we are proposing generous levels of allocations of 90 percent of 2005 emission levels. This still creates the critical price for emissions at the margins. There is still a full cost faced by all sectors after they come into the scheme for their increases in emissions, and a full benefit to their pockets if they reduce emissions. That is how an emissions trading scheme is made to work. As a consequence, we predict that what is currently projected as our deficit during the first commitment period, 45 million tonnes, will cut back to 25 million tonnes, and that is good progress.

I want to say something about engagement with other parties, because we want to move forward positively and constructively with other parties on this. It is true that other parties have more recently started to talk about emissions trading and putting a price on carbon. The Greens have been talking about it the longest other than us, and National has recently been talking about emissions trading—although I do have to say that its initial steps were to be in electricity alone, but more recently it has also supported devolution, to some extent, in forestry. So I think there is a building consensus around this issue, and I am keen to build upon that.

In terms of the effect on consumers, we need to be careful not to exaggerate the price effects. We will get consumers worried if we exaggerate. There will be plenty of threatened, self-interested groups who will try to do exactly that. These costs are for some time in the future, and they are not enormous—4c a litre of petrol pales into insignificance compared with the approximately 40c per litre increase that we have had in the last few months. Indeed, those increases in petrol prices recently would be more than the amount that consumers will feel from both petrol price rises and electricity price rises into the future combined. Also, the Government intends to help people in that regard.

Finally, I draw this discussion back to the topic of carbon neutrality. We are advancing towards the aspiration of carbon neutrality that the Prime Minister mentioned. We will achieve carbon neutrality in the electricity sector by 2025, with a very modest level of offsets. We will be 90 percent renewable by then, too—in fact, more than that, probably. We will achieve carbon neutrality in the whole of the stationary energy sector by 2030, and achieve it in transport by 2040. That is a very difficult task, but I believe we can achieve it. To achieve it we will have to be one of the first adopters in the world of electrically powered vehicles. These really are charging ahead internationally, and, as a consequence, they will be very, very cheap to fuel. Thank you.

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

The National Party has taken the view that the framework announced by the Government today is broadly in line with National’s thinking on the issue. This is not to say that there will not be a raft of difficult issues ahead for the Government and Parliament to deal with. Some of them are technical issues that will have to be resolved if New Zealand is to have a sensible carbon emissions trading system. For instance, there needs to be a high degree of confidence among those who are trading that the measurement of carbon is consistent and reliable. That is clearly not the case yet. There will be decisions to make about not only where the carbon is measured but where the credit or the debit is actually incurred. There is a range of views about where that should be.

The objective of further development of emissions trading systems should be certainty. Markets are used to factoring in variations in price, but they like certainty about the rules. Today’s framework is a step forward in respect of creating that certainty. Those in, say, the business and agricultural sectors will be supportive of the framework; it is what they have come to expect. If anything, we have had pressure from the business and the agricultural communities for politicians to get on with establishing a framework. A classic example would be those who are making investment decisions in the energy sector. They need to know what the rules will be, even if the price of carbon will be uncertain.

There will be some other issues, in addition to the technicalities of the trading system, that will warrant further discussion. The linkage with the European market and whether that is the kind of market that will work for New Zealand are among those issues.

To just step back from the detailed issues, I think we should record here today the rather remarkable outcome—which was probably hard to imagine 10 years ago—that across the political spectrum political parties have converged on the idea that one can have financial incentives and tradability as a way of achieving environmental outcomes. I expect that as a result of the progress made on the emissions trading system, we will see more of that type of thinking being applied to the environment. In fact, it is becoming increasingly clear that given the complex interaction between maintaining environmental standards and achieving economic growth, a market price will be about as good an instrument as one can get to transmit information about technological progress, about consumer preferences, and about the limitations or otherwise of Government regulation.

