Climate Change Response (Emissions Trading and Other Matters) Amendment Bill

I want to just mention at the outset of this contribution that my colleague Moana Mackey is unable to speak in the Committee today. She is our spokesperson on climate change issues, and she is ill. But I am very pleased to rise and make a contribution as a former spokesperson on the issue.

I want to make just a couple of points about Part 1. It is the major part of the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill by a country mile. Of the 103 clauses and the schedule in this bill, fully 102, apart from clauses 1, 2, and 3, appear in Part 1. So it is to be expected that the bulk of the debate will be concentrated on this part. As was said in the earlier stages of this debate, and also by many submitters to the Finance and Expenditure Committee, whose submissions I have had the opportunity to read, the bill is a great disappointment to those who would see progress on the issue of climate change in New Zealand.

The legislation is fundamentally flawed. It is rushed, and it will do nothing to curb the growth in New Zealand’s gross greenhouse gas emissions. Indeed, the provisions of Part 1 simply reflect the delusion that seems to have seized the Government that the environment and the economy are contrary forces to be balanced against each other when actually they are two sides of the same coin and need to be seen properly as dependent upon one another. The weakening of the emissions trading scheme, which this part will substantially accomplish if it is passed, will make New Zealand absolutely struggle to meet even the Government’s target of a 50 percent reduction in emissions by the year 2050.

It is instructive to compare what the provisions of this part would do with what the Government promised when it campaigned for election in 2008, once Labour had actually legislated for an emissions trading scheme for New Zealand. These were the promises. The changes National said it would bring in would be fiscally neutral. Well, that promise is already broken, and this part will ensure that it is further broken. The Government itself has estimated that this legislation will cost some $328 million. That is the size of the subsidy that this Parliament will be enacting if it passes Part 1. The Sustainability Council thinks that the subsidy is about four times that number—$1.3 billion. That is what Part 1 will accomplish if it passes in its current form. And this is on top of the 51 million tonne deficit that the emissions trading scheme now contains, which is also estimated to cost around $1.3 billion at the current carbon cap price. This is simply a continuation of National’s approach of passing costs on to New Zealand taxpayers to reduce costs for polluters.

This Government’s tinkering is doing more harm than good. There is no certainty in the business environment. We all, I think, agree that certainty to businesses is a fundamental thing that we ought to be providing so that they can get on and plan, and they can get on and order their affairs. If the rules change every year, if the commitments just go on to the never-never every year, if the promises are postponed every year, then there is certainly no certainty for business or for any other actors in this particular part of the economy.

This bill fails to target some of the crucial issues within the emissions trading scheme—for example, the influx of cheap international units making the price of carbon in New Zealand lower than in other schemes, and making for a large deficit in our emissions trading scheme. What the part shows is that National is happy to manage the slow decline of New Zealand rather than moving forwards to a clean and clever low-carbon economy. That was the intention of the original emissions trading scheme, and this part of the bill simply takes us further and further away from that original intention. Labour is not content to fall behind the rest of the world, and we will be voting against this part of the bill.

My colleague Moana Mackey has put forward a number of amendments that would go some way to fixing some of the damage that this part would cause. There is Supplementary Order Paper 144, where Moana Mackey’s amendments would provide for a transitional phase-out of the two-for-one surrender of units and a transitional carbon cap price. That is a very good Supplementary Order Paper, and I want to commend it to the Committee. She also has on the Table Supplementary Order Paper 142, which would require 50 percent of units surrendered to be New Zealand units. That would help to deal with the problem, which I mentioned earlier, of the influx of units that is so undermining the scheme and the price in New Zealand.

She also, in Supplementary Order Paper 146, has amendments to clauses 42 and 71 that would provide for some transparency. I remember when Dr Nick Smith was the Minister responsible. He always said that the most transparent regime that we could achieve in this area would be the best one from the point of view of the public. Well, I agree, and so does Moana Mackey, and what she has done is put forward an amendment that would provide for that by ensuring that the costs that are actually faced by consumers and taxpayers would have to be published by the Government so that the public could actually have an idea of what this massive wealth transfer, this massive subsidy scheme, which is what the emissions trading scheme has become, is actually costing consumers and taxpayers. It is a very good amendment, and I commend it to the Committee of the whole House.

Moana Mackey also has an amendment on Supplementary Order Paper 141, which would delete clause 96, relating to the application of the emissions trading scheme to the agriculture sector. I said earlier that there can be no certainty in a scheme where there are constant reviews being undertaken, where deadlines are continually being put out, and where in New Zealand’s case the largest source of emissions, the primary sector, is simply being given the message that it will never be—

💬 Shane Ardern: Where’s the science? Back it up with science.

—bound by the emissions trading scheme. Mr Ardern asks: “Where’s the science?”. Well, the fact that a member of this Parliament would ask that question so far into the debate, the fact that the National Party still contains climate change deniers who would say that agriculture and primary production simply do not contribute to the problem, is a sad testimony to what a lack of progress we have made in this country on this question—if that contribution can seriously be made in this Committee.

There are other amendments before the Committee in the name of Kennedy Graham. He has put forward a comprehensive Supplementary Order Paper 147. I think there are a number of measures in that Supplementary Order Paper that the Committee should pay close attention to and give careful consideration to. Many of them, at least on my first blush reading of them, seem to make a lot of sense, and I want to commend Dr Graham for having put those amendments in front of the Committee. I hope that we will see some careful consideration of them, because, as we have heard in previous contributions, the scrutiny that this legislation got in the select committee was not the sort of detailed look at this sort of complex economic question that it merits. There was a very truncated select committee process, and that is not what this question deserves.

Dr Graham and Moana Mackey are both trying to remedy that at this stage of the debate by ensuring that there is material before the Committee that allows an alternative view to be considered, and I hope that that will be what happens in this debate. I hope we hear detailed contributions on it and that we hear a response from the Minister for Climate Change Issues both to the issues I have highlighted, which Moana Mackey’s Supplementary Order Papers would deal with, and to the scheme that is put up in Dr Graham’s Supplementary Order Paper. It deserves, I think, at least that courtesy, both because of the importance of the issue and because these are clearly bona fide attempts to address in good faith the major problems we face in this area.

I want to make just a brief contribution on the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, and I want to begin with the substance. The core issue that Parliament wants to address with its climate change legislation is the issue of greenhouse gas emissions. I was fascinated to read the just tabled report from the Ministry for the Environment on the level of emissions. I really would ask members opposite to pick up that report and have a look at page 17, because what it shows is this: in the years 2000 to 2008, in every single year, the level of greenhouse gas emissions increased quite dramatically. In fact, over that period it shows it went from 64 million tonnes up to a level of 78 million tonnes in the 8 years that Labour was in Government supported by the Greens.

In the period in which we have been the Government, it is interesting to note that in each year emissions have gone down. I was expecting to hear speeches from members opposite commending the Government for its record in that regard. I thought that was the core of what this debate was all about. So I would, firstly, challenge members to look at that annual report and acknowledge that under this Government the emissions trend for New Zealand has changed, and that New Zealand is set to comfortably meet its Kyoto commitments. Before members opposite bag New Zealand’s international reputation in this area, I want them to line up and tell me which countries are doing a whole lot better than New Zealand. I say to the Minister in the chair, the Minister for Climate Change Issues, that New Zealand can stand tall. We are doing our fair share, as we promised.

