Energy (Fuels, Levies, and References) Biofuel Obligation Repeal Bill

I move, That the Energy (Fuels, Levies, and References) Biofuel Obligation Repeal Bill be now read a second time. During the first reading debate a number of points were brought up by people who think that this is the worst thing that could ever happen to the biofuel industry in New Zealand. But I have a few questions for them. They will be aware that there are about 20 million litres a year of biofuel produced in New Zealand right now. So the first question is: where is that being sold? Or are those people out there producing the stuff and somehow stockpiling it in hope of the day their captive clients, by way of the obligation, who need the stuff will come along to buy it off them? Of course they are not: they are selling it now; it is being used now. Since the obligation came in on 1 October, have there been any purchases by some of the major oil producers or oil sales—or should we say motor fuel sales—outlets in New Zealand? No. So those companies like BioDiesel Oils (NZ) that are saying “It’s all over, we’re out of here, we are gone.” are not being straight up and down with the real current situation.

I had one of my office staff phone that company’s representative to ask whether we could talk about its situation so that I could know more about it, because I had noted that that particular company had had significant business development grants through Government agencies. I thought: “Why don’t I go along and see what they’ve done with that money and what is now at stake?”. The response was: “Don’t bother.” The representative said: “Don’t bother. They’re going out of business.” But if a company is producing 11 million litres of biofuel right now, why would it go out of business? The problem, you see, is that the previous Government created an expectation that industries could be built off the back of compulsorily acquired customers. But that is simply unreasonable—quite unreasonable.

My colleague Mr Auchinvole has just explained that to meet the obligation in the current year, this country would need some 60 million litres - plus of biofuel. If we look at the list of what is being produced, even if these organisations geared up, there is no guarantee that domestic production would be aggregated, purchased, and blended by the oil companies here. The easy way around it is simply to import the lot, and there we have the simple problem. There are no standards in place, no measure against the sustainable production of that particular biofuel, and there would be the strong possibility that New Zealand could be importing someone else’s problem. There would be no mark against us, no measure against us, but the world’s carbon dioxide emissions would rise as a consequence. The Greens sit there saying: “We must develop the local industry and if we do not have compulsory acquisition of product, then it won’t happen.” The bill we are repealing did not make the compulsory acquisitions that their argument relies on.

I want to make a couple of strong predictions for the future of biofuels in New Zealand. Here we are in 2008, a country that produces about 22 million litres of bio-diesel. I bet that in 2 or 3 years’ time, we will be producing much, much more.

💬 Hon Darren Hughes: How much?

I will put a figure on it. I say it will double in 3 years—there is no question about that. I have faith that the investments made by these organisations will see them able to sell their product in this country. I point to some extraordinarily exciting things like the deal that Solid Energy has done with the Stark fishing fleet in Nelson. Fishing boats out there are 100 percent fuelled by bio-diesel. That is marvellous; if they have a spill, it is fish food. Do they have stinky diesel on the boat and the crew? No, they do not. That sort of use is going to develop in this country and it is going to expand in this country. That is why we are going to persevere with the development of sustainable production standards for biofuels. That is why we will continue on our exercise of equalising tax treatment for bio-diesel, bio-ethanol, and other biofuel products.

I ask those who are so downhearted about the future of the industry in this country whether—since, if we were to go ahead with the obligation as it is in place currently, by 2012 we would need some 300 million litres of biofuel a year—there would be any chance that we would get from 22 million litres a year now to 300 million in a couple of years’ time, bearing in mind that Mr Hughes over there thought it was a huge joke for me to suggest that the capacity would double, let alone go right up to 300 million.

💬 Hon Darren Hughes: The member’s capacity could easily double.

Yes it could. That is right. It would certainly not go from 30 million, 20 million, or 60 million, or whatever it is, to 300 million—absolutely not. It will not go up tenfold inside 3 years, and the former Minister knows that. We were always in a position where this country would be heavily reliant on imported product and cannot guarantee where that product comes from.

I do not need to recite to people here what the UN says about biofuels. It is amazing that members on the other side of the House always talk about how wonderful the UN is until they disagree with it.

I want to make one other point: that the current law we are repealing made provision for those who are obligated by the law to come to the Minister of Energy and Resources and say “We can’t meet our obligation this year. Can we defer it?”. The answer to the House—before the question is asked—is that it is highly likely. In fact, it was obvious to us that all of the major sales outlets were going to ask for that deferral. All we are doing is saying: let us get some standards in place, let us continue to put the incentive—and significant Government money has gone into this industry—into developing the local biofuels industry, and then have a look at how much we might see going into our daily vehicle fleet. I make the point again that 20 million litres - plus is produced in this country right now—all being sold.

