Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill

Thank you, Madam Speaker. I present a legislative statement on the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill.

ASSISTANT SPEAKER (Hon Jenny Salesa): That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon JAMES SHAW: I move, That the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill be now read a first time.

Having made it through the title, I don’t have a lot of time left so I’ll crack on with it! I nominate the Environment Committee to consider the bill. At the appropriate time, I intend to move that the bill be reported to the House by 11 November 2022 and that the committee have authority to meet at any time while the House is sitting except during oral questions, during any evening on a day upon which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, and outside the Wellington area despite Standing Orders 193, 195, and 196.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. The New Zealand Emissions Trading Scheme, the ETS, is the Government’s primary tool for meeting our domestic and international climate change targets. It operates on a simple premise: businesses that are responsible for the greenhouse gases that cause climate change face a price for those emissions, and those that remove emissions get a financial reward.

Aotearoa New Zealand is the only country to have forestry included in an emissions trading scheme, where forest owners can earn units for the carbon absorbed by their forests. There are currently almost 390,000 hectares of post-1989 forest land in the ETS which have been voluntarily registered by around 2,900 participants to earn units. In addition, the ETS puts a price on emissions for removing forests that existed before 1990, which were counted towards New Zealand’s baseline emissions when the ETS was first established. This means that those who cut down pre-1990 forest land become mandatory participants and must pay units to account for their emissions.

The ETS is underpinned by a strong compliance system to safeguard its integrity. This was strengthened in 2020 following a review of the ETS. Among a range of changes, this saw the introduction of a stricter penalty that applies when participants fail to meet their unit obligations on time. It usually arises when forests are harvested, deforested, or deregistered from the scheme.

I will refer to this penalty as the “three to one penalty” because it is set up at three times the price of carbon as set in regulations for each unpaid unit. There is no ability for the regulator to waive or to reduce the penalty in size.

A key reason for its introduction was to ensure consistency with international practice. However, it’s important to note that, unlike New Zealand, most international schemes do not include forestry and can often exclude participants that emit less than 25,000 tonnes of carbon dioxide equivalent per year.

The three to one penalty came into force for most participants on 1 January 2021. I say “most participants” because its application was deferred for small forestry participants, being those with annual unit liabilities of less than 25,000 units, until the end of this year. This was due to concerns that the three to one penalty could cause serious hardship for small forestry participants if they were to incur it.

Instead, a transitional arrangement was put in place. Under this arrangement, the previous penalty set at $30 per unpaid unit, with discretion to be reduced by up to 100 percent, has continued to apply when small forestry participants fail to pay by the due date and incur a penalty.

With the year end soon approaching, so is the expiry date of the transitional arrangement. I do not believe that allowing expiry on 31 December this year would be in the best interests of small forestry participants or the wider scheme itself. I say this due to the scale of the penalty, meaning that if a small forester were to incur the three to one penalty and be unable to pay it, their assets—such as their home or their farm—could be at risk if they default.

To put this into perspective, if a small forestry participant with 10 hectares of forestry land was required to pay units valued at $500,000 under the ETS, they would be subject to an additional penalty of around $1.5 million if they did not pay those units on time. These penalties will continue to increase if the price of carbon rises.

The transitional arrangement, which I have discussed today, has enabled officials to develop and consult on options for a new penalty to apply to small forestry participants which is proportionate and fit for purpose. That work is well progressed and I’m pleased to say that advice has been provided to Ministers to make final policy decisions on a new penalty very soon.

This bill will extend the transitional arrangement until the new penalty takes effect on 1 January 2025 by making a small amendment to current provisions in the Climate Change Response Act 2002. This will ensure that there is enough time to educate participants on the new penalty before it takes effect, whilst safeguarding small forestry participants from the risks posed by the three to one penalty in the meantime.

The orderly passage of the bill ahead of the expiry date of the transitional arrangement is crucial to avoid serious hardship to small forestry participants if they were to incur the three to one penalty. I therefore commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Madam Speaker. Well, the very title of this bill emphasises the biggest challenge we face with our emissions trading scheme (ETS): the immense and extraordinary complication of it. To have a title of a bill as long as this, as the Minister for Climate Change just admitted to, that does as little as this is pretty significant. But I think, just to get back on to the ETS and the issues that this bill raises, it does emphasise how extraordinarily complicated this whole process is in its entirety, not just related to this bill. I think this bill in itself emphasises how complicated that is.

I imagine there would be a number of MPs in this House who have had people come to their electorate offices who have inadvertently removed trees that were pre-1990 trees and suddenly faced a massive great bill which is quite intimidating for them. The reason that happens is because those trees have never been registered on a title, and so often it will happen that someone might well have bought a farm quite innocently where the trees had been removed pre them buying the farm and suddenly they’re confronted with this very issue that this bill discusses. So it’s a very real issue for foresters, and, of course, the Minister talked about this being specific to small foresters, but there are many issues related to what we might term a small forest, because it’s pretty easy for a big forester to turn a big forest into a little forest if they want to. So you’d need to have some controls around that as well.