The second issue I want to address is the question of agriculture. I have listened to speaker after speaker concerned about New Zealand’s balance of payments, wanting us to grow this country’s exports. Is there a member in this Chamber who does not understand that the backbone of New Zealand’s exporting industries is our primary industries? Yet here we have members opposite wanting to kneecap our most important exporting industry. I want to ask members opposite how that will help New Zealand’s balance of payments.

I particularly want to challenge members opposite on an article in the Guardian newspaper last week. Do you know what it said? It said British consumers help climate change by eating New Zealand lamb. That is what the British newspaper said. Do you know why it said that? Because scientific studies have shown that when they consume New Zealand lamb, the impact in terms of emissions is about half that of consuming British lamb. The question I have for members opposite, who have consistently run the argument that for environmental reasons agricultural emissions should be put into the emissions trading scheme on 1 January next year, is this: for the British consumer, if that takes place, you are actually providing a financial incentive for them to consume lamb that is produced somewhere else, other than New Zealand. That will actually drive emissions up.

I am all for environmental responsibility, but I want to see measures being adopted in New Zealand that will help, not hinder, the reduction in the growth of emissions. I say that the position the Minister has taken that New Zealand should not put agricultural emissions into the emissions trading scheme until we see greater progress internationally—and, secondly, when we see the product of the huge investment that this Government has made in research programmes that will develop the practical technology by which farmers can address those emissions—is absolutely the right policy, both economically and environmentally, for New Zealand.

The third point I want to make is the complete contradiction of members opposite in terms of their campaign around manufacturing jobs. You see, members opposite cannot cry foul about the potential job issues for key industries like New Zealand Steel, Holcim cement, and the aluminium smelter down in Invercargill—they cannot sing that tune in one breath, and then in the next say that they want to impose greater costs on those same manufacturers. I challenge the next member from Labour, a member who has been championing the cause of jobs in the manufacturing sector, to explain how putting more costs on the manufacturing sector is going to help jobs at this economically very difficult time. Labour cannot have it both ways.

The final point I want to make is in respect of electricity prices. You see, I constantly hear members opposite saying that they are concerned about households and their power bills. I simply challenge them to be honest and upfront, because the amendments they have tabled in their names will all lift the price of power bills for average Kiwi households. I am one of those who want to see incentives for renewable power, but there has to be a balance. There has to be a balance towards the shift we need to make in New Zealand before there is more renewable energy—and no Government in the last 20 years has had as good a track record as what we have seen take place in the numbers that are published by the Ministry for Business, Innovation and Employment. It is proper that we do that. The important reforms that my colleague Amy Adams is working on in the Resource Management Act will help us build more renewable energy. But we need to balance that with the real costs that electricity imposes on both households and businesses. The part that I get frustrated with is this: members opposite keep talking about the emissions trading scheme costs as though they fall only on corporates, but they do not. Every cost that we impose in this bill is not being imposed on some corporate but on ordinary New Zealand households, farmers, and businesses. I challenge members opposite to bring that reality to this debate.

The very last point I want to make is that I have heard all sorts of rhetoric from members who say that this bill takes the emissions trading scheme backwards. That is untrue.

💬 Dr David Clark: $328 million.

That is untrue, and I just want to say to the member who has interjected that, actually, under this bill the New Zealand emissions trading scheme will take up a new sector of gases on 1 January. Not only is it going to include industry, electricity, and transport fuels, which are not subject to the Australian scheme, but on 1 January next year it is going to include those very powerful greenhouse gases, which expands the scheme next year to more than what it was this year. Sure, members opposite can claim that the scheme may not be going as fast forward as they would like. That is a fair argument. But it is not—

💬 Dr David Clark: It’s in reverse.

The member says it is in reverse, but the one-for-two obligation operates now. In terms of the sectors that includes, they are all there now. The truth is the emissions trading scheme under this bill will next year include more gases and will be more extensive than it is now. It is important that we debate what is in the bill, not what is in the fantasies of the members opposite.

In the limited time we have I do not want to devote too much time to responding to the previous speaker, a speaker for whom I have considerable respect, not least on climate change issues. Notwithstanding that, it is not too hard to refute each of the points he made.

Firstly, he commented on the increase in greenhouse gas emissions from 2000 to 2008 and the reduction in emissions from 2009 to 2012 as if that was a badge of honour for the Government. It was nothing of the sort. It had to do with the global financial crisis.

💬 Hon Dr Nick Smith: No, it doesn’t.

It does. The gross emissions—

💬 Hon Dr Nick Smith: It’s the stop in deforestation.

That is one aspect. But the fact is that the gross emissions went down—you are talking about net—largely because of the global financial crisis. If, in fact, there is economic growth again and if you do not decouple, then those gross emissions are going to rise again. What Dr Smith did not do was point out figure 2.1 of the Emissions Trading Scheme Review Panel’s report to the effect that gross emissions are going to rise. He did not point that out. Whichever Government is in power, unless there is a strong emissions trading scheme in place, gross emissions are going to rise. And I do not see him to receive the point. In fact, he asked for the Government to be commended for the gross emissions going down. Well, if that is the case, the Government has to be commended for the emissions going down because of the global financial crisis only.

His second point, from the Guardian, is that New Zealand lamb has less of a carbon footprint than British. That is true, as far as it goes. What he did not say is that in either case our agricultural emissions are going up as a result of increased meat production to meet increased global population. So unless you can decouple agriculture from an increase in gross emissions, we in this country—whether we are less carbon-intensive than Britain or not—are going to be responsible for an increase in emissions. We cannot afford to do that, and neither can the world.

Point No. 3 was that with manufacturing jobs you cannot have it both ways. True, you cannot, and you do not have to. The Green Party put out a platform in 2011—only a year ago—for 100,000 new green jobs that reduce emissions and increase the quality of life, with employment going up. It is easy enough to do; it is just that we do not get hung up on the old-fashioned notion of how to get jobs.

Point No. 4 was that with electricity prices you need a balance. I totally agree with that. It is just that you get a balance by some recycling of revenue that can be obtained through either an emissions trading scheme or a carbon tax, and it does not have to be in the way that Dr Smith is implying.

Finally, he is criticising the Opposition for critiquing the emissions trading scheme as going backwards and said that that was untrue. Well, he is right there. It is not going backwards; it is going forwards. It is going forwards to dangerous climate change and potentially catastrophic climate change. Nothing is going backwards. Nothing can go backwards, at least not in this universe—although there may be one or two parallel ones in the Chamber. But the fact is that we cannot afford to have the kind of emissions trading scheme that is in front of us, that is being further weakened, if we want to have regard for what is going on around the planet. Mr Banks looks at me as if he is wondering what is happening in the Arctic. Well, the fact is that polar ice has melted 80 percent since 1980, and it is on course to be ice-free for 1 day in 2015. That is 50 years ahead of 2065, which was the scientific—

💬 Shane Ardern: So how would taxing agriculture—

We will get to that, yes—patience, and we get there. You can adopt only an emissions trading scheme that is going to be strong enough to meet the requirements coming from the science. That is the premise on which the Green’s Supplementary Order Paper 147 is based. It is a rather broad-ranging emissions trading scheme, which seeks to strengthen all the provisions that have been weakened in the emissions trading scheme in the last 3½ years.