This legislation remains a mistake. It remains a muddle. It has no logic in it that would withstand even a cursory examination—it is a crock. The Minister Gerry Brownlee, who has just resumed his seat, has shown again with the tantalising illogic of his contribution that he does not believe even half of the things that he is saying. This legislation puts ideology ahead of common sense. It puts low-grade politics ahead of any progress. It makes our economy dumber. It makes our economy more vulnerable, and it is a part of a package of environmental regression that we have seen over the past week or two that is staggering in its extent.

The point is that even if we forget about climate change—let us play that game ever so briefly—oil is running out. It is a finite resource. When we have used it once it is gone, it does not come back, it is not available to be used time and time again. Oil is non-renewable. And if this speech is sounding like something resembling a Norwegian parrot sketch, then it is because I think that point needs to be made time and time again to a Government that appears to believe, unlike any other Western Government in this world, that oil can somehow go on forever—it cannot. It cannot, so oil will be substituted one way or another, sooner or later, around the world. As the price goes up the substitution will begin, and as the price goes up higher the substitution will quicken, and so on. Electricity will be part of that substitution, inevitably, but so will biofuels.

The difference between biofuels and oil is twofold. The first feature is that biofuels will be a range of products, not one product—not just crude oil. It will be a range of products. It will be this, that, or the other feedstock used to produce some sort of alcohol, and this, that, or the other feedstock used to produce some sort of lipid. We will have a range of technologies in the same way, for example, that electricity around the world is produced country to country by using a different set of technologies or a different mix of technologies.

The second feature about biofuels that we know—this is not guesswork; this is known—is that the production of biofuels will be quite highly distributed. It will not be centralised. It will not focus on the small number of high oil - producing nations. Again, like electricity, it will be widely distributed across a nation or across the world, just like agriculture is distributed across many nations across the world. Nearly every nation—I can think of one or two that may not—will be involved in the production of biofuels in my lifetime, and most of them are now. Most of them are just starting off.

But there are some impediments to biofuels. The biggest impediment, the underlying reason for the sales obligation, is that if the capital invested is to have certainty then investors need to know that it will be sold, and because the person who produces the biofuels is not an oil company, then they need to know that the oil company will step up to sell it. That means that oil companies will have to invest in this, that, or the other bit of kit in order to do that, and oil companies do not like doing that sort of thing.

As Jeanette Fitzsimons pointed out, oil companies did not like it when we told them that we needed to take lead out of oil because it was addling our kids’ brains. Oil companies did not like it when we asked them to take some sulphur out of our petrol because the sulphur content is now so high that some new cars cannot run on it. Those cars have been designed for a much, much lower sulphur content. The oil companies said that they could not do that. A negotiation was entered into, and finally the capital investment at Marsden Point was made. Sulphur was reduced from 5,000 parts per million to 500 parts per million, and then to 50 parts per million, and it is on its way to 15 parts per million—so-called zero sulphur.

It was the same for benzene when the benzene level in this country rose to the point where the ambient benzene levels were known to be a cause of myeloid leukaemia, where the link between the amount of benzene inhaled and the advent of that particular cancer is a straight line graph. It is one of the closest causes and effects in any cancer research that one could ever find. When we said that our benzene levels in New Zealand were too high and that they would cause a known amount of cancer, the oil companies said that they could not help, but now they have.

So too with biofuels. The oil companies came to the select committee and said that it was 7c or 8c. The Minister in his first reading speech delivered that as evidence. It was wrong. It was wrong, just like the oil companies always make their estimates wrong, because it is in their interests to do so. The are behaving rationally when they go for a high level in their figures. The oil companies have made their point and the new Government has swallowed it, hook, line, and sinker. In doing so, it has delayed the inevitable.

What is more, when we find the situation arising where we are in a position where we need to produce some serious biofuels, we will not be starting from level 1 or level 2, but we will be starting from scratch. We know that the legislation that is about to be repealed is modest enough. We know that by 2012 we would have got ourselves all the way up to 2.5 percent and that we would still be 97.5 percent dependent on fossil fuels, but we would have begun to have some kit in place, and we would have had some companies that were doing OK and, if you will, refining their production because of their research and development and their learning by doing. We knew that would be the case. We knew that there would be a competitive market. Therefore, we can forget about any arguments about compulsion somehow raising the ability of a non-competitive approach, because there would have been an international biofuels market. Whether or not the Greens preferred that, it would be that way. That issue was not going to arise.