We support this bill; I think it certainly needs supporting, but I just want to talk for a minute about the issues that it raises. I think it’s all very well to go back in history, but because this is such an immensely complicated topic for the average person—not just this bill but the whole issue of the ETS and the way we’ve arranged our climate change response—one can only but think that if we’d got our heads together some 15 years ago and agreed on stuff, rather than poking our heads out, I guess, and setting off on a path that was then reversed, we might’ve been in a much better position now. Unfortunately, when you look at the response to He Waka Eke Noa, it could well happen again, and I think that’s tragic for New Zealand , because I think if there’s one area we need some certainty in—it’s probably the most important issue in my lifetime, and consequently all of yours, and if that’s the case, we should really be getting some collective thinking on how we deal with these issues and manage them in a manner that I think is sustainable for the future and gives investors and other people in New Zealand certainty as to what is going to happen in the future. Every time we bring one of these bills to the House, make alterations to it, it then changes some of the rules that have been set initially, and I think it’s very unfortunate that that should happen.

So I think that whilst I said we support this—and the reason that we support it is because, if you look at these penalties, they were attached to the price of carbon, I think three times the price of carbon. That’s all very well when the carbon price is $14 a ton; not so flash when it’s at $80. So, as the Minister himself said, the challenge of those fines and penalties becomes very significant.

The changes to this bill arose out of submissions to earlier discussion on this issue, and it always amuses me when we say submissions by Māori landowners and organisations noting that the penalty regime is not equitable and would affect them. It actually affects all sorts of people, because not just Māoris have collective ownership of land in New Zealand; there’s many people that have collective ownership in New Zealand. I think that we need to be very aware that there are all sorts of organisations that have this very same challenge that Māori landowners have. So I think it’s particularly important that we consider all types of land ownership when we look at these types of penalties and the complexities and the issues that complicated land ownership arises. It’s not till you go to register yourself in the ETS that you realise how extraordinarily complicated just that process can be, and, of course, there’s a massive great waiting list right now as people rush to register forests and forestry land in the emissions trading scheme. Some of them are going to be significantly penalised by the fact they could wait up to two years, and so that delay in getting registered then delays their ability to claim those carbon credits.

So there are quite a lot of issues facing us at the moment, and I suppose my plea to the Parliament is that in the future we get our heads together on some of this stuff and don’t put ourselves in a position where we create, I guess, divisive issues that then lead us to stall what undoubtedly we should be progressing as a Parliament and as a Government. I think it’s most important that we get to a point where we can collectively agree on these things.

If you go right back to the early discussions on this in—I guess it was well-known as the “fart tax”. In fact, one of our esteemed members of Parliament drove his tractor up the steps of Parliament to protest against it. If we hadn’t gone to that extreme at that time, I’m sure we’d have been in a much stronger position now. So every time we take an extreme view of something, we go way up there, it gets pulled back, and that consequently slows the progress down and we don’t make the progress that we should make with respect to some of the very important issues that face us. This bill is just an epitome of that, because it was put in place with good intentions, the environment’s changed significantly, and so we have to change the rules. I think if we’d thought this whole issue through at the very beginning of this discussion, probably some 20 years ago, we might’ve got to a much better position today. History will be what it is, and we’ve just got to put up with that.

Hon Damien O’Connor: Yeah, well, there’s the reminder there—the reminder there. Just remember that—remember that.

IAN McKELVIE: And it’s all very well to criticise people on each side of the House, but, of course, every part of this House is equally as guilty as the other, Mr O’Connor, and so I think that we should be really careful that we progress these things in an orderly fashion and don’t go to extreme lengths to try and, I guess, insert our will on other people or on other industries.

The interesting thing about this whole challenge for New Zealand is that we’re a very small country. I had the privilege of spending—you can tell by my voice; too much red wine in South America—a couple of weeks in South America, and they have a very different attitude to this than we do. It’s very interesting, because if we start to shift our costs offshore, then they’re just going to lap that up, and that was pretty blatantly obvious in our trip through South America. So everywhere’s different, but I think we need to make sure that we play our part in the world, that we play it well, and that we ensure that our country is sustainable for the future.

That’s probably about all I can put into this bill, but we certainly support it, and I think it’s a fact that it’s resurrecting a challenge that will arise in many more places than this before we get through this whole climate change discussion and the emissions trading scheme discussion in the next few years. Thank you, Madam Speaker.

Thank you, Madam Speaker. I actually agree with the previous speaker, Ian McKelvie. There needs to be a lot more collective effort in this House to be able to work together on the big, gnarly issues. Climate change is something that is affecting us all, no matter where you live in the country, and we can all be quite parochial about the places that we come from. But, actually, climate change is real, it is an emergency—we have had our councils, our Government, declare climate emergencies; we have our children striking out in the street about it. The more that we can work together on these big issues, the better off we’re going to be.