The departure point for—let us call it—the Green emissions trading scheme is that we look to the purpose of the Climate Change Response Act 2002, which is to enable New Zealand to meet its international obligations under the convention and the protocol. That is not just the Kyoto Protocol; that is the framework convention as well, which goes beyond the Kyoto Protocol. So we have to meet the requirements of reducing our greenhouse gas emissions post 2012 under the framework convention. That is an obligation. How do we do it? And how do we do it in a way that meets the science that is coming out? The science makes it clear that there is a range on countries such as ours to reduce emissions by 25 to 40 percent by 2020, and 80 to 95 percent by 2050. I note in the Cabinet paper that the Government has the impudence to say that it does not follow that New Zealand or any country has to be within that range, which I suggest is an illogical absurdity and morally irresponsible. That range is determined by the scientists. All annex 1 countries are meant—meant—to be in that range.

If we proceed from that, we can then turn to the targets as they are set out in Part 1 of new schedule 5, proposed in Supplementary Order Paper 147. Here are the figures—which I have never seen come out from the Government, incidentally, although they are there, more or less—in the review panel’s report as to the tonnages that are meant to come down. We can either say it is too damned hard and we will rip it up and throw it into the waste-paper basket and look forward to potentially catastrophic climate change, or we can say: “My God, this is going to be difficult, and let’s work together to work out how we do it.” I am prepared to do that. I do not think for a second that we have got all the answers, but these are the figures that would be required.

💬 Shane Ardern: The basic question is, by taxing agriculture—

Yes, I understand the question—thanks for that. We will get there. If you then proceed to Part 2 of new schedule 5, you will find there are 5-yearly carbon budgets, as in the British model, as to how we get there. They reflect the figures that are in Part 1. If National MPs and Green MPs look to that, we would be able to at least have an informed dialogue as to how to get there.

How do we get there? We get there by setting up an independent commission on climate change to give independent advice to the Government—whether it is National, Labour, Green—as to what figures are meant to go into the carbon budgets to get down to virtually a carbon-free economy by 2050. We would set up an appeals tribunal to receive any pleas for financial relief from any sector—whether it is corporate, farming, households, or individuals—that believes it is experiencing undue financial hardship as a result of a strengthened emissions trading scheme. Let us not gloss over the fact that there will be change, and uncomfortable change, as a result of the need to adapt to a low-carbon economy. The challenge is not to deny it; the challenge is to work our way together as to how you get through it. I do take the points about the shock therapy of an apparent carbon tax.

The measures would be the introduction of a price floor and termination of the price cap; a phase-out of the one-for-two surrender obligation; termination of the issuance of free allocations to participants; introduction of auctioning under the general discretion of a Minister, commencing in 2013; restrictions on international units that can be traded and surrendered in New Zealand, to the tune of 30 percent; introduction of agriculture into the scheme in 2014, which was originally intended to be 2013; and a requirement on emissions trading scheme participants who are purchasing units under the scheme to purchase a minimum percentage of those units in the form of units held by participants in the Permanent Forest Sink Initiative. The foresters have had it bad. Permanent Forest Sink Initiative foresters are only part of that, but they are probably getting a worse deal than anybody.

There is a huge need to look at each of these provisions. I put it forward to the Committee, with respect to the Minister for Climate Change Issues, to engage in a proper dialogue—a respectful, mutual dialogue—on each of these provisions. Although I will receive sincerely a critique of these provisions from the Government, which no doubt will be on the grounds that it is too difficult and it will incur too much short-term financial pain, the answer to each of those critiques to the Minister, to the Government, to National MPs, and to all colleagues in this Committee—because we are in it together, let us face it—is whether you can show to our satisfaction a weaker scheme that is going to meet the demands of the science that has come out in the last 3 years, since the 2007 Intergovernmental Panel on Climate Change report, pertaining to ice melt, potential methane release, and the impacts of climate change that are around us. Thank you.

I want to build on some of those comments made by Dr Kennedy Graham. There was much in Dr Nick Smith’s speech prior to it that was poppycock. I think there was not enough time for Dr Graham to constructively add to the debate and to address all of the nonsense raised by Dr Smith.

Dr Smith, in his contribution, said that the desire was to address greenhouse gas emissions through an expansion of the scheme. This is a lofty way of phrasing things, but it does not sit well with the facts, because we know, and the Government estimates, that this legislation, the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, will cost $328 million. It is legislation that is increasing the taxpayer cost because those costs are not being met by polluters. So the facts do not quite line up with the rhetoric. That is not unusual from this Government, but it is unfortunate because here we have a serious issue that needs addressing and a Government that is scurrying from it as fast as it can.

Dr Smith raised the issue of emissions increasing in a dramatic way between 2000 and 2008. Emissions certainly did increase, and I guess that is something this Government has not had to grapple with, because at this stage the increases are largely coincident with economic growth and we know that this National Government has the worst economic record of any Government in the last 50 years.

💬 Todd McClay: Rubbish!

It has the worst economic record of any Government in the last 50 years, Mr McClay, so it has not had to deal with this issue of economic growth and to what extent one can decouple growth from emissions.

Certainly, the last Labour Government consented a significant amount of renewable energy, some of which is now coming on stream. It was the Labour Government that introduced the emissions trading scheme, with the support of the Green Party, into this Parliament, and it has seen at least some response to climate change—a response that was not particularly forthcoming before it was tackled by the Labour Government. That scheme, I have to say, was a fairly modest one, and I think all members who supported it would acknowledge that it was ambitious in including all sectors and all gases, but that it started in a modest way. Its aim was not to put businesses out of business; its aim was to shape the way in which future investment decisions were made so that businesses would make their decisions based upon an understanding that there would be a carbon price in future.

That decision, that framework, is, in fact, the subject of one of the Supplementary Order Papers, Supplementary Order Paper 142, that I wish to discuss as I get into my address to this Committee—one in the name of Moana Mackey. It talks about the possibility of having New Zealand - based units to ensure that there is actually a reasonable price of carbon, so that future investment decisions are made in a way that is in New Zealand’s long-term interests, not in the interests of the next couple of years—the economic returns in the short term—so much as in the longer term.

We know that New Zealand’s products capture a higher premium price in the market because we have an environmentally friendly reputation. That reputation is under threat—that reputation is currently under threat. As New Zealand waters down this legislation we will no longer be able to attain the same premium prices in the market. When the scheme was introduced we in the Labour Party calculated that it would put an additional couple of cents of cost on a block of butter—a couple of cents. But those couple of cents would go towards offsetting the emissions and it would also help to ensure that those products were seen to be on the right side of the equation.

💬 Shane Ardern: It would go to a northern hemisphere farmer. Production would go elsewhere.

Mr Ardern would like to see us wind back the legislation further, but it cannot be done. The legislation that is being put through will ensure that the subsidy to farmers goes out indefinitely. The farming industry, which proudly claimed itself to be subsidy-free in the 1980s, now is faced with the prospect of being heavily subsidised indefinitely. The National Government is ensuring that polluters are subsidised, and ensuring that those farmers who are taking measures to reduce greenhouse gas emissions through good farming practices are not encouraged.