I want to step back briefly to make sure Parliament understands the long history of this issue, because we need to see it in context to understand that this is another step—a significant one—on a pretty long pathway. The previous National Government back in the early 1990s was heavily involved in negotiating the initial framework that anticipated carbon trading. I was pleased the Minister noted the contribution of Simon Upton, who was then, and probably still would be now, one of the pre-eminent environmental politicians in the OECD. It was actually Simon Upton and the New Zealand negotiating team that invented forest sinks. Until New Zealand put that idea forward it was not part of the framework; it was negotiated in by New Zealand, in New Zealand’s interest. I note that the Government, in its forecasts about carbon emissions, is relying heavily on about a quarter of a million hectares’ growth in forestry, which simply shows that across the political spectrum there is an understanding of the particular New Zealand characteristics of climate change, and of the kinds of tools that we need to have to deal with those matters.

Another step along the pathway occurred in March 1999 when the National Cabinet of the time decided that it preferred emissions trading systems over a carbon tax. That was a Cabinet decision made at the time. There was a lot of discussion then about carbon tax. It was not fully discussed in the public arena, but the Cabinet of the time demonstrated that the direction should have been towards emissions trading systems rather than the carbon tax. In 2002 that decision was then changed back to a preference for the carbon tax. Then in 2006 there was another change back to emissions trading systems. So I think it is fair to say that the emissions trading system has had almost 10 years of debate in Cabinet, and each Cabinet has found it difficult to get to grips with the technicalities and implications of the system. But it has survived that process and that on its own signals that it is sufficiently robust to warrant broad party support, and sufficiently robust to survive successive Governments, which is pretty important to make it all work.

From National’s point of view, we published a Bluegreens document last year that indicated further progress towards the emissions trading system. I think that an important decision, at least for us, was to move to the idea that it should be comprehensive and all sectors should be incorporated in it. The Government has outlined in its document a transition of sectors coming in, and I think that any of the sectors interested in it would consider it to be a pretty fair and reasonable transition, which is not to say there will not be all sorts of difficulties. The point I make to the Greens is that the transition will, of necessity, unavoidably mean that there are winners and losers as accidents of history. The issue is how to make that transition in a way that is fair, and how to make sure we get to an end result that will have the effect of slowing down, then perhaps one day reducing, carbon emissions.

There are a few implications from this that will work themselves out over the next few months. In my capacity as finance spokesman, I note that the fiscal liability associated with signing up to Kyoto back in 2002 remains substantially on the Government books. That is one implication. It may well be that there are not other better answers, but, if I can make something of a political point, the Government signed up to Kyoto in the belief that it would generate a positive benefit for New Zealand. This should be a lesson to Governments that analysis is not the only answer, because signing up to Kyoto has turned out to be a significant liability and one way or another the taxpayer will meet that cost.

We have made the point in a press release that we look forward to ongoing discussion about the issues, because there is a great deal of uncertainty out there amongst the public. I know that the Minister has made the point that the costs could be relatively small. That does depend on particular assumptions about the carbon price, which is a bit like the assumptions about the Kyoto liability—it could be wrong or it could be right; we simply do not know and we do not believe that the Government knows. But it will be important, for this framework to have credibility with the public, that we can get a reasonable degree of certainty about the cost impacts on them. I think I have heard Dr Cullen say that everyone is interested in climate change but no one wants to pay the price of changing the climate. That is a risk for the whole framework and it is important to make sure that the public understands it. We are also keen to make sure that the implications for growth in the economy are well understood and not unreasonable, and that is also a matter of dealing with the devil in the detail.

I note that the hard decisions have been left until after the election, as the Greens have pointed out. There are only benefits before the election and there are hard decisions after it. It was not going to be any different, but the Government needs to understand that if it is very committed to climate change, it may have to give more indications about the decisions it would make if it survived as a Government, because the public will be just a wee bit sceptical about that particular distribution.

The last point I make is that if we go into carbon trading, that should actually mean less emphasis on regulatory solutions, not more. The whole point of having a price is to get dynamism and innovation, which a regulatory system cannot deliver. To all those who will be subject to this regime, we need to make it clear that they will not be subject to both systems—both a carbon trading system and whimsical regulation on the part of bureaucrats and politicians who want to get their photos taken.