This is a very long title of a bill, the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. Whilst it is a long title, it actually says what it is on the tin—it’s one of those bills. One thing that I’ve learnt, having been here now—this is my fifth year—is that there’s plenty of legislation that’s gone through this House where it’s intended to do one thing, then stuff happens, and then there needs to be another revision, another amendment. Maybe it had an unintended consequence, or maybe something wasn’t captured, or maybe there was a delay in the timing. This is one of those bills, and I’m sure that it will be great relief for those many small forestry owners that may indeed get caught up in an unintended consequence of the primary legislation and the primary goals that we’ve been trying to achieve.

So I’m glad that the opposite side of the House supports it. On this side of the House, we support it. I thank the Minister for bringing it forward. I support this bill to the House.

Oh, thank you, Madam Speaker, it is a pleasure to speak on this bill, and, as my colleague Ian McKelvie said, if you read the title of the bill up, it’ll be half your speech gone—I think that is right. He made a very good point about the complexity of the emissions trading scheme (ETS) and the response to climate change. Actually, the emissions trading scheme is very simple in theory. But, in practice, it is very complex, as Ian McKelvie pointed out earlier.

The previous speaker, Tāmati Coffey, mentioned the School Strike 4 Climate, so I feel justified in bringing this up, seeing as it has been brought up. It demonstrates, in fact, how complex it is; it seems like a very simple issue until you get into the detail. And poor Izzy Cook, who led the School Strike 4 Climate here in Parliament grounds, was interviewed by Heather du Plessis-Allan on her show, and virtually said—in response to a question from Heather du Plessis-Allan about “Should I take a flight to Fiji”—“Well, given we’re in a climate emergency, you shouldn’t fly.” Heather said, “Well when, Izzy, did you last take a flight?” “Oh, a couple of months ago.” “Where was that?” “Oh, Fiji.”

Jan Logie: Shame on you! Shame on you for retelling that kid’s story in this House for your benefit!

Hon Member: Oh, come on.

STUART SMITH: The poor girl—all right, now listen to this [Interruption]—listen to this—listen to this, this is outrageous. If it wasn’t for people like that—

ASSISTANT SPEAKER (Hon Jenny Salesa): Order! Order! Go ahead, Stuart Smith.

STUART SMITH: Thank you very much, Madam Speaker. Poor Izzy would not have been taken advantage of. They put her out at the front, as a spokesperson, not equipped to argue the case. She didn’t realise that her actions and calling for everyone else not to take a flight were hypocritical when she’d already taken one, and, in fact, does that as part of her life. I don’t blame her for doing that—I think it’s good; I’ll take flights as well. But I’m not calling it a climate emergency, and I’m not trying to tell other people not to take flights. And the poor girl was taken advantage of. I think I blame the education system for this: they’re ramming this down people’s throats, and, unfortunately, without taking an evidence-based approach. If only they did that, we would be in a much better position than that. And I think that’s one of the big issues with it.

ASSISTANT SPEAKER (Hon Jenny Salesa): I’ll ask—order! I’ll ask the member to come back to this bill.

STUART SMITH: Well, this is all related to it, Madam Speaker, but I’m coming right back to that now, because this bill is an attempt to tidy up what is a complex issue. So, as I said, it’s really quite simple: you account for the emissions that are emitted, and you account for the carbon dioxide on the other side that is sequestered. Pretty simple, right—until you get down to the difficulty of measuring that. And what we’ve seen lately, with the He Waka Eke Noa, is how badly that can go wrong.

Hon Member: Not this bill.

STUART SMITH: And this bill’s quite tied to that, and, unfortunately, it’s so complex that it’s not understood by many—judging, quite clearly, by those comments from the other side of the House.

Foresters have been and are being caught by this anomaly in the bill, in an attempt to try and create a market. Unfortunately, this market is not just influenced by buying and selling; it’s influenced by policy decisions and announcements which wildly move the market. For example, the Climate Change Commission and the Government are trying to control the number of emissions trading units for sale, and are also trying to control the price. It’s Economics 101: you either control one or the other; you can’t control both.

Unfortunately, with this bill, it tidies up this transitional—well, it gives it a time to tidy up this transitional arrangement, which is a $30 penalty per unit, if people haven’t paid their units. As Ian McKelvie said, most of us—us rural members of Parliament, anyway—will have people, and I have, who’ve come into my office saying, “I’ve cut down some trees I didn’t know I was liable for—I didn’t know they were included in the ETS, and now I’ve got this liability. What am I going to do?” Well, you know, unless they report it, it’s probably not known, because it’s not on the title. But most people are honest; when they find out what’s going on, they get really worried about—and quite rightly so.