The one issue that did arise was that none of the oil companies except Gull Petroleum wanted it. The oil companies did not say so because they knew they would be unpopular, and they are already unpopular enough because they are making very substantial profits. They would prefer that their profits around the world continued. They would prefer to do biofuels themselves when their own product, mineral oil, became woefully unaffordable. That would be their preference when people stopped buying their product, to then start making their own. But, you see, the future of biofuels will not necessary involve oil companies, and they know it. They know it. In the same way that supermarkets are not particularly involved in agriculture, so too would oil companies not be particularly involved in biofuels.

Then there is another issue. In New Zealand the future of biofuels almost certainly will not be substantially around tallow and it will not be substantially around bio-diesel produced from algae, although those will be important technologies. A still more important one will be biofuels produced from our woody biomass, our trees, and there we bring in a very interesting new dimension, which is the patient capital of Māoridom. That seems to me to be a potential future—in fact, it is more than a potential future—as the science is moving enormously quickly on that. I toured it in North America just about 4 months ago. For example, on the issue of enzymes, there is progress beyond belief. It is astonishing. The smart money of Silicon Valley has gone out of biotechnology and into biofuels, just as this Government is heading in the opposite direction.

We now have a Government in this country that is putting our country—inadvertently, perhaps, but doing so none the less—into reverse. This is regression. This is not progress. This is a dumb future, not a smart future, and this is very, very dumb legislation.

I find it somewhat galling that that was the Minister who convened a group on climate change for 6 years under the previous Government. Let me remind the House of his record. This is the member who went around New Zealand promising a $500 million cheque from Kyoto, but do members know what we have? We have a $500 million liability. This is the member who talks renewable energy, yet during his period as Minister we saw a trebling in the amount of electricity produced from coal. If there is any member in this House who should be ashamed to show his head and to lecture the new Government about climate change, it is Pete Hodgson.

I also want to draw to the attention of members opposite their record of emissions over 9 years. The only thing the Labour-Green Government led on, in respect of emissions, was increases. Let me read the figures for the record that was reported by the United Nations. The increase in emissions from New Zealand in the course of the last Government was 18 percent. The record of John Howard’s Government was an 8 percent increase. The record of George W Bush was a 6 percent increase. So let us get the record straight: in Government, Labour had a record that was twice as bad as John Howard’s, and 3 times as bad as that of George W Bush. So for Parliament to have a lecture from the Labour Party about successful climate change policy is like being given a lecture by Dracula on domestic safety and anti-violence. You see, Labour’s record on climate change is about as bad as it can get, and one of the reasons we need this biofuels bill is that it is another chapter in that party’s botched policy.

Let me systematically go through and point out the botched aspects of that biofuel policy. The first thing we heard from members opposite was standards for sustainability of biofuels. I have a simple question for members opposite: having been in Government for 9 years, where is their sustainability standard? We on this side of the House searched under the ministerial desks, and we looked in every nook and cranny of our ministerial offices, because we were sure that somewhere there would be a sustainability standard after 9 years of rhetoric. We looked under the chairs, under the desks, and in the corners of our offices; it was nowhere to be found. After 9 years, there was no sustainability standard.

💬 Hon Darren Hughes: Keep screaming.

I ask Mr Hughes why he would compel the use of compulsory biofuels when there is no standard. When the United Nations, the OECD, and every reputable international organisation were expressing real concern about biofuels, the previous Government compelled their use without a sustainability standard. I say to Mr Hughes that that is bad policy.

💬 Hon Darren Hughes: One-half of 1 percent!

He says it is only half of 1 percent, but half of 1 percent without a sustainability standard has the risk of being some sort of politically correct policy that might make him feel good in his conscience but that does absolutely nothing for climate change, and actually risks doing real damage to the environment and real damage in terms of the starving in the world who are competing for food along that way.

I have to say that the most extraordinary contribution I have heard in this debate was from the previous Minister of Finance, Michael Cullen. Let me go through the logic of Dr Cullen’s argument. He said that if we go down the road of providing an excise exemption for biofuels, as we do already for ethanol, there is a cost to that, but that—listen to this—a compulsion has no cost. How many members of this House really believe there will be no cost to the consumer as a consequence of compelling the use of biofuels? I say to Dr Cullen that if there were not a cost, why do we need compulsion? The members opposite are silent. The only reason they are compelling the use of biofuels is that biofuels are uneconomic. There are lots of other good things we do not compel for.