💬 Shane Ardern: How are they doing that? What are they doing? Give me a hint of what they’re doing.

Mr Ardern does not want to see those good farmers encouraged. He wants to encourage the worst farmers to continue doing what they are doing, and those farmers who are making changes in their farming practices, who are putting modern farming practices in place, not to be encouraged. We know that the use of nitrogen on farms can be changed, according to best practice, to reduce emissions.

💬 Shane Ardern: Yes, doing that. Yes, a tick for that.

Oh, it is all done, says Mr Ardern. He is well ahead of most of New Zealand on this issue. I will concentrate back on my speech, rather than take too much more wisdom from that member on this matter.

There is, of course, this prospect of losing our premium in the market—I will come back to the point—which at all costs must be avoided because New Zealand needs a smart, safe, business-friendly future, not a future that is tied to the worst parts of our economy in terms of those who are the greatest offenders in terms of emissions, but to one that rewards good farming practices and advances, and clean, green, climate-friendly businesses.

The studies that Dr Smith referred to in his address, I have to point out, that talked about lower emissions with New Zealand stock were commissioned under the Labour Government, so there is a rich irony in him claiming that point.

There is also a point that needs to be addressed when he asks which countries are doing more than New Zealand. Well, most countries. New Zealand’s per capita emissions are embarrassingly high. If New Zealand, with its renewable resources—with its rich renewable resources—cannot address climate change, it is ridiculous to expect other nations to attempt to do so. New Zealand can, at lowest cost, address this issue and so it is incumbent upon us to take a lead. The costs are not great. New Zealand needs to get on with it, show what can be done, and take a lead in the climate change space.

This Government, instead, is moving us backwards rapidly. It is costing $328 million with this legislation. It is looking to avoid—the latest reports say—future obligations in the way that very few countries did the first time round, and really putting New Zealand in a space where we will be less proud to call New Zealand home. Where we need to come back to is the kind of sensible Supplementary Order Paper that stands in the name of Moana Mackey—one that encourages New Zealand units to be traded. New Zealand is the only country that currently does not place quantitative restrictions on international units. We need to step back into best practice and away from worst practice, which this Government seems to be attracted to. Let us do what the Australians are doing. The Australians are looking to do this. Many other schemes do not even allow any international units at all. What we have here is a scheme that takes us backwards rapidly, that undermines the framework, and that, in fact, gives greater confidence to polluters.

This is not good enough—this is simply not good enough. We as a country need to be leading the charge and leading the technological development for addressing greenhouse gas emissions, because that is the way to future prosperity. Developing new technologies and the intellectual property that goes with them is what will lead the market and set the prices in future—that is both in the agricultural sector and across the energy sector more broadly. New Zealand needs those kinds of things.

This Government has the worst economic growth record in 50 years. There are other ways to sort that out, other than rolling back what is already a very modest emissions trading scheme. We need tools to address the exchange rate, and to give the Reserve Bank those tools. We need better savings policies so that New Zealanders have money to invest in businesses. We need pro-growth tax reform that encourages money to go away from the speculative sector and towards the productive sector in our country. Those are the ways to support businesses in New Zealand. Watering down our climate change legislation is not the way to achieve economic growth in this country.

In a previous life I represented a very big farming constituency, the electorate of Whangarei. I do not think it is even a farming constituency today, because it has come back on to the boundaries of the city. But I will take a farmer in Mangawhai Heads right now. In my day, in those days, farmers would love to listen on their crystal sets to what was going on in the Parliament while they were milking their cows. They would invariably be milking their cows with their wife and maybe a son and a neighbour, and they would be doing their best. They have been up since 4 o’clock or 3.30 in the morning, and it is now 10 to 5 at night and they are halfway through their herd of 350 cows. They listen to the Labour Party member who has just resumed his seat, David Clark, and the eminent member from the Green Party, Kennedy Graham, who I am sure is very knowledgable on these things, but they are terribly confused.

I want to take the confusion out of this debate this afternoon, because if we stopped milking cows in this country today, if there were no cows in this country today, if the farmer from Mangawhai Heads, with his wife, his son, and a neighbour, milking their 300 cows this afternoon were not there, and there were no cows being milked in this country, it would not make any difference to the timing of the melting of the ice down in the Arctic—no difference at all. That is the problem. All I know is that the farmer in Mangawhai Heads listening to this debate this afternoon on his crystal set will be saying that what the Labour Party has told us today in this Committee is that it is going to cost $320 million to $350 million if this Minister, this fine Minister in the chair, Tim Groser, does not take the decision, with the support of the ACT Party and the member for Epsom, to say taihoa. The farming sector, the productive sector, the export sector of the New Zealand economy cannot take a $380 million to $400 million hit in 2013, and maybe more in 2014, 2015, and 2017, because we want to lead the world in terms of the milking of our cows so that we can stop carbon emissions on this earth.

I am not going to debate this afternoon whether greenhouse warming and the Arctic ice—and I am saddened about that because I am an animal rights activist, and greenhouse warming and the melting of the ice in the Arctic means a lot to me, because it means a lot to that environment. But the problem we have here is that the country is fundamentally broke. We are borrowing $1 billion a month. We have borrowed $55 billion in the last 3 years, and the farming sector that you represent, Mr Deputy Speaker, from the bottom of the South Island is the people who are keeping this country afloat, and they really cannot take an impost of a taxation like this in the absence of the rest of the world, which is not even following us. The rest of the world is not even following New Zealand, let alone staying with us on the proposition. Australia, Canada, the United States, and Britain are not even following us, and we are at the forefront of this as a country.

Going back to the Mangawhai farmer, the Mangawhai farmer lives in the Kaipara constituency of the local authority. The Kaipara District Council has got more debt per capita than a citizen living in Greece. So that Mangawhai farmer listening this afternoon on his crystal set to this debate in the Parliament will say: “What is going on here? We’re struggling to make ends meet here. I’m a dairy farmer. I don’t own the property; I’m a sharemilker. I own these cows. I owe the bank $550,000. I’m struggling with my debt, and all I hear from the parliamentary Opposition is that it wants to put a tax on me, milking my cows for the town supply of milk, for the domestic sector, and for exports to the rest of the world, so that we can pay the interest on the $1 billion a month we’re borrowing because we’re going broke slowly.”

Kyoto and the rest of the agreements—farmers in Mangawhai Heads do not really understand. You see, the farmers milking cows in your electorate, Mr Deputy Speaker, or in Mangawhai Heads—there are not many farmers in Epsom—clearly understand that all costs impact on their viability to be able to pay the bank the interest on the money they owe it for the cows that they are milking, and that the cows that they are milking provide export receipts for New Zealand to pay the interest on the money that we borrow, which is about $1 billion a month for the last 3 years and going forward.

It has got to be condensed into a simple debate. This National-ACT Government said at a Cabinet committee meeting not so long ago: “Taihoa on 2013. Let’s taihoa on that. Let’s make sure that the productive sector has an opportunity to pay its way, pay the debt, pay the interest on the $1 billion that we have been borrowing, and make our export sector competitive.”