So it will give them time to try and do something about it, but I think this will also be a band-aid on it. We support it; we’ve got to do this. But I think, in the end, it’s going to be a very difficult thing to finish, to get tidied up properly, and I think we’ll have problems with this for quite some time. As we’ve seen with He Waka Eke Noa, where there are lots of other opportunities for sequestration, that’s been taken away from the Government. They say, “OK, we can’t measure methane, but we’ll estimate that. We can’t measure sequestration from small riparian plantings and shelter belts, so it’s too hard, we’re not going to do it.” So, on the one hand, they are saying “It’s too hard; we can’t do it.” On the other hand, “It’s too hard, but we’re going to do it anyway.” And that is why this market is such a mess.

But I’m looking forward to hearing from the Hon Damien O’Connor—I hope he gets to speak on this bill. I understand he had a fantastic day at AgFest on the West Coast, and I want to hear his report on it because the bruises have healed—you must have a wee bit of make-up on to cover those up—but I understand it was a fantastic day. I wish I was there to see it; I would have paid double the price to see it.

That’s about all I’ve got to say on this bill, but I just want to finish by saying it would be far better if people stuck to what the ETS is all about and actually do it properly—allow people to count all of their sequestration as well as all of the emissions. So I commend the bill to the House.

Tēnā koe, Madam Speaker. Look, this House grants privileges to members to say whatever they want, really. I’m just saddened that Stuart Smith chose to use his privileges of this House to attack a 16-year-old girl. I think that’s shameful, and he should be thoroughly and heartily ashamed of himself.

In respect of this bill, it is a good bill. The emissions trading scheme (ETS) is a complex scheme, and one of its challenges is that people with smaller holdings don’t put the resources into necessarily knowing and understanding exactly what trees and forests are in the ETS and what aren’t. As has been noted on the other side, it is possible that they could cut down a forest without realising that, in fact, they are in the ETS scheme, and the penalties are rightly significant if that isn’t paid. So this bill does allow some breathing space whilst that particular problem is addressed in a more thorough-going way.

It’s good to see that it seems to be supported around the House. I absolutely commend it to the House as an extra step down our zero-carbon journey. Kia ora, Madam Speaker.

Tēnā koe, Madam Speaker. Thank you. I think the speech by the previous National speaker, Stuart Smith, really highlighted why National needs to lose the next election, because if National was in charge of climate policy we would be going backwards. We heard from that speaker about how “We have had problems with this for quite some time. We want to stick to what’s in the ETS.”, but no commitment by the National Party to fixing the emissions trading scheme (ETS). We have heard from National that they completely support what farmers want with He Waka Eke Noa. They were quite happy for the agricultural sector to set its own levy rather than have that done independently, and I think that speaker just highlighted how deficient National is in its thinking about climate, particularly when he was gaslighting a young woman who was standing up for the future, for her generation, and for more action on climate protection.

So the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill is certainly a long title, but it reflects what has been part of this Government: to fix the ETS so that it actually works, so that it is a critical tool in helping reduce emissions. It’s been part of the major work programme that James Shaw has led as Minister over the last two terms, from passing the zero carbon Act and establishing the Climate Change Commission to provide independent advice, to changing the ETS so that we’ve seen that price on pollution double and then double again, to establishing the Climate Emergency Response Fund; having $4.5 billion—the revenue from the ETS—ring-fenced so that it’s invested in reducing emissions and protecting the climate, being the first country in the world to have mandatory climate-risk reporting, banning new fossil fuel exploration off the Taranaki Coast, having a whole programme of change across the State sector to replace coal-fired boilers in our prisons and in our schools, and making sure that we have clean vehicles in this country through the clean car discount, which, once again, National opposed.

So it’s good that they are supporting this bill, because the whole monitoring, enforcement, and compliance regime for the ETS needs to be robust so that the ETS has that integrity. As the Minister explained in his speech, the transitional regime needs to be extended so that the policy can be worked on so that the penalties that apply to, particularly, those small foresters that have a liability of less than 25,000 units annually, aren’t unduly penalising.

It’s a very small bill, it’s a very sensible bill, and it does allow that time to make yet another action that will ensure that our ETS is robust and that it really does help drive down climate pollution and protect the climate for present and future generations, including for people like Izzy and all the other School Strike 4 Climate activists who are concerned about their future and are providing us with the mandate to do much more. Kia ora.

So, firstly, I want to confirm that ACT will support this bill at first reading because it’s important that people who are subject to very, very bad law that imposes an outrageous cost burden on them have an opportunity to come to Parliament and make a submission about things that affect them. But I also want to make it clear: when the primary legislation was passed, ACT opposed it, because we do not believe that imposing excessive costs on the New Zealand economy, landowners, and primary producers if it does not reduce emissions globally—that there’s any point to it whatsoever.