I heard another wonderful argument from Dr Cullen, who said that the price of fuel has gone up and down by 70-odd cents a litre, so who is worried about 3c or 4c extra cost? I say to the member opposite that each cent on a litre of gas costs New Zealand consumers $60 million. That is $60 million for every cent. In the middle of a financial crisis, when households are finding it harder than ever to meet their budgets and when businesses are under a real squeeze, we on this side of the House are concerned about every single cent of costs that we will be imposing on consumers.

Labour’s real flaw in the bill was that it was flim-flam. The real problem for Labour members was that they were going into the election campaign and campaigning on that carbon-neutral, world-leader, grandiose argument when their record was appalling—

💬 Hon Lianne Dalziel: You’ve gone from fast follower to rapid reverse.

The member should somehow explain how she reconciles the previous Prime Minister’s rhetoric of New Zealand being a world leader, and the first carbon-neutral country in the world, with the United Nations’ official figures that show that the previous Labour Government had the worst record—the worst record—of any country that we would want to be associated with in terms of actual increased emissions. I accept that the rhetoric of members opposite was bolder than anyone else’s on the planet—yes, it was—but their record was awful and, frankly, on the issue of climate change the facts are more important than the rhetoric.

Members opposite cry crocodile tears about jobs. If I was a biofuels manufacturer and I could persuade the Government to compel everybody to buy my product, I would be in there like a robber’s dog. I would love to be able to pass a law to say that people had to buy my homebrew beer; I think it is good stuff, and I think I could make good dosh by selling it. But is that good law? No, it is not.

I do not think that any member of this House can honestly say that the answer is electric cars, biofuels, or hydrogen cars. We need to provide sensible incentives in order for new technologies to come on stream. The sort of compulsory mentality of the previous Government is a flawed approach. The United Nations Secretary-General has urged Governments around the world not to proceed with mandatory requirements for biofuels. I am yet to hear any explanation from members opposite as to why they are ignoring that advice.

The last word has to be with the Parliamentary Commissioner for the Environment. The Parliamentary Commissioner for the Environment said that this law was a real risk to New Zealand’s clean, green image. That is why members on this side of the House say that it is a botched policy, and the sooner we get it off the law books of New Zealand the sooner we can move on with some climate change policies that make sense and that will work for both our economy and our environment. That is the agenda of the new Government.

Goodness gracious me! It is hard to believe that the member who has just resumed his seat was a member of the Local Government and Environment Committee, which worked on the Biofuel Bill. To be fair to the member, he did turn up to meetings. Unfortunately, because he had declared his hand as being opposed to the bill very early on in the select committee process, I do not necessarily believe his contribution was nearly as constructive as it could have been. If he had left himself open to the possibility that he did not know everything and that the submitters who came along and told us that they wanted this legislation might have had a point, then maybe he could have worked with us and with the Greens to come up with the standards and principles that came out of the select committee. I certainly will not say the member failed to turn up to the select committee, because he did attend meetings, but he clearly did not listen to a lot of what was being said there. It is astonishing how much of the information that was given to us by officials has been twisted. In that speech, coming as it did from someone who claims that climate change debates and environmental debates should be about fact, there was not a lot of fact from the former select committee member.

We are at the second reading of the Energy (Fuels, Levies, and References) Biofuel Obligation Repeal Bill. We had the first reading half an hour ago, and it is always slightly odd to give a second reading speech half an hour after giving one’s first reading speech. But, because we are under urgency, this is where we pretend that the bill has been to a select committee. This is where we pretend that Mr McNicholl, who is losing $10 million worth of investment in a Waharoa biofuel plant—the company’s plant is on two sites—has had the opportunity to come to a select committee and tell members of this House exactly how much money he will lose from the repeal of an Act that gave him some certainty in his business. This is where Mr McNicholl would have been able to come to a select committee and tell members how many jobs will be lost in his industry because of the repeal of Part 3A of the Energy (Fuels, Levies, and References) Act 1989, and he would have been able to tell the select committee how damaging the repeal of the legislation will be for our environmental performance and, more important, for the development of a domestic biofuel industry in New Zealand.

But this bill is being rammed through under urgency. Mr Gerry Brownlee, as Leader of the House, now has a 100-percent record of bills in this House going through all stages and with none of them going to a select committee—100 percent of the bills passed so far by this new Government have not gone to a select committee. They have been rammed through, and the public of New Zealand have not had a single opportunity to come to a select committee and take part in a process that we in New Zealand are very proud of. We know that sometimes there are reasons why bills might not go to a select committee, but that is certainly the exception rather than the rule.