PETER BROWN (Deputy Leader—NZ First) Link to this

Let me assure the House at the start of my contribution that New Zealand First understands climate change. We recognise that there is a problem and we are prepared to cooperate with the Government and the Minister to a very reasonable degree. We will do our bit to encourage businesses and households to make more efficient use of energy—we will encourage that wherever we go, wherever we speak. We will encourage people to use their car less or to change their car to a smaller model; to switch off their appliances when they are not in use; to turn off the lights, which I suggest is a particular failing of many teenagers; to use more public transport; and to insulate their homes and to take advantage of the Government’s offers in that regard. We are particularly encouraged by the announcement that the Government wants to do more to encourage the use of the electric car. I think I saw a statement that in so many years’ time, owners of electric cars will be able to charge up at the kerbside, or something along those lines—that intrigues us.

There is little doubt that New Zealand First will support the legislation that will put the emissions trading scheme into being. We will look at it positively. But, having said all that, I point out that we have three major concerns. One is the price of carbon. The Minister indicated that it would raise the cost of petrol by 4c a litre. My understanding is that if the price of carbon comes into being at the same level as it is in Europe, the cost of petrol will go up close to double that, if not slightly more than that. [Interruption] Does Dr Cullen dispute that? [] I cannot quite hear Dr Cullen, but I understand that the current cost of carbon in Europe is about $30 a tonne.

TARIANA TURIA (Co-Leader—Māori Party) Link to this

Madam Assistant Speaker, tēnā koe. Tēnā tātou katoa. The Māori Party has often spoken out in Parliament about the urgent need to take comprehensive action on climate change. We are very concerned that New Zealand is the fourth-highest nation amongst developed nations in the emission of greenhouse gases, and that New Zealand’s emissions are growing significantly faster than those of Australia. We have raised the alarm at the reality of carbon emission increases outstripping population growth and GDP, and in effect this means that it leaves us in the dubious position of having emission levels more than twice the world average and well above the OECD average. All of us have a responsibility to do what we can to ensure that we here in Aotearoa are not putting more carbon into the atmosphere than we are able to offset by other means.

Indigenous peoples across the globe understand their role and responsibility as being unique in conserving mother Earth, but it is not the exclusive duty we hold. The Māori Party believes that if we are to reverse or halt any of the catastrophic climate change impacts currently threatening Papatūānuku, then urgent and specific attention must be accorded this issue by all peoples of this land. So with the announcements today that everyone can have sustainability, we have absolutely no argument. Having suffered major flooding myself at home in Whanganui and the Rangitīkei, and knowing also the impact of flooding in the Bay of Plenty and Gisborne, and of droughts in the Hawke’s Bay, Otago, Marlborough, and Tasman, the impact of human activity upon Ranginui and Papatūānuku is something I am acutely aware of.

We know that the Government has been challenged to look at the impact of climate change policy on the indigenous flora and fauna claim currently before the Waitangi Tribunal—Wai 262. We also know that the tribunal has been looking into the issue of carbon credit allocation when Crown-owned forests are growing on Māori land. These are hot issues on our party policy agenda, and we are delighted that the contribution of the New Zealand forestry industry and the Federation of Māori Authorities has helped the Government to see the light of day.

The New Zealand forestry industry’s six-point plan, which the Māori Party endorsed earlier this year, called for landowners with Kyoto-qualifying forests, and those replanting non-Kyoto forests after harvest, to benefit financially from the value of the carbon their forests remove from the atmosphere. Although we are disappointed that it took the Government 6 months to agree with this stance, it is still very positive news that it has reversed its decision on the allocation of carbon credits for forests. Tangata whenua have been vocal in their criticism of the Crown in claiming ownership of the carbon credits of Māori-owned forests on Māori land, and of Crown-owned forests on Māori land. In particular, we commend the initiative of the Federation of Māori Authorities, which has taken a case to the Waitangi Tribunal to challenge the Government’s carbon credit confiscation.