So the purpose of this bill—the problem definition, according to the regulatory impact statement, is that the emissions trading scheme for forestry is complex. There’s a small number of forestry participants who have become non-compliant with requirements because they simply don’t understand it. That’s one of the problems with having a climate Minister who makes rules about what you can do with private property in your business, who simply doesn’t understand the effects that has on people who farm, who do farm forestry, who produce things, who manufacture things.

That’s why ACT alone opposed the zero carbon Act, because it gives the climate Minister unbridled power to decide which industries, which farms, which means of production are allowed to survive and which ones must be squashed. That’s why ACT opposed the zero carbon Act. But we want to give people who are affected by this terrible legislation, this Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill—we want to give people who may have cut down some trees on their land and only just worked out they’re liable for penalties of hundreds of thousands of dollars, for something either they did or a previous landowner did since 1990, the chance to come to select committee.

Now, when we think about the Kyoto Protocol or the Paris climate accord—those agreements that politicians from New Zealand political parties, either Labour or National or the Greens, went and signed New Zealand up to; climate targets that they had no idea how New Zealand primary producers or manufacturers or just people trying to get to work could meet, but they signed us up anyway. They didn’t care about the cost, and then, when they worked out that actually Kiwis aren’t buying it, they tried to terrify the children and the young people by declaring a climate emergency—ACT opposed that. And so here we are, the Minister for Climate Change, a representative of the Green Party, is coming to the House to explain that “Actually, we got it so wrong that potentially we are going to bankrupt some landowners who didn’t realise that, if they cut down some pine trees on their farm that were planted before 1990, they could be liable for penalties of hundreds of thousands of dollars.”

I note that the Minister isn’t going to be listening to this, which is disappointing. Maybe he’ll review the tape later. But I want to paint a little picture: imagine a world where you’re a young farming couple, a husband and wife, and you’ve bought a farm in the back country, somewhere that you could afford. It’s steep; it used to be subject to erosion—say it’s beef and lamb country, somewhere in the King Country. On that property, there’s mānuka scrub, there’s regenerating bush, and there are big trees that were small trees when the big land clearances happened over a hundred years ago. Over a hundred years ago, in places like Raurimu and Te Kūiti, big rimu, big totara were harvested—essentially, clear-felled—to produce timber for homes in Wellington and Auckland and Melbourne and Sydney and even further afield.

But what was left behind is now regenerating, and, actually, on a lot of those steeper slopes in farms in places like the King Country, pine trees were planted both to stabilise the soil and as an investment for the future, because those farmers weren’t sure what the price of lamb and beef would be 20 or 25 years down the track, but they knew there would be value in those trees. Now, for the people who planted those pine plantations in the 1980s, they had no idea there’d be an emissions trading scheme. They had no idea there’d be a Minister for Climate Change from the Green Party who would pass a law essentially telling people what they’re allowed to do with their own land and what they’d have to pay if they dared to cut down some pine trees. These young couples who have bought farms in places like the King Country, in the central North Island, now find themselves subject to enormous penalties.

So what would ACT do? What would we do differently? Well, look, New Zealand needs to play its part on the world stage when it comes to climate change—we do—because we’re being constantly threatened by bullies like the European Union that, if we don’t do our part for climate change, they will exclude our products and our primary production from their markets. Now, even though the Prime Minister’s announced a free-trade deal with the EU, actually we haven’t seen the document yet. So maybe there is still a bit of stand over going on there. Maybe that’s what this is—maybe that’s what this is.

So what would ACT do? We’ve got to play our part. We actually think that the price of carbon emissions in New Zealand needs to be about the same as our top-five trading partners. I’ve just come back from the US; I’ve been looking at infrastructure, three waters, and how they do climate resilience and adaptation. When I told them that we’ve got an $86 a tonne carbon price on our manufacturers, and that if you cut down trees and you don’t plant more you’ll pay 85 bucks a tonne for that carbon, they said, “You’re going to send yourself broke. What country in the world would do that?” Well, the virtue-signalling climate warriors who declared a climate emergency in the New Zealand Labour Party and Green Party—these people who sit here in the House lecturing us. ACT says no to that. We’ve got to play our part, but our carbon price needs to be around the same as our top-five trading partners so we don’t send ourselves bankrupt.

The other thing we need to do is reform the emissions trading scheme so that New Zealand businesses which emit carbon and want to do their part to mitigate that can plant trees not just in New Zealand—captured under the emissions trading cap, where you’re not allowed to offset your emissions outside the country—but say, for example, they wanted to replant forests in Borneo that had been cut down, say to produce palm oil, to make biofuel, to satisfy some other climate change low-carbon mandate; that, in fact, New Zealand businesses or people who manufacture here, who could be multinationals, could go to somewhere like Borneo or South America, to the Amazon jungles, and they could replant forests there and get the carbon credits for it.