There is no evidence that I have seen—and I would like to see it from Dr Graham, who knows more about this than I will ever know, and I respect that; he probably also understands this—of how you can quantify the carbon emissions from that dairy farmer’s 280 cows in Mangawhai Heads, when we do not even know whether one jersey cow compared with another jersey cow has the same level of emissions. What are the emissions anyway? There is a 50 percent variance. All the work I have seen, and the article that I read in The Economist, tells me that there can be up to a 50 percent difference in the emissions from one cow to the next cow. All I am saying today in the Parliament from the constituency of Epsom, where there are no dairy farmers, is thank you, Mr Trade Minister, for two things: the work you do on international trade, and the gauntlet that you have picked up on emissions taxation in this country, which was going to be an impost on that farmer from Mangawhai Heads with his wife, his son, and a neighbour from down the road, who are milking 280 cows night and morning for export receipts to pay the interest on the money that we are borrowing to fund the Crown account. It is the Crown account that we are borrowing for every week, and it is about funding.

If we had oil on farms in Mangawhai Heads, then maybe we could be leaders in carbon emissions on the global scene. But we do not have the oil. What we have is cows’ milk and by-products of cows’ milk for the export sector to pay for this—$380 million to $400 million. It could be more. In 2014 it could be $500 million. If we had a Labour Government, a Greens Government, and a New Zealand First Government, by 2020 it could be $1 billion on the dairy farmers of New Zealand as taxation for this. The farmers simply cannot afford it. I speak on behalf of hard-working mums and dads who are up the metal road, behind the gates, up the path, in the sheds—all night waking up, worrying how they are going to make ends meet—milking cows for milk, for production, and for exports to pay the money that we are borrowing for the Crown account so that we can live in a style that we have become accustomed to and cannot afford.

All I am saying is that when the economy comes right, and the Crown account stops borrowing from the Chinese to fund it each week, each month, and each year, then we might be able to afford to even have a debate like this. But these debates are costing $8,000 a minute in this Parliament to talk about taxing farmers, the productive sector of the New Zealand economy, which is holding this country up.

I will say one final thing about emissions control and this National Government’s attitude towards it. I thank the National Government for its sensible proposition that right now is not the time to be even having this discussion. Right now is not the time to be taxing farmers on their emissions. Right now is the time to be supporting the farming sector, the productive sector of the New Zealand economy, to pay the interest on the money that we are borrowing each week for the Crown account, which we cannot afford. Thank God for the farmers, and, Minister, stay staunch on this. It is very important to the New Zealand productive sector. Stay staunch on it. Do not buckle to any of the Supplementary Order Papers, because the ACT Party and the member for Epsom will not support silly Supplementary Order Papers that mean more taxes, more impost, and more costs on that farmer whom I talked about, who milks 280 cows at Mangawhai Heads with his wife, his son, and the man from down the road.

New Zealand First does not support the emissions trading scheme as it is, or this Climate Change Response (Emissions Trading and Other Matters) Amendment Bill. It is just another expensive imposition on the people of New Zealand and on the businesses of New Zealand, and we think it will be an expensive failure in terms of emissions. We need to think about the whole thing again.

The need to attack climate change and to ensure that business improves its emissions performance is not denied, but doing so in this way is not the correct approach. New Zealand First understands the nature of this country’s international obligations, but this emissions trading scheme will turn environmental protection into a carbon credit bank to make emissions reduction a speculative business. Issuing tradable credits means New Zealand ends up paying for the wrongs of other countries and other polluters around the world. Businesses should not be able to buy their way out of bad emissions performance. That is what this scheme will essentially do, and that is the essence of our opposition.

Continuing with this scheme will cost billions of dollars to the New Zealand economy. We simply cannot afford that, especially when it will not be the emitters who pay, and especially when the scheme will not be effective as a means of assisting the problems with climate change. We believe we simply cannot afford it at this stage, in any case. We note that many other countries are not having a bar of it. New Zealand should rethink its position entirely.

We believe these funds should instead be retained in New Zealand—and that is New Zealand First’s policy—in order to provide the means to tackle our own emissions and our own pollution here in this country. We should be applying environmental levies or much better-targeted carbon taxes so that New Zealand will be able to play its part. We should have the strategies, the plans, the legislation, and the regulation to achieve the emissions performance we seek, and in consultation with New Zealand business, because we think that without the cooperation of New Zealand business—New Zealand business generally, agriculture, and the whole of New Zealand business—we will have no chance, really, of achieving any of these objectives.

I might say that I think most New Zealand businesses would prefer New Zealand First’s approach over the emissions trading scheme as a whole. For example, we think that transport must be a first target, requiring more use of rail, less polluting vehicles, better public transport, incentives to use non-liquid fuel vehicles, and so on. We do think that agriculture needs to play its part. We think that it needs to pay much more attention to sustainable agricultural processes. We see diesel emissions as a major problem with the many old buses and trucks that are chugging along New Zealand roads. We must use emissions regulation to require better performance from them and industry as a whole.

New Zealand First maintains that the State must strike an appropriate balance between economic progress on the one hand and appropriate emissions goals on the other. The emissions trading scheme does not in itself decrease emissions; it just facilitates the trading of credits around the world to those economies that can afford to buy them, and for that reason we do not see the emissions trading scheme devised by this Government as being sustainable. We see it as nothing more than another imposition on the people and product of New Zealand without anywhere near sufficient benefit in terms of emissions or assisting the fight against climate change.

This particular bill improves nothing whatsoever. It simply makes a bad scheme worse by so compromising it that it lacks credibility. New Zealand First opposes the bill and the scheme. We think New Zealand and the world deserve better.

I want to speak in some detail to one of the Supplementary Order Papers that sits in the name of my colleague Moana Mackey because I do think that if the Committee were to take the Supplementary Order Paper on board, then this legislation, the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, would be greatly improved. Indeed, that is a point that Moana Mackey made to the Hon Peter Dunne in a letter dated 31 October this year, which I am going to seek leave to table at the end of this contribution.

What I want to say to Mr Dunne is this. As Moana Mackey pointed out in her letter, his commitment to supporting this legislation could still be fulfilled while voting for her Supplementary Order Papers. That is something that also goes for the Hon John Banks and any other member of the House who wants to support the legislation of the Minister for Climate Change Issues. But with some sensible tweaks, it could be made better.

I listened with great interest to the contribution of the member who just resumed his seat, Denis O’Rourke, because I remember that when I was chairing the Finance and Expenditure Committee that heard submissions on the original emissions trading scheme legislation, the Labour Party did not have a majority on the select committee. The legislation was reported back to the House with the support of Jeanette Fitzsimons and Doug Woolerton, and they made the decision that they did—to support an emissions trading scheme—because they heard evidence that indicated that it would make a difference to the behaviours that Denis O’Rourke has just quoted. And so it would have.

The original scheme would have encouraged greater use of sustainable practices in agriculture had the signal been retained that agriculture would eventually come into the scheme. The original scheme would have incentivised more use of rail, for example, to transport heavy goods rather than having those things on our roads. The original scheme would have incentivised greater renewable electricity investment. I can say that very clearly. I was on the board of Meridian Energy for a number of years. I remember very well the debates on that board in anticipation of what we all knew would happen—that the Government would bring in a price signal around the use of carbon. All the generators at the time knew that that would happen in some form or another and they began to modify their behaviour accordingly. Genesis Power—Meridian’s biggest competitor at the time—essentially was making plans to exit, if it could, its dirty coal businesses. It was, for the first time, looking at making investments in wind farms. Why did this happen? It was because everybody knew that a price signal was in the wind.