I endorse what the co-leader of the Greens raised earlier—that the hard decisions have conveniently been left until after the elections. We are also cautious, in light of advice from Greenpeace, that major polluters, the big energy users, stand to benefit from windfall profits under the scheme, with free subsidies. Climate change is too urgent, too critical for the big industry polluters to make money from business as usual. We really need to start seeing our economy as part of our environment and not continue to see the environment as part of our economy. The obsession with growing the economy as an indicator of human success, while at the same time destroying our environment, is insane. Everyone needs to contribute, and everyone needs targets in place immediately to achieve a dramatic reduction in greenhouse gas emissions. We need progress in offsetting emissions and reducing emissions, and it is a call that all of us must respond to.

I was pleased to see earlier this afternoon that Charlie Pederson, on behalf of Federated Farmers, has welcomed the view that agriculture has been given more time to find ways of reducing greenhouse gas emissions before joining an emissions trading scheme. Clearly, there have been economic pressures impacting on the Government, which would no doubt imagine that less production for agriculture, as the largest industry and export earner, means less income for rural communities, provinces, and city people, and less in taxes for the Government.

Well, the Māori Party does not believe that economic imperatives should be any excuse for failure to make genuine progress in improving the efficiency of the whole natural environment. New Zealand must invest in alternative solutions that can help farmers to reduce their on-farm methane and nitrous oxide emissions. I have been very interested in learning about programmes in which biological principles are applied to balance the chemistry and enhance the biology in the soil. Through such schemes, fertilisers are more efficient, less is lost through runoff and leaching, soils are less vulnerable to compacting, and the nutrient-holding capacity is increased. Applying biological agriculture perspectives and methods results in higher mineral and antioxidant levels in produce; increased soil fertility, yields, and storability; reduced erosion, fertiliser use, and input migration; and fewer insect, weed, and disease pressures.

Through the impact of biological and sustainable farming, we have seen that we can increase both the soil humus and carbon levels, along with improving the nutrient density in foods. Such initiatives can lead to lower greenhouse gas emissions, more carbon sequestering, and better profits. It is a win-win all around.

The Māori Party is pleased that Labour has responded to the call issued in September 2005 to take a collaborative, united approach towards the most critical issue facing our future sustainability, and we thank the Minister for coming and advising the Māori Party on where the Government was going on these issues. We welcome the announcement from the Minister of Māori Affairs that he will be establishing a Māori reference group to provide leadership on all of these proposals. We would hope, given that we occupy four out of seven of the Māori seats, that we will be invited to provide names of people who might join that team.

The Māori Party is also committed to assisting whānau, hapū, and iwi as tangata tiaki, to take whatever measures are necessary to ensure the well-being and future health of the environment. Our environmental policy begins with the challenge: “Ki te pai te manaaki ka manaakitia.”; if we care, nurture, and respect, we too will be cared for, nurtured, and respected. These are sound words for all of us—industrialists, users, consumers, polluters, farmers, whānau, hapū, and iwi—and we can all sign up in the transition to a sustainable Aotearoa.

Hon Dr MICHAEL CULLEN (Deputy Prime Minister) Link to this

I thank members for their contribution to date; obviously there are still some more contributions to come. We are trying to follow this debate between meetings over in the Beehive.

I particularly welcome the fact that we clearly have a cross-party basis for moving forward on discussion around the details. As Bill English rightly said, the technicalities in this are extraordinarily difficult. That means, therefore, that it is extraordinarily difficult to get them right, and we need a lot more work, discussion, and feedback in the process of finalising some of these details. Equally, we need to try, as far as we can, to get a high degree of certainty around the outcome, because these policies are ones on which businesses and many others will be making decisions that will affect them for many, many years to come, and therefore they wish to have some degree of certainty that the framework, once in place, will be sufficiently robust and not need major changes from time to time.