I have a member’s bill in the tin which provides for just that: for New Zealand businesses to go and contract to mitigate their emissions by doing planting or carbon sequestration in other countries. I mean, Australia’s worked out how to do carbon sequestration: their Gorgon natural gas project in northwest Australia has sequestered between six and seven million tonnes of carbon while they’ve got the natural gas out of the ground to use. Now, in New Zealand, if we wanted to do that, you can’t even get credits for sequestration. So, for all of the virtue signalling, for all that we’ve heard from the climate warriors about how they want to save us from ourselves, they’ve come back to the House—the Minister with this bill, this bill to reform a bill that he only passed in 2020—and assured the House that, actually, this was a fair scheme to make people pay for their emissions. And yet here he is coming back to explain that, actually, the penalties are so extreme and the outcomes are so perverse that he’s asking the House under urgency to review this bill and send it back to select committee because the due date for payment for people—most of whom didn’t even know they had an obligation—is 1 January 2023.

That’s an example of the appalling, rushed legislative approach by these people who have no practical experience, who sit in a Labour Government, and who lecture us on how we should live. ACT rejects that. We’ve said we will repeal the zero carbon Act in our first hundred days if we were part of a new Government, and that all of this cost in the economy, slowing down business, slowing down people trying to drive places and do things—we’ll put an end to that. ACT is New Zealand’s hope for the future.

Madam Speaker, Fakaalofa lahi atu. I rise to make a contribution to the first reading of this bill, in my short call, the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. The Government is taking action on climate change and has a goal of getting to net-zero emissions by 2050. However, we recognise that there is much to do. The purpose of this bill focuses on being the vehicle for implementing the new surrender and repayment penalty framework for small foresters. As stated by many of my colleagues who have already spoken, we cannot ignore the effects of climate change. I do want to acknowledge our communities and the participants who continue the work for low-volume emissions.

The other purpose of the bill is to extend the transition period provided for New Zealand emissions trading scheme (ETS) participants with low-volume emissions liabilities. The bill is a climate change response in the Climate Change Response (Emissions Trading Reform) Amendment Act 2020, introduced in conjunction with the zero carbon Act in 2019, and the legislation put in place is the architecture tool and framework to support our transition to a low-emissions economy. What we do know is that businesses that are responsible for greenhouse gases that cause climate change face a price for those emissions. And so to promote the reduction of the emissions, they are to plant trees to take that carbon out of the atmosphere, and those businesses will receive a financial reward.

In my previous working life on the Auckland Council, we voted in 2019, unanimously recognising the climate emergency and, in the following year, passed the Auckland climate plan in line with the Government’s key priorities in the big budget of over $2 billion. In order for the Government to achieve its targets of cutting climate pollution, it is about listening to the concerns of our communities and the sectors involved. The Government is also considering independent expert advice provided by the Climate Change Commission. The Climate Change Response (Emissions Trading Reform) Amendment Act also introduced a revised penalties and compliance regime that came into force for most New Zealand ETS participants on 1 January 2021. This bill will allow an extension of time for small forestry participants to be educated and informed of the changes before the implementation of a new penalty that is intended to be effective on 1 January 2025.

There are also other initiatives that Government is working on in the forestry and agriculture sectors on managing exotic-forest incentives, so work needs to be progressed to make this bill effective. I commend this bill to the House.

Thank you, Madam Speaker. I’m just going to make a short contribution to the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill.

Ian McKelvie: That’s a minute gone!

NICOLA GRIGG: That took up 15 seconds—I’m well on the way. This bill, realistically, shouldn’t have come up. As usual, we find ourselves in this House fixing bad bills that the Labour Government seem to have passed into law, but it does seek to rectify what should have been reconsidered and resolved back in 2020. We think this deferral is a quite necessary band-aid or a cover-up to try and compensate for the severe limitations of the original Climate Change Response (Emissions Trading Reform) Amendment Act 2020. I would have thought anyone sitting in the climate change portfolio seat might start to work on some snappier titles for bills that they do bring to this House, because they’re all long and meandering.

The reason we are going to support this bill is because it does start to reduce or mitigate a real risk of hardship for small-forestry owners—which we know do tend to either be mum and dad owners—or for farm owners, Māori land owners, or Māori forestry owners. We do think that they are at risk of some fairly onerous penalty regimes. The deferral, of course, will allow forest owners a bit more of a chance—12 months, I think—to prepare themselves for the necessary steps that they’re going to need to take to ensure compliance with this piece of law. I think a lot of other people have commented this evening that it is a very complex and complicated piece of law, so I would imagine many will need to take external advice on that just to understand and just to ensure that they are complying.

We do support these much-needed time extensions. They will come just in time, given the original date was due to roll around on 1 January next year, which I think is just over about 2½ months away.

As I’ve already noted, this is to impact and try to cover and try to protect some of those really small owners. I understand that about two-thirds of the post-1989 forestry participants own less than 50 hectares of registered forests in that emissions trading scheme, and, as I’ve said, they are usually small players. So this rigid penalty regime that is in existence will have quite a real possibility of disproportionately impacting these particular owners, particularly, I understand, given the linkages between the penalties and the carbon prices, which, as we all know, are heading to the zenith at a great rate of knots and are likely to increase in the coming years.