This is important legislation. The Biofuel Bill was with the select committee for a long time because we wanted to get it right, because we wanted to work really hard on getting the sustainability principles in place, and because, unlike National, we did not believe in just throwing up our hands and saying that because the oil companies had come to the select committee and put up a few arguments, we would scream that the issue was too hard to address and do nothing. We decided that doing nothing was not an option. We listened to the numerous submitters who came along to the select committee. Of course, biofuel producers have as much of a vested interest in this issue as oil companies, and we took that into account. We are certainly not naive in that regard. But we listened to the submitters, and we came up with a bill that we felt balanced the need for a domestic biofuel obligation, the need to create a domestic biofuel industry, and the need also to not put too much compulsion on the people who are doing that.

It occurs to me that perhaps the Minister in charge of this bill does not actually know what the principal Act does, because the Act is actually extremely flexible. We were at pains to make sure that the level of compulsion in the legislation was limited only to the percentage of biofuel that is required to be sold. I will reiterate: in the first year it is 0.5 percent—0.5 percent—going up by 0.5 percent every year. The original bill had a final obligation of 3.4 percent. Again, that is not exactly out of this world, but from listening to the Government members speak, one would think we had placed a biofuel obligation of 80 percent or 90 percent on the industry. We had an original obligation of 3.4 percent. But we listened to submitters and we listened to the oil companies. We got official advice that told us, yes, that an ethanol plant they had expected to be developed in New Zealand would not come on stream now, and that they thought that perhaps the obligation should be dropped to 2.5 percent in order to reflect that. And we did that—we did that. We listened and we responded to the concerns of those in the oil industry that they would not be able to access enough biofuel in New Zealand to be able to meet their mandatory obligations. Of course, that is what select committee processes are for, if one is a member of a Government that believes in having them.

I will talk about the biofuel obligation, because a number of Government members have got up and talked about this issue being all about what is sold at the pump. In fact, nothing in the Act states biofuel has to be sold through the pump. I am not sure whether the Minister is aware of that. A number of direct sales of 100 percent biofuel have already been done. We must remember there is a limit at the pump on the level of blend that can go through: a maximum of 10 percent ethanol and 5 percent bio-diesel. But companies can sell higher blends than that, of up to 100 percent, direct to customers if they want to, and it does not even have to go through the pump. We did not tell the oil companies that they had to sell biofuel across the whole country, and we did not tell them that they had to do so only in Auckland or Wellington. It was left up to them to decide how they implemented their obligation, according to whom their clients were and what their existing infrastructure was. Let us not forget that a number of oil companies already import ethanol, because they sell it. The oil company I worked for sold ethanol. Any claim that there is no infrastructure for the selling of solvents and for blending fuels is not true, because oil companies currently sell ethanol as a solvent. Some oil companies already have the infrastructure there, although others may have to develop it.

But one of the advantages of bio-diesel, and one of the reasons why we wanted to create legislation that would support the development of a local biofuel industry that would be predominantly bio-diesel, is that there are not the storage requirement issues that one has with regard to ethanol. Ethanol is more dangerous than bio-diesel and requires a lot higher safety standards—a lot more double-skinned tanks and things like that. Those things are not required for bio-diesel, which uses the same systems as diesel. Another advantage of the Act was in trying to create a local biofuel industry that we knew would be predominantly bio-diesel. It would mean that the obligation could be met from domestic production, and that would, as I said before, eliminate a number of the concerns about sustainability.

When we think about compulsion, we need to remember that the Act is very, very flexible. It allows the oil companies to implement their obligation how they best see fit, and where they determine it needs to be implemented. The oil companies told us during the select committee process that they simply could not access enough biofuel to meet the original obligation of 3.4 percent. However, when we looked into that using the oil companies’ own figures, which they had provided to the select committee, we found that with all the development that was in progress they could meet the original target of 3.4 percent. To say they could not meet the target when we had dropped the obligation in the Act down to 2.5 percent seems slightly ridiculous.

Mr Brownlee likes to talk in terms of litres. Of course, the obligation uses units of energy, not of volume. To meet the 2.5 percent obligation requires 5.5 petajoules of biofuel; for the 3.4 percent obligation it was 8 petajoules. We were told that the potential for domestic production over the period to 2012 was for up to 4 petajoules of bio-diesel from tallow, 2 petajoules of bio-diesel from rapeseed oil, and 0.3 petajoules of biofuel from ethanol. That is enough to meet the original obligation of 3.4 percent in the bill, but because the legislation was designed to provide certainty and to provide the basis for a domestic biofuel industry, we did not feel the need to push that target, and we took the officials’ advice.