There is, of course, still a degree of scepticism around the whole issue of climate change, and one sees that that scepticism is receiving, perhaps, rather more publicity than it really deserves, given the current state of the science. That scepticism takes various forms. One form is to accept that there is global warming but to argue that there has been no effective input from human activity to cause that global warming. I think that that argument really falls down very firmly, because the nature of the connections, and the mechanisms in relation to the connections, are now so well established that it is quite clear that human activity in terms of greenhouse gas emissions has contributed significantly to global warming over the last century, or so.

The second is the more complex argument that I have seen quite frequently. This argument is that the global warming we have seen is well within the known range of global variation in temperatures over the long run, and therefore it is nothing to worry about. When one considers that sea levels have been many hundreds of metres higher than they are at present, on occasions—and many hundreds of metres lower; let us remind ourselves the British Isles, for example, were connected to Europe as recently as about 9,000 years ago—this is actually reasonably cold comfort, particularly for people living in a Pacific Island State or Bangladesh, given that not much of Bangladesh would be left if the sea levels rose some few hundred metres.

That brings me, I think, to the more important point. Modern civilisation has arisen in the last 10,000 years during a period of quite long climatic stability, by long-term historic standards. It is probably one of the factors that has enabled civilisation to emerge. We have now developed intense economies, highly populated, and often based very close to the sea. Therefore, climate change poses a kind of threat, which when we were simply small numbers of wandering tribes—as we all were not many thousands of years ago—was nothing like as great then as it is now, had there been this kind of global warming. But faced with the world as it is today we face a very different situation, one that has a tremendous geopolitical context. I referred to Bangladesh before, but can members imagine what would happen if 50 million, 60 million, or 70 million Bangladeshi saw their country disappearing underneath them? Where would they go in the meantime? What would happen? Who would take those people in? We can take in a relatively small number of Pacific Islanders who might be affected should their States completely disappear, but it is quite different when looking at some other countries around the world.

Let us look even at our own case. I live, as probably Mr Tremain well knows, about 1.5 metres above sea level in Napier. Quite a lot of people in Napier live about 1.5 metres or 2 metres above sea level. A lot of people in east Christchurch live at about that level above sea level. It does not take much change to have very significant impacts upon many New Zealand cities, potentially by the end of this century on current forecasts. Let us remind ourselves that the data, as it comes out, is emphasising that the change is happening faster than previously thought, as the recent data on the Greenland ice cap seems to be suggesting.

So this is an issue that has to be addressed. We could say we do not need to address it in New Zealand because we are only a little part of the problem; therefore, we can be only a little part of the solution. But of course that will not work. In the end, the developed countries have to take the lead on this matter. We have contributed most of the problem; we have to contribute most, in the first instance, to the solution, and in doing so, to lay the ground for a more comprehensive international agreement in the future that will have the Chinas, the Indias, the Brazils, and other countries tied into those kinds of solutions. It is significant that at the recent APEC conference it was the Chinese President who was one of those leading the discussion around climate change, because China is recognising that these issues are of considerable significance for itself, as well.

It is clear, I think, after all the work, that the emissions trading system is the best approach. It is the most comprehensive, and it is the one that provides the clearest economic signals. A carbon tax was much simpler to implement. The emissions trading system is on the one hand much more complex to implement than a carbon tax, because it involves issues of allocations, free allocations, and a market system being required to be set up in some way or another. But on the other hand it probably most effectively enables economic instruments to operate and decisions to be taken.

Of course, some relative prices will move; that is of the essence of the system. That is what it is designed to do—to send a signal that we need to increase energy efficiency, and that we need to invest in renewable energy because we have changed the price of thermal generation and made it more expensive. So we have changed the decision at the margin in terms of choosing between thermal and geothermal or other forms of renewable energy, such as wind or hydroelectricity. And, yes, other measures need to reinforce that, such as measures around the building code recently taken, and so on, and so forth. But the reality is that we need to reduce our dependence on fossil fuels and we need to start doing that relatively quickly.