The problem with some of the contributions we have heard already in this Committee stage, particularly the one from the Hon John Banks, is this: he says we have to defer this scheme, it is too expensive, it puts too much of an impost on our productive sector, and it could not cope with it. Well, let us be very clear. Let us, as members in this Committee and the public listening to this debate, be very clear about what we are actually saying. We are saying that those who emit, those who pollute, should not have to bear the full costs of that activity; the taxpayer should subsidise them. For all the rhetoric we hear about being indebted to China for our lifestyle, the reality is that these changes will cost the New Zealand taxpayer $1.3 billion a year. That is the subsidy that we are conferring upon the polluting sector by failing to act and failing to put in place a scheme that would incentivise all the behaviours that—I agree with Mr O’Rourke—we want to see in New Zealand.

When we hear this talk about New Zealand leading the world with an emissions trading scheme and other countries not pulling their weight, what I say to members who say that sort of thing is to wake up and look at the evidence. We are falling well behind a number of countries in a number of areas. I see that the Minister in the chair, the Hon Tim Groser, is shaking his head. I hope he gets up and takes a call at some point in this debate. It is always a pleasure to hear from him and it will be great to have him share his wisdom with the Committee.

But the point is this: the reality of what countries are doing overseas, in fact, to put in place better use of sustainable energy, the attempts by countries overseas to bring in better sustainable practices in primary production—the manufacturing of solar panels in China is one example, and the attempts by that country to wean itself off its addiction to coal and on to other forms of energy so that it is not engaged in polluting practices as it tries to grow its economy—is the reality of the world environment. It does not matter whether a country is running an emissions trading scheme or not; it is what it is actually doing in practice to properly price the use of polluting technologies and to incentivise the use of renewables and cleantech. That is where, when we say we are falling behind, members on this side of the Chamber start to get so concerned.

The other real concern in the debate, of course, is the fate of forestry and what these changes will do to that industry. Again, that is why Moana Mackey was so keen to write to the Hon Peter Dunne and say: “Look, you have a chance not to completely devastate that industry, which was brought into the scheme right from the beginning, which was sitting on valuable credits, and which now sees the value of those credits effectively being devastated.” That is a sector that we rely upon for our emissions profile, which Dr Nick Smith was so ready to point to in his earlier contribution. Without the forestry sector and its contribution, which will go out the window once this legislation is passed, our emissions profile will look very poor indeed. I know that the Minister knows that, fears it, and is concerned about it. What I want to know is what the Government is going to do about it.

What Moana Mackey has done is put up some alternatives. There is the Supplementary Order Paper in her name, Supplementary Order Paper 142, which would restrict international units. What would happen under that proposal is that a 50 percent restriction would be put on international units so that New Zealand units would be preferred over international ones, so as to protect our forestry industry. We are not linked to any other emissions trading scheme, so this would, effectively, limit UN offset credits to 50 percent. We know that since the emissions trading scheme came into effect there has been a sudden collapse in the price of UN offsets—which no Government could have predicted—because of the massive oversupply of world units. With current UN offset prices at around $1 and the one-for-two deal that was brought into the scheme when Dr Smith was the Minister, this makes our carbon prices around only 50c per tonne at present. The only scheme in the world at the moment that is comparable is India’s, which charges 50 rupees as a tax for every tonne of coal that is burnt.

So a restriction on international units coming into New Zealand is crucial to protect our forestry industry and to keep faith with that sector, which has been part of this scheme, for good reason, from the beginning. If we do not move to protect the forestry industry, then this Parliament will be ripping it off. Forestry groups—I know, because I have seen the submissions—came to the Finance and Expenditure Committee and told the committee, as they have told the Government time and time again, that the faulty settings on the emissions trading scheme were harming forestry. They have been ignored. If we want to see deforestation on a big scale—let alone a deterioration in our emissions position—we will just go ahead and pass Part 1 as is, without Moana Mackey’s amendments. But if we do actually care about those issues, then we will try to deal with the issue.

Without Moana Mackey’s amendments, there will be significant job losses in the forestry sector. New Zealand is the only country that allows virtually unrestricted access to offset credits. In Australia only 12.5 percent is allowed, and in Europe there is an average of about 14 percent. The 50 percent restriction that Moana Mackey’s Supplementary Order Paper would impose is generous by comparison, but at least it is something, and at least it would put in place some sort of protection for that precious forestry industry of ours. If we are ever going to link with the European scheme, the Australian scheme, or both, then we are going to have to put in place some sort of restriction in order to be compatible—that is pretty clear—so we might as well do it now, by way of Moana Mackey’s amendments. It would not significantly raise prices.

At the same time, we have seen that the collapse in the carbon price has had devastating implications for our carbon forestry sector—[Bell rung] Mr Chairman.

I am sorry, the member has had four calls.

Thank you, Mr Chair. I was so busy calling that I did not actually hear my name being called out. Normally, I would start off a contribution on a bill such as this, the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, by saying that it is a pleasure to rise and speak on the bill, but it is about 6 minutes since the Melbourne Cup has been run. That I am here at all to take a call on any bill is a minor miracle—

The CHAIRPERSON (Lindsay Tisch): Who won?

—but it shows the level of my commitment. It was Green Moon who won, for all of those people who are wondering whether their sweepstakes came in or not. Even though it is Melbourne Cup day, it is important to be here speaking in opposition—

💬 Hon Trevor Mallard: Well, isn’t it appropriate to have a jockey in the Chair at the moment?

And appropriate, as my colleague points out, that the member for Waikato is in the chair at this time and that that really important horse racing town of Matamata be represented in the Chair at the moment.

I do want to get on to the substance of this bill. It is really important to speak in opposition to this bill, which will take us somewhat backwards in terms of our commitment to the international issue of climate change. We have had speakers from the Government who are, today of all days, trying to convince us that it has flip-flopped and now agrees that putting health and safety ahead of profits is an important thing for this Government, when, in fact, it has been guilty of doing the opposite. Here it is again, on the very day that it is trying to convince us that it now understands that health and safety is more important than profits, putting an important part of this country’s future behind profits with this bill. The Government is putting profits ahead of the environment in this instance. It is doing that by delaying the entry of agriculture into the emissions trading scheme.

Dr Nick Smith said in his contribution to this debate that if anyone was concerned about this country’s balance of payments, they would support this bill. Well, I think he could not be more wrong, because one of the reasons that our agricultural industry and the products that come from our agricultural industry are so sought after on the world market is because of the clean, green image that New Zealand has, which this Government is putting at risk. That is our place in the world. That is one of the niches we have. We are not there because we are a mass producer of milk; we are there because we are a good producer of milk. One of the reasons behind that is our environmental record. Here this Government is, putting at risk with this bill that very important part of how we market to the rest of the world.