We do think that meeting these obligations is going to be seriously onerous on these owners. I’m drawing a lot of parallels and similarities here between the pressures and requirements being put on the forestry sector along with the agricultural sector. Funnily enough, they are one and the same at times, and it’s just another layer of complexity and compliance that these businesses, which are often small to medium sized enterprises, are having to deal with—

Hon Member: Oh, save it.

NICOLA GRIGG: —and it’s really interesting when you hear the bellows of derision from across the House, because it just goes to show how very, very out of touch the Labour Party and the Green Party, particularly, are with business. They just don’t seem to realise that these things cost money and they cost time, and they cause stress and they cause anxiety. The “Government of kindness” seems to forget, at times, the anxiety-inducing terror that compliance and regulation often causes people. We do also note that in a cost of living crisis—that this Government’s still refusing any responsibility for—adding more complexity and more paperwork just adds to the cost of doing business, which we all know is passed on to consumers.

So, look, I’ll just wrap up now. We’ve said that we would support this bill, primarily because it does seek to resolve some issues. It allows the Government and small industry a bit of a reprieve to try and establish a more equitable regulatory system, and there will be a new extension to that surrender period. We will support it to select committee, but there’s certainly some questions we have that we look forward to that committee thrashing out on our behalf.

Thank you, Madam Speaker. It’s a pleasure to stand and take a short call on this bill—not going to repeat the name.

A couple of things that I feel haven’t been mentioned tonight that I’ll just cover. So, as we know, the penalty came in place—three times the price of carbon per unit is the penalty—and one of the difficulties was that the regulator had no discretion to waiver or reduce those penalties that apply on top of the original liability. This is the crux of it really; it has affected our small forestry holders.

A small forestry holder, for this House and for those around, is defined as having a net liability of less than 25,000 units per year, which roughly equates to around 60 hectares of post-1989 Pinus radiata being deforested. So it’s likely to result in the unit surrender of an obligation of around 25,000 units.

When I checked today’s carbon price, it sat at $81. Deforesting 60 hectares at 25,000 units would create a surrender cost of over just about $2 million. If the forester failed to surrender those units by 1 January 2023 currently, they would be required to pay three times the cost of those penalties, so that’s $6 million, plus repay the original $2 million. So, unless you’re Ian McKelvie, that’s a lot of money.

The reality is that this piece of legislation, very small, very sharp—it extends the differential arrangements until the end of 2024 to avoid this. It creates more time to enable a new surrender or repayment penalty regime and is to be finalised for small forestry owners or participants and it mitigates that risk to them. I think it’s an important little bill. It gives us some time. I commend it to the House.

Thank you very much, Madam Speaker. I rise to speak on the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill in the first reading—quite the mouthful.

This bill will amend the Climate Change Response Act 2002 to extend the transition period it provided for New Zealand emissions trading scheme (ETS) participants with low-volume emissions liabilities related to forest activity within which they must comply with the penalties and compliance regime introduced by the Climate Change Response (Emissions Trading Reform) Amendment Act 2020. The extension until 1 January 2025 will mitigate the risk of serious hardship to small forestry participants who would fail to surrender or repay units by the previous date, which is 1 January 2023.

The complexity of the New Zealand emissions trading scheme for forestry means that small forestry participants are more likely to make unintentional errors that result in unexpected unit-surrender obligations. Small forestry participants may find it difficult to meet unexpected unit surrender or repayment obligations, particularly at high carbon prices. I note the spot price now is $81, so it’s gone up very, very rapidly. Meeting these obligations could create serious hardship for these participants, potentially putting key assets such as their home or farm at risk. Extending the current deferral arrangement until the end of 2024 will mitigate risks of such serious hardship for small forestry participants. It will allow time for a new surrender or repayment penalty for small forestry participants to be finalised, and it will allow time for participants to be educated and informed of changes before implementation of the new penalty, which is effective from 1 January 2025.

This deferral will also give officials a window of time to consider the impact of the penalty on participants with small-volume liabilities, including whether further amendments to the penalty provision may be required. For those listening in who do not know what the penalties are about, the penalty applies when a person fails to surrender or repay carbon units to the Crown by the due date, the so called surrender repayment penalty. In their revised penalty regime, the regulator’s discretion to reduce the penalty was also removed and the size of the penalty was increased to three times the price of carbon as set in regulations. Therefore, one of the implications of the new payment regime is the risk of serious hardship to small forestry participants resulting from the significant size of the penalty and the personal nature of the assets they hold. To mitigate that risk, legislative change is required to ensure that those small forestry participants are not subject to the three-to-one penalty and avoiding the resulting impacts on them.