I was fascinated at the press conference where journalists thought there had been no reaction to the increase in petrol prices that has occurred over the last 2 or 3 years. I simply ask people to look at the shift in the nature of new cars being bought over the last 2 or 3 years. All those Suzuki Swifts, Honda Jazzes, and all the rest of them are being bought, rather than large 6-cylinder cars as was the case only a few years ago. People do react to those kinds of price signals and we do see motor manufacturers again, for the first time for generations since the oil shocks, starting to look at ways of improving fuel efficiency in their motor vehicles. We can change those motive powers. That is where I disagree so strongly with Jeanette Fitzsimons, who seems to assume the motor vehicle is a thing of the past and that roads will not be required. What will change will be the energy source for motor vehicles. People will still want to have motor vehicles into the long-term future, and to have the freedom and the pleasure they bring to ordinary people. We are not going to revert simply to wandering around the country on foot, as we did up until a couple of hundred years ago. What will change is how we drive our motor vehicles, not the fact that we have them.

I think that brings a very important point. I think a false trade-off is often made between economic growth and these issues. What I think climate change is going to persuade us to do—and what the announcements today are part of doing, and only part of doing—is to shift to a different form of economic growth that is far less resource-intensive but nevertheless is economic growth and economic development. We do not need to put on hair shirts and cover ourselves with ashes, and pretend that what is required of us is to somehow go back hundreds of years in terms of our standard of living. If we sell climate change to people on that basis, we will be lucky to get 5 percent support for the measures that are required to halt climate change. The best modelling we have is that over the next 5 years the measures we are proposing today will knock off perhaps 0.1 percent or perhaps 0.2 percent of total growth over that 5-year period. But in the longer term, increased productivity and increased efficiency, of which the climate change measures are part, in practice may well lead at least to a stronger rise in our real and genuine standard of living, and one that is far less reliant upon unsustainable resource use, compared with our forms of economic growth over the last 150 years.

In that respect, the important thing now is a broad range of consultation and discussion, both within this House between parliamentary parties, and of course with the wider stakeholders. I think, particularly, there are issues specific to Māori that we need to ensure we have a good understanding of and common ground on, before we move forward to final decisions in this area.

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

National broadly supports the Government’s announcements today on an emissions trading system. They strongly replicate what we had stated in terms of the benefits of an emissions trading system in our discussion document A Bluegreen Vision for New Zealand, which we released a bit over a year ago.

Four major debates have been going on around the issue of climate change. One of the first of those is that an economic instrument is a better way for Parliament and the Government to send the right signal to New Zealanders than a whole lot of regulatory options or the Government necessarily choosing any particular technology, whether it be electric cars, forestry, or all the range of alternative responses there are to climate change. So I think there is a broad consensus that an economic initiative that sends a price signal should be the primary policy tool in responding to the challenge of climate change.

The second debate is the one between a carbon tax and an emissions trading system. In Cabinet in March 1999, National had a very intense debate and decided that an emissions trading system was the best of the economic instruments in terms of a way forward. Around this issue, the big challenge is that everybody likes the idea of reducing emissions but nobody wants to pay. So the challenge is to come up with a system that will get the maximum benefit at the least cost. The reason National has consistently supported an emissions trading system is that we believe it is the way in which, at the least cost—but it is a cost—we can get the most environmental gains.

In 2000 the current Government decided it preferred a carbon tax over an emissions trading system, and that remained Government policy through until 2006. We now have a position where Labour has said it too now backs an emissions trading system, and I think that is an important step forward and shows a convergence between National and Labour over policy in that area.