What we know from previous contributions is that it is also dipping into the pockets of the taxpayer, to make sure that this happens. It is subsidising polluters with taxpayer money—taxpayer money to the tune of $328 million. That amount is significant, because the very day—the very day—that this Government announced its intention to increase the money paid by taxpayers by $328 million, in order to subsidise the agricultural sector, and to delay its entry into the emissions trading scheme, it also announced a financial veto on my bill to extend paid parental leave. I think this tells us everything we need to know about the priorities of this Government. It is quite happy to spend taxpayer money subsidising agricultural polluters and actually giving them another reason to continue to pollute, rather than find solutions to minimise that pollution. The Government would much rather put taxpayer money into that than into supporting families. It would much more readily put money into this area, continue that regime of pollution, and risk our international reputation than support children. That is where the priorities of this Government lie, and that is why this bill is so fundamentally wrong.

It is wrong because it tells us that this Government, which promised the country a brighter future, has absolutely no intentions of that. It has no intentions of delivering a brighter future, unless what it meant by that brighter future is a future full of more pollution, unless it meant a future where our international reputation goes down the gurgler, and unless it had every intention of the brighter future being about making sure that we have a country where farmers do not strive to find solutions and that they have no financial incentive to strive to find solutions for pollution, but instead are given a subsidy by this Government, via the taxpayer, to continue on their merry old ways—the merry old ways that have actually meant that we have increased, and continued to increase, our emissions in this country when we are striving to reduce them. I do not know how the Government MPs can stand up opposite and argue that they are committed to reducing emissions and meeting the target we have of a 50 percent reduction in emissions by 2050. I do not know how they can do that while at the same time promoting this bill, which ensures that the sector that actually contributes the most significant amount to our carbon emissions can continue to do that unchecked, and without the financial incentives to actually get its act together on this.

I am based in the Waikato area, and I know about how important this sector and its reputation is to this country. I know about how our reputation as a food-producing nation relies significantly not just on our ability to push milk out the farm gate but that it is of high quality. We will lose the race, and holding that market position and holding that niche, if we do not address these issues immediately and urgently. We should not be continuing along to be a follower, as the Prime Minister would have us—a close follower. We need to be a world leader, because that is the reputation that I want to see for our agricultural sector and our agricultural products in this country—world leading. That is the market position we must fight to retain. We will not retain that while we have measures like this that put the cost on the taxpayer while letting the agricultural sector continue on its merry old way, without the financial incentives to find the solutions that we all need—that we all need—to make sure that we keep at the top of our game.

Far from being the type of legislation that somehow protects our agricultural sector and enhances our reputation, as the Government would have us believe, this legislation is actually the antithesis to that. It is actually the antithesis because it damages our international reputation. Our international reputation has to be one of the most valuable things that we have when we are trading with the rest of the world. You would not know that by the way that the Prime Minister, in particular, bandies our international reputation around as if it is some stand-up comedy routine—some stand-up comedy routine. That is what the Prime Minister is doing.

💬 Andrew Little: In an offensive way.

In a very offensive way. Offending Finland, offending Great Britain—

💬 Andrew Little: David Beckham.

Yes. And he is continuing on to make this country a laughing stock. It is no wonder that a Government led by that Prime Minister has come up with this piece of legislation, which will continue to damage our reputation in exactly the way that John Key goes about with his stand-up comedy routine. He might find it amusing in front of a bunch of teenage girls, but on the world stage, hey, Mr Key, what I want to say is that makes us look ridiculous. Do not keep doing that with legislation like this, with silly comments like you have been making in recent times. Our reputation is much too important to do that and to be the leader in our country, going around bandying this type of legislation around and making those sorts of comments.

Right from the start I think it was evident that the National Government really was not focused on our international reputation at all, because it rushed this bill through the House to meet its December deadline. It clearly has not listened to what submitters have asked it to consider with this. Todd McClay frowns, but I want him to go and see the forestry industry in his electorate and explain why his Government has ignored the submissions that the forestry submitters from his electorate came to make to the Finance and Expenditure Committee. I want to hear a contribution from Todd McClay to actually explain how he has gone to those submitters.

I just want to pick up essentially where I left off a short while back in introducing my Supplementary Order Paper 147 to the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, to address it in a little bit more detail and then put a question to the Minister for Climate Change Issues, if he would be good enough to answer in the fullness of time.

I want to also just pick up, in a sense, on the imagery that we were treated to by the Hon John Banks of the erstwhile dairy farmer in—I think he meant—Mangawhai. So we have the dairy farmer up at 3 in the morning and milking at 5.30 a.m. in Mangawhai, and he is worrying about his mortgage and his revenue and his costs and his net profit, which is the right thing for him and the rest of us, on his behalf, to worry about, especially at that hour. He would also take into account—in today’s world, as opposed to the time that the Hon John Banks was mentioning when he was involved with that dairy farmer; the 2012 version of the dairy farmer—and would have heard, probably on Twitter, rather than his radio kitset, that the global emissions of greenhouse gases have to be reduced from 48 billion tonnes to 44 billion tonnes, that is gigatonnes, from 48 billion tonnes to 44 billion tonnes, between 2010 and 2020. He will say to his wife as he comes in for breakfast: “That’s a massive global reduction needed for our grandkids to avoid dangerous and potentially catastrophic climate change. That’s a massive global reduction.” His wife will say: “Yes, I agree, and New Zealand will have to play its part. It will have to do its fair share.”, which is the phrase that has come out of the framework convention and is essentially the yardstick that the Government and the Opposition are using to judge the adequacy of what we are doing.

So the dairy farmer and his wife have agreed over breakfast that New Zealand has to do its fair share. They will say: “Well, how do we find that out?”. The dairy farmer will say: “Well, with great respect to the Minister, it isn’t by unilaterally plucking out of the air a five-set conditional unilateral target of 10 percent to 20 percent off 1990.” “That will be manifestly inadequate.”, his wife will say, because she has been reading on the internet, as opposed to listening to Parliament, and she will be better informed. She will say: “That’s not enough. You must ring the Minister. He’s a decent, honourable, open-minded gentleman. He will respond to you.” The dairy farmer will say: “Well, what’s the figure I should mention?”. His wife is a lot more knowledgable than he is, because he is milking the cows and she is following on the internet. She is plugged into box 13.7 of the Intergovernmental Panel on Climate Change’s Working Group III report from 2007, which says that countries like New Zealand have to do 25 percent to 40 percent net in that year, including land use, land use change, and forestry. So the farmer at Mangawhai will approach the Minister, and he will say: “I’m informed, reliably, that New Zealand’s net emissions, including land use, land use change, and forestry, were 55 million tonnes in 2010. And for us to be in the mid-point of what is required for our fair share of meeting the global emissions, we have to go from 55 million tonnes down to 41 million tonnes net in 2020, and further down to 6 million tonnes in 2050.”

The dairy farmer and his wife will have agreed on that and are approaching the Minister. They are asking, from Mangawhai, the Minister to please explain to this House, with the emissions trading scheme as it is currently constructed, and under the amendments coming through—I will finish on this and I will give 5 minutes to Mr McClay—“What is your critical path during your tenure in office and afterwards, so that you will have launched it for the country to go from 55 million tonnes down to 41 million tonnes net in 2020, and 6 million tonnes in 2050, please?”.