We have heard a lot about the impact of the biofuel obligation on the price of fuel. Dr Smith is choosing simply to quote the oil companies, and not the official advice that we received at the select committee.

💬 Hon Dr Nick Smith: What’s your figure?

Of course, one of the difficulties about saying how much this measure will cost is that we need to take into account the price of oil, the price of biofuels, the exchange rate in relation to imports, and also how the obligation will be implemented. If the oil companies chose to sell 100 percent biofuel direct to customers and none of it through the pump, there would not be any impact on the price of fuel at the pump. Every week at the select committee Dr Smith would ask the officials to go away and do some more crystal ball - gazing, and every time they came back with advice he would say it was not good enough, because they could not accurately predict the figures. As Dr Smith knows—and I hate to think of all the grey hairs he gave the very young officials from the Ministry of Economic Development we had at that time—the officials came up with a group of tables that took into consideration a number of scenarios. Those tables said that for petrol it could possibly be a negative number, which meant it would be cheaper—

💬 Hon Dr Nick Smith: If it’s cheaper, why do you need compulsion?

Oh, my Lord! The tables also said that for Gull Petroleum, which currently sells biofuels more cheaply than the other oil companies sell their regular petrol, with bio-diesel the price could possibly go up by 1c to 3c per litre.

Well, it seems that all National’s friends have deserted it except ACT. The Māori Party is not voting for this silly Energy (Fuels, Levies, and References) Biofuel Obligation Repeal Bill, and Peter Dunne is not voting for this silly bill. It is not a popular bill and it is squeaking through with a narrow majority.

This is a second reading debate. Normally we would be debating what happened at the select committee and talking about all the people who came to talk about the effects of this legislation on them, but we cannot do that, so it is sounding like a very repetitive debate. I will talk just a little bit wider and look at where this bill sits, because it is not just about biofuels.

This bill is part of an extreme ideological position that says regulation is always wrong. Whether it is about energy efficiency standards for lights and hot water, about a renewable electricity preference, or about biofuels, regulation—according to this Government—is always wrong. In fact, this Government has actually abdicated its power to govern in favour of a Mr Smith, and I do not mean the Dr Smith sitting opposite. We have two Smiths already in National, but that is not enough. National has co-opted Mr Adam Smith as well to run the Government for it, and the mantra is freedom, choice, and the market. Of course, we all support freedom, choice, and the market, but markets do not necessarily deliver the outcomes we want.

Public policy usually aims to serve a purpose. Otherwise, we would not bother having any. It has a goal. The goals of the biofuel legislation were two: firstly, to reduce by a little bit our carbon dioxide emissions in order to start meeting climate change obligations and, secondly, to start preparing in a small way for the day when oil becomes unaffordable and then unavailable. That is about energy security, which is a term I seem to have heard an awful lot about from the present Minister of Energy and Resources, Gerry Brownlee, but with this bill he is actually moving in the opposite direction.

I hope Gerry Brownlee is around the next time an oil tanker headed for New Zealand turns round in mid-ocean and goes somewhere else. Some members may remember, as I do, when that happened in 1979. During the false oil crisis, if you like, that happened in the 1970s, an oil tanker simply did not turn up at Marsden Point, and that led to all kinds of restrictions in New Zealand. That was a very temporary situation, because of an action taken by the Organization of Petroleum Exporting Countries. When it happens next time, it will be part of a permanent situation of oil being very expensive and, ultimately, very much less available.

I hope Gerry Brownlee is around to see that when it happens, and I hope I am around to see his face when he realises that it would have been possible, if he had left the law as it was, for New Zealand to have a small local industry making sustainable diesel so that we could still run our emergency services and get food to the supermarket—because we will not be able to do that with electric cars. If we do not build an industry in New Zealand, we can forget the idea that when oil becomes too expensive overseas we will be able to just import biofuel. If we cannot import oil, then we will not be able to import biofuel. This is about energy security, and the Government is opposed to it.

Many countries overseas use sales obligations to meet goals of energy efficiency. They put sales obligations on the power companies to invest in energy efficiency, renewable energy, and biofuels. This is not rocket science. A myth is being perpetuated that regulation and mandatory standards are somehow mutually exclusive. That is almost never the case. Biofuel producers will still have to compete to supply the obligation. The oil companies will still have choice as to whom they buy from, and if people try to price racket, they simply will not have a market for their product.