The third key debate has been around the issue of forestry. The forestry argument is incredibly important to New Zealand. If we want to look at how sensitive New Zealand’s Kyoto balance is around the issue of forestry, I note that the projected deficit for New Zealand through until 2012 is 40 million tonnes, and 34 million tonnes of that is in respect of deforestation. We have consistently argued that the best way in which we can get landowners to plant trees is to give them a clear business signal that they will get the benefits of those carbon credits. That was the view that Simon Upton advised in Kyoto that New Zealand would take—that we would allocate those carbon credits and debits to the landowner. That was a position we held, and in fact Labour confirmed it in June 2000. We were very disappointed that Cabinet in July 2002 reversed that decision. We do believe it has contributed to a loss of confidence in the forest sector in recent years that has seen quite significant loss of forests.

It is a very significant decision by the Government today to allocate those Kyoto credits to the forest owners. Let us not pretend—it is not a free lunch. Those forest owners will also get the debits. The reason National believes it is right and proper to allocate both the credits and the debits to the forest industry is that landowners will be provided with the incentive to do the right thing by climate change: to retain forests, and to plant new forests. National believes it is a substantive step forward that on this key issue of forestry we also have a convergence of views.

There is a fourth issue that has been equally difficult, and it is that for New Zealand the most challenging of the sectors is the agricultural sector. I am sure Labour MPs will have been lobbied as hard as National MPs have been as to why the energy sector might be exempted or the agricultural sector might be exempted or the transport sector might be exempted. There has been a pretty intense debate. Again, I think there has been a sensible convergence towards the acknowledgment of the fact that if an emissions trading system is to work, it needs to include all sectors and it needs to include all gases. There has been, and will be, some debate around the question of what the right order is. Again, the level of consensus that has developed is surprising. I think everybody accepts that the challenge for the agricultural sector, which is so vital to the New Zealand economy, is probably the hardest in regard to the issue of climate change. So we support the Government’s decision that the agricultural sector should be the last to enter an emissions trading system.

I think that the debate between the transport sector and the energy sector is a pretty difficult game. We said in our blue-green paper that the energy sector should go first. The Government has decided that the transport sector should go first by a year. We are not going to argue over that. My view is that it is a pretty balanced call. There is a difference, but I would not want to exaggerate its importance.

I think it is also important to reflect that the tough decisions are still down the track. It is very easy for us in Parliament to have an academic argument about emissions trading being a good idea, but the rubber hits the road when the consumer hits the price. I think that the decision by the Government to defer beyond 2008 and the next general election is so that another Government takes the heat about what those price impacts will be on consumers as they fill up their cars at petrol stations and as they receive their power bills.

Also, there are very difficult decisions to be made about industries like the steel industry, the cement industry, and the aluminium industry, which are affected by international competitiveness. The Government has said that there may be some compromise and some deal with them. Again, those decisions have been deferred on to the next Government. So the hard decisions are to be made further down the track.

I think it is also important to reflect this afternoon on New Zealand’s actual record of emissions, because it is not one of which we can be proud. Since 1999, emissions have gone from 69 million tonnes a year to 77 million tonnes a year. That increase of 8 million tonnes a year in our greenhouse gas emissions represents an increase of 12 percent. The figures released today by the Government show that a 20 percent increase in greenhouse gas emissions will have occurred over the 9 years of this Government. Those figures are the eighteenth worst in the OECD in terms of percentage growth. Those figures are substantially worse than our major trading partners. Looking at that growing surge of greenhouse gas emissions should motivate all of us to be determined to try to implement measures that will constrain them.

National also would want to reflect on the differing and interesting definition of “carbon neutrality”. I think the Government has been a little inventive in this area. The Government is effectively saying it wants carbon neutrality but it would exclude agriculture. In a funny sort of way—and I do not want to be political about this—I do not think we are too far apart on this issue. National has said that it wants a 50 percent reduction in emissions by 2050 based on 1990 figures, which is actually about a 65 percent reduction. Labour is saying with its announcement today that it wants to be carbon neutral—if we can call it that—excluding agriculture, which is 50 percent of emissions, by 2040. Well, it is within a bull’s roar, and we should not judge the outcome in terms of claiming what emissions might be. I do believe, though, that calling that “carbon neutral’’ and excluding half our gases does not seem completely correct.