New Zealand has a total of 10.1 million hectares of forest, covering 38 percent of New Zealand’s land area. Of this, 8 million hectares are native forest, 2.1 million hectares are plantation forest. Of that plantation forest, 1.7 million hectares are productive, and the remainder is in reserves and unplanted areas near bodies of water and infrastructure. Based on reported emissions in 2021, the largest participants in the New Zealand ETS were forestry participants: 2,205 were voluntary post-1989 forest participants, 42 were mandatory pre-1990 forest participants who deforested more than two hectares, 141 were mandatory non-forestry participants with surrender obligations, and there are also 211 mandatory non-forestry participants, including in the agricultural sector, who do not currently have surrender or repayment obligations, only an obligation to report emissions. But the complexity of the New Zealand ETS for forestry means that small forestry participants are more likely to make unintentional errors that result in unexpected unit-surrender obligations. Initially, the deferral was developed in response to submissions during a previous select committee stage, and feedback from forestry stakeholders reflected two main issues: the size of the penalty was viewed as excessive and posed a risk to participants who may be having trouble meeting their surrender obligations due to no fault of their own; and, secondly, they reviewed that the absolute liability approach to the regime allows no flexibility to regulators to mitigate the penalty in certain limited circumstances, for example, when a force majeure event means participants cannot meet their surrender obligations on the due date.

Two-thirds of post-1989 forestry participants have less than 50 hectares of registered forest in the scheme. Participants are usually natural persons or small businesses, including farmers with small forestry blocks, Māori landowners, forestry syndicates, and conservation groups. Landowners with pre-1990 exotic forests may be unaware that their land is subject to deforestation liabilities. It is difficult for landowners to determine if their land is pre-1990—it is not recorded on the land title. Mandatory participation is on a regular familiar obligation, but arises in circumstances where they have mistakenly or unintentionally deforested their property.

I heard a bit of criticism from the Green Party in an earlier submission. I just want to respond to that very briefly. The Green Party was claiming the National Party didn’t care about climate change and the response to it, and I would absolutely refute that. The National Party very much cares about it and we’ve worked hard on this for many years. However, we need to have a system that will actually balance our climate change mitigation responsibilities and ensure we don’t have what’s called emissions leakage, which means sending emissions offshore, which will increase the planetary emissions profile, which, unfortunately, is what we’re looking at at the moment, which the Green Party was criticising.

We need to be very careful. I would just say, again, very briefly, how we do this, because if we reduce food production in this country and we shift that overseas with the resultant emissions leakage, shifting that emissions profile overseas to less-efficient farmers than we have here in New Zealand; we have the example, unfortunately, of Sri Lanka, which ended nitrogen fertiliser use last year, as the Green Party is calling for in New Zealand. The result is that over a quarter of their population now is reliant on food aid—2.4 million children. That was a country that, pre-pandemic, had reached upper middle class status. So they brought on a complete stop to nitrogen fertiliser last year that meant they went from being self-reliant in food production—they were self-reliant on rice production—to not having enough rice to feed their population, and also reduced their tea plantation, which was their primary foreign exchange earner, and, therefore, they didn’t have the foreign exchange to buy food. So, as a result, they now have more than a quarter of the population in extreme food poverty and reliant on food assistance. So I would just suggest to the Green Party that they carefully consider policy settings that they propose around this space.

So, just back to completing my submission on this bill, I’d say, given all the considerations and potential issues that the current deferral arrangements would pose, National supports the bill’s aims to extend the current deferral arrangement until the end of 2024 because this is a practical solution that’s being proposed. Doing so will mitigate the risk of such serious hardship for small forestry participants, it will allow time for a new surrender or repayment penalty for small forestry participants to be finalised, and it will allow time for participants to be educated and informed of changes before implementation of the new penalty, which is effective from 1 January 2025. This deferral will also give officials a window of time to consider the impacts of the penalty on participants with small-volume liabilities, including whether further amendments to the penalty provision may be required.

So it is a practical change, taking into account the complexity of this climate change response which is very, very complex, and this is something we are seeing right across this. As we see with this bill, don’t get it right the first time and have to be very responsive to the impacts on our communities. For that reason, the National Party is supporting this bill.

Thank you, Madam Speaker. Happy to take a brief call for a bill that has an extremely long title, so I won’t refer to it. But what I will say is that this bill seeks to simply extend the time frame within which those forestry participants who have a low volume of emissions must transition for the purposes of penalty in line with New Zealand’s emissions trading scheme.

I have full confidence that the good folk on the Environment Committee will be able to deal with this bill. It is a discreet bill, it is a short bill, but nonetheless I know that the members on the Environment Committee will give it its full attention—

Hon Member: Hard-working.

TANGI UTIKERE: —hard-working indeed, and I commend this bill to the House.

Motion agreed to.

Bill read a first time.

The question is, That the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill be considered by the Environment Committee.

Bill referred to the Environment Committee.

Instruction to Environment Committee