Mandatory standards have a number of other advantages. The first one is that it creates some certainty, and business likes nothing better than it likes certainty when it is looking at where to invest its money.

💬 Hon Judith Collins: It really likes the National Government.

The National Government is creating anything but certainty, and we are already seeing business go down the drain because of that.

If we are looking at setting up a biofuel industry in New Zealand we are going to ask whether the market will be a stable market or a stop-go market. Producers would still have to be competitive to access that market, but they need to know it will be there. If we want innovation, investment, and good science, if we want biofuels produced from algae to flourish in the future when the science is ready, and if we want ethanol produced from wood wastes in New Zealand—all totally sustainable and all made from New Zealand resources—then we need certainty for investment, and this bill is taking that away. Mr Brownlee says that because Fonterra sends 22 million litres of ethanol now to Gull Petroleum, it proves that there is a market now and that it can be increased many times over with no market certainty. Well, I do not know where that comes from, but clearly the fact that one contract exists does not mean there is an unlimited ability to expand.

The next point is that if we want choice, we can have it only if we have information. How are consumers to know whether they are buying biofuel or petroleum, or, if they are buying biofuel, where it comes from and whether it is sustainable? How can consumers possibly exercise choice in this situation? Even the energy star labels on appliances are read only by the committed, and that is why we needed minimum energy performance standards.

Consumers’ day-to-day choices simply cannot meet long-term strategic goals. We need investment in infrastructure to meet long-term strategic goals, and we do not get investment in infrastructure with a stop-go market and the daily fluctuating choices of consumers. How can consumers choose renewable electricity? They pretty much cannot, and that is why we put an obligation on the power companies to build something that is renewable. How can consumers choose the best-performing lights, when the best-performing lights are not even imported into New Zealand? Our market is dominated by junk light bulbs because it is not big enough for the good ones, and they simply do not come in.

Pricing and subsidies are often much more expensive than standards. In this case, a tax exemption for biofuels will cost the taxpayers, not the fuel users. I think that is an interesting distinction. A mandatory standard, if it costs at all, costs the fuel users in proportion to the amount of fuel they use. A tax exemption has the taxpayers subsidising the fuel users. I want to know why the cyclist, the public transport user, and the person with a small car should subsidise those with gas guzzlers, because that is what this repeal bill does.

National has a very inconsistent approach to subsidies. National, subsidies? I thought National was not in favour of subsidies, but it is proposing to remove a mandatory standard and replace it with subsidies. Phil Heatley said in the Herald on Sunday that National was cancelling the green homes insulation fund because it would not tax people to pay for their neighbour’s insulation. Yet it is quite happy to tax people to pay for their neighbour’s health care when they have more severe asthma attacks because the home is uninsulated. Where are the logic and the consistency in that? Now we find that National is prepared to tax people to pay for their neighbour’s fuel.

The principle seems to be that subsidies are OK when they go to big business, but they are not OK when they go to ordinary people. The end point of this ideology is that we would abolish the building code, because people can choose whether they want their houses to stand up or to fall down and whether they want them to be energy efficient. We would abolish driving on the left, because people can choose whether they want to run into people. We would abolish regulations for hazardous substances, for food safety, for seatbelts, for fishing quotas, and for the Standing Orders in the House, because on all of those matters the consumers could actually choose to run things the way they want to and we could get rid of mandatory things.

I rise to speak to the second reading of the Energy (Fuels, Levies, and References) Biofuel Obligation Repeal Bill. ACT, of course, is supporting this bill and nobody should be surprised that we are debating it today because well before the election the National Party made it very clear that it did not consider it appropriate to incentivise the uptake of biofuels through a mandatory obligation, and ACT stood in this House and supported that very stance when that legislation was rushed through under urgency shortly before the election. It made no sense then and it certainly makes no sense now.

💬 Moana Mackey: It had gone to select committee.

The select committee discussion was held, that is quite right, so why do it again this quickly? It is interesting that Labour members are suddenly very worried about sending everything to a select committee. They certainly were not during their 9 years in Government.

Anyway here we are, and there are very good reasons to repeal this legislation. Many of them have already been discussed and I just want to briefly mention those again. Firstly, there are very legitimate concerns around the claimed environmental benefits of biofuels. The booming biofuels industry is driving the deforestation of millions of hectares in rain forests in countries such as Brazil and Indonesia.

💬 Hon Pete Hodgson: It’s nonsense.