The one key area where there remains some difference between National and Labour, and an area in which New Zealand needs to make progress—and I would challenge the Government on it—is around renewable energies. The real challenge with the Resource Management Act is how long it is taking for renewable energies to be able to be introduced, whether it be hydro, geothermal, or wind generation. If we really are going to make progress we need to have a far more concise process for dealing with consents. We need only look at the options of the West Wind project in this city to see how dragged out those proposals have been. Again, National says this is a good starting point. There has been a convergence of views. We believe that an emissions trading system is the right way forward for New Zealand in terms of the important issue of greenhouse gas emissions and climate change.

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

Thank you, Madam Assistant Speaker, for the opportunity to speak in this very important debate on climate change. I must agree with my colleague the Hon Dr Nick Smith, who said that there is indeed a broad consensus with regard to the Government’s announcement of its emissions trading scheme.

Right at the outset, I acknowledge some of the outstanding contributions made by members of this House over the years. In that acknowledgment I include the Hon Simon Upton; the Hon Dr Nick Smith, who, of course, has been a champion of this issue; and Jeannette Fitzsimons, who has for years been a very visible figure in New Zealand regarding the issue of climate change. We may not necessarily agree with everything that Jeannette Fitzsimons has said or with the methods she has been keen to employ, but nevertheless she has been a loud voice.

The fact that there is a broad consensus gives us a lot of cause for optimism here in New Zealand. Although, as both the Hon Bill English and Dr Cullen have pointed out, there are technical difficulties associated with introducing a carbon emissions trading scheme, undoubtedly this option is technically far superior to the other option of a carbon trading scheme. We must remember, of course, the Hon Pete Hodgson’s promise to New Zealand only 3 or 4 years ago that the Labour Government, on ratifying the Kyoto Protocol, would more or less be the recipient of a half-billion-dollar cheque for New Zealand. It is a very salutary lesson that the calculations now are that it will cost the New Zealand taxpayer in the order of $800 million to satisfy the conditions of that ratification. Nevertheless, I think it was Dr Cullen who once again pointed out that there is still a degree of scepticism around the science. I think that most of the scientific community, however, has an overwhelming view that human-induced greenhouse gas emissions are related to climate change.

I have a very vivid spectre deeply impressed on my mind, and that is the picture of Beijing that came across on TV the other day, where cyclists, traffic, and pedestrians could hardly see their way through the streets 1 year out from the Olympic Games. The local authorities have been reducing the traffic substantially in order to reduce emissions and to see, hopefully, whether it would be feasible within that time to clear the air. It is not a very salutary thought to think that the Olympic Games could be held up because the contestants will have difficulty in contesting. There are examples of various asthmatics who are deeply worried about whether contesting will be possible. I think that is a very realistic vision of just how important it is that we get control of carbon emissions throughout the world.

David Parker pointed out that moving 30 million people in Bangladesh would almost be an absolute human impossibility, and here, closer to us in the South Pacific, we have countries such as Kiribati and the Tokelau Islands that could easily disappear under the sea if some of the worst predictions were fulfilled.

One of the things that gives us hope is the fact that there is this broad consensus, because inter-party collaboration is one of the ways through this. We know that whatever happens, nothing will happen fast. Long-term planning and long-term research and development will be absolutely fundamental, and to switch from one thing to another will be just totally unsatisfactory. It is important to get the basics right, whether they are the economic tools in terms of emissions trading or whether they are the scientific research and development programmes to see whether we can improve the technologies.

It is certainly in the technologies that, again, we have a great deal of hope. The other day David Parker unveiled the electric car at Waikato University. It will be taken to Australia to, hopefully, win a magnificent prize for the length and speed of distance that it can travel in that competition. That just shows the enormous gains we have had in electric car development over the last few years. One of the great things, to my mind, is the fact that electric cars are not only emission-free but noise-free. If one goes to places like parts of London—