Mr Hodgson is chipping in over there, but the evidence is pretty clear. Many other countries are now exhibiting very serious lessons that we should be paying some attention to. In the United States the leading source of biofuels is corn or maize. Nobel Prize - winning atmospheric chemist, Paul Crutzen, a man not known for his climate change scepticism, found in 2007 that biofuels made from corn and rapeseed—something that Jeanette Fitzsimons stood in this House and propounded the benefits of—contributed more to global warming than fossil fuels. If we are prepared to stand up in this House and ignore the evidence from other countries, then we are not very clever are we. Biofuels made from corn and rapeseed contribute more to global warming than fossil fuels and there certainly is a lesson here that should be learnt.

Back to Brazil; it is the second largest producer of biofuels in the world, but we will not hear that from the other side—the second largest producer. How has it achieved this honour? It has been through having a large-scale slash and burn of the country’s native rainforest. Given the stance that the Greens have made about rainforests for I do not know how long—about the last decade—I do not think that we should be ignoring that. As if the rainforest was not diminishing at a rapid enough rate as it is, Brazil has now embarked on an unprecedented campaign of cutting down rainforest to plant sugar cane for biofuel production. That is something that I did think the Greens, and possibly some of the more conservative members of the Labour Party, might have thought was important enough to consider during this debate.

The loss of Brazil’s rainforest though is potentially not the worst impact of biofuels. The worst impacts may well be seen in Africa. In May 2008 Olivier de Schutter, the United States food adviser, stated: “The ambitious goals for biofuel production set by the United States and the European Union are irresponsible. I am calling for a freeze on all investment in this sector.” So why did he call for that? The reasons are twofold. Firstly, food that was once used for its intended purpose is now being turned into biofuels. The very poor in the world are now starving because they can no longer afford what was very cheap food that made them sustainable. It actually kept them alive. Again, the Greens and Labour once upon a time believed in helping out the poor of the world.

Secondly, land once used for intensive food production is now being converted to biofuel production. The cause is the latest fascination of the West and the victims are those in poverty in Asia and in Africa. Sadly, those who are in poverty in New Zealand will now have more costs imposed upon them. Pushing food prices up will hurt most those who are least able to afford it. Legislation that diverts food supply into fuel for those least able to afford it is very dopey legislation and we in this House tonight are doing absolutely the right thing in repealing this legislation. The ACT Party fully supports this initiative by the National Party. It is the right and proper thing to do, and we support it with pride. Thank you.

We have not heard any new arguments from the Labour Opposition against the Energy (Fuels, Levies, and References) Biofuel Obligation Repeal Bill. Even the Green Party co-leader Jeanette Fitzsimons has run out of new arguments: she extended the debate into the so-called bigger picture.

I want to emphasise once again that biofuel, according to even one of the Labour Party members, is actually on sale. It was available before the mandatory requirement was introduced by the passing of the biofuel legislation in the last parliamentary term. Biofuel is available, and New Zealanders who choose to use biofuel can get it. It makes one wonder why the Labour Opposition is so hell-bent on making it a mandatory requirement.

The Opposition is calling for a mandatory requirement in the face of two major deficiencies. The first is the lack of a standard for sustainable biofuels. My diligent, hard-working, honourable Minister, Dr Nick Smith, looks everywhere for one! For 9 years the previous Labour Government never made any effort to develop standards to ensure that the biofuel industry could grow. For 9 years it did nothing, and now it is too late. The previous Labour Government was lazy, and that explains why its members are on the Opposition benches. For 9 years it did nothing, and the Labour Government in its dying days decided once again to try to mandate the bringing in of a compulsory requirement for biofuel to be sold.

I am so glad to be able to take a call to support our sensible and credible Minister of Energy and Resources, the Hon Gerry Brownlee. First of all, he has repealed the compulsion part of the legislation. Even more sensibly, he is creating a process to develop standards of sustainability so that the biofuel industry can prosper. More than that, instead of compulsion, the Minister is introducing a tax incentive. On this side of the House we believe that the growth of the biofuels industry is a desirable development, and we want to see it happen. But we do not believe that compulsion is necessary, because people already have access to and can choose to use biofuels. Tax incentives, however, make sure that the biofuel sector can grow. That is a good thing. I think the energy Minister, the Hon Gerry Brownlee, has made a fantastic compromise. He has put a lot of thought into it.

We trust New Zealanders—our people are intelligent. When they are asked to make an informed choice, they can make that judgment for themselves. There has never been any need for compulsion. When the last Labour Government tried to bring in compulsion, it showed that it did not trust the people. What happened? On 8 November the people threw the Labour Government out.

Debate interrupted.

Sitting suspended from 10 p.m. to 9 a.m. (Wednesday)