I want to take a brief call in this stage of the debate, just to say to the Minister for Climate Change Issues that I think that the work he has done here in this piece of legislation, the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, and the changes to the legislation are very important. I know that in the Finance and Expenditure Committee, when we heard New Zealanders and went to different parts of the country, indeed, from memory, we heard submissions for 19 hours. I did a little bit of checking and when last a bill was before this House on this very issue the select committee was not able to take that amount of time. We heard from some 780 submitters from a total of 803 submissions—again, from memory—which was slightly more than when the House has dealt with this legislation previously. Finally, we considered and then deliberated on this in the committee for some 9 hours. So when members opposite say that this was a rushed process, I say that although the report-back time that was given to the committee may have been shorter than for other bills—and, indeed, when one stacks up the evidence—the committee went to great lengths to offer all New Zealanders an opportunity not only to submit to the committee to be heard by the committee but also where there was interest from members across the House, where there was something more that submitters could add, the committee, and I as chair, was happy to let those submitters spend some time. Indeed, I think one submitter—I checked—had a dialogue of 50 minutes with the committee, and a couple of others had 45 minutes. So we went to great lengths in the committee to make sure that New Zealanders had their say on this extremely important piece of legislation.

What this amendment bill does—and this is why I want to commend the Minister for Climate Change Issues again—is bring balance to a piece of legislation that at the heart of the policy in the previous Government and in this Government is important to all New Zealanders. We did hear members of the Opposition say during the select committee consideration that they had concerns to some degree around the cost to New Zealand consumers, and that if we did not make the changes we are making, these costs would not go up. I want members to remember a submission that came to us from the very south of the South Island, from Invercargill, around an aluminium smelter. At the time in the newspapers members opposite were saying that the Government had to do more about the cost of electricity so that jobs were not lost in this important manufacturing sector. But on the other side of the fence members of the Opposition were also saying that we should impose greater costs upon manufacturing in aluminium than would be the case under this legislation. I would ask them to consider on the one hand why it is that they want us to find ways to lower costs so that manufacturing can continue and people can keep their jobs, but on the other hand, when it comes to emissions trading scheme legislation, they are happy for those costs to be ramped up and, indeed, for jobs to be lost.

We have heard from one of the previous speakers, who occasionally passes through the Waikato to areas of the country where we grow great numbers of trees, about a Supplementary Order Paper in the name of a Labour Minister—a Labour member—that is going to help—

💬 Hon Trevor Mallard: Premature.

Well, I will not speak to that, Mr Mallard, and “premature” anything at all, but what I would say to you is that when it comes to the paper that has been put forward by Moana Mackey, it adds nothing at all to existing legislation. So what Ms Mackey is saying is we must put in the legislation a quantitative restriction around the importation and use in the New Zealand scheme of foreign carbon credits. But it adds absolutely nothing to the legislation, because, as members opposite will know because it was put in place when they were responsible for this legislation, through regulation the Minister can deal with the quality of foreign credits and also the quantity of them. So we already have that ability, and in fact this Government a year ago put in place restrictions on the basis of quality over some international credits, so they are no longer fit and they are no longer legally able to be in the New Zealand scheme. They are no longer legal tender.

I congratulate the Minister on listening widely to the sector and asking his officials to go and have a look at other credits to see whether or not they are up to the grade that we require them to be as part of our scheme. Indeed, I would expect a report back next year, when the House will have an opportunity to look at the facts, at the science, around this to decide whether or not they are credible. So I know Ms Mackey feels strongly about this, but actually this is a bit of wolf-whistling. It is a little bit of politics. What she is trying to do is already possible under the legislation. It has already been done under the legislation, and it does nothing more than suggest that members in the committee from the Opposition did not pay enough attention, did not really—

Mr McClay has certainly enhanced his reputation with that speech. Well, he has enhanced his reputation for not letting the facts get in the way of a good story. We know that that member oversaw the select committee process for the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill. He has reminded us of that fact, and he has tried to suggest to this Committee that it was a generous process, it was a process where all submitters were heard, and where due consideration was taken. Well, nothing could be further from the truth. In the interests of gutting the forestry sector in his own electorate, in what one might consider an ill-conceived attempt to make his own seat a marginal one, Mr McClay has pushed ahead with this legislation without the full process that we would normally expect around this kind of major legislation with implications for New Zealand’s international reputation.

National rushed this bill through the House to meet its December deadline of the transitional period ending. It said that its reason for doing this was that there had already been a significant review, but the great irony there is that the Finance and Expenditure Committee did not listen to, or did not take heed of, the recommendations of that review. Indeed, in the select committee process as it was provided, there was not adequate time for full submissions. Many submitters said there was not adequate time for full submissions, due to the short period of time allocated for this process. Instead of the usual 4 to 6 months that we would expect for a piece of legislation of this nature to be going through the select committee process, the bill received just 7 weeks.

💬 Charles Chauvel: How long?

Seven weeks—7 weeks. It was basically a rubber-stamping exercise. This piece of legislation was rushed through the select committee process.

💬 Hon Trevor Mallard: $1.3 billion a year.

That is why—yes, $1.3 billion a year it costs to run this, and—

💬 Hon Trevor Mallard: So how much a week was the select committee, then? Nearly $200 million a week.

It is $200 million a week, Mr Mallard says, for select committee time to rush a process like this through. A mockery—a rubber-stamping exercise. It is not adequate. And what we see as a result, of course, is $328 million more in cost to the taxpayer. Industries that are doing good things are up for the chop, with jobs going in the forestry sector in Mr McClay’s own electorate as a result of these changes, and those who are doing things that are the old way of doing things are advantaged. Those who are not willing to make the transition to adopt new technologies that are climate friendly are rewarded, and those who are actually making that change are punished for the additional costs of stepping up to make the change to gear up for the economy of the future. This is shameful.

As I said, the Government justified this short select committee process on the basis that it was preceded by an extended period of ministerial consultation with key stakeholders. The interesting point to note around that is that the key stakeholders did not include the environmental sector. A piece of environmental legislation, and key stakeholders did not include the environmental sector—that is what the National Party calls balance.

This piece of legislation—let us remind ourselves why it is here. The Supplementary Order Paper in the name of Moana Mackey, which proposes that we allow for New Zealand Units to have a more prominent role, places an obligation on participants surrendering credits for a minimum of 50 percent of those units to be New Zealand Units. That is the aim of Supplementary Order Paper 142 in Moana Mackey’s name. This would make sure that the price, which is artificially low at the moment because of uncertainty around future agreements and because of the global financial crisis, is kept at a reasonable level so that those who are in the space of making positive contributions to our climate are supported through the transition period to a fuller carbon price.

That Supplementary Order Paper needs to be put in the context of the Kyoto Protocol and New Zealand’s wider obligations. We know that the Kyoto Protocol was set up because New Zealand wanted to be a part of the solution. The protocol—

💬 Charles Chauvel: The “Coyote Protocol”.

Sorry?

💬 Charles Chauvel: “Coyote Protocol”.

“Coyote Protocol”. My pronunciation is corrected—thank you, Mr Chauvel—in line with a previous contribution. We know that this protocol aims to ensure that the world addresses climate change as a whole. New Zealand is stepping forward to do its share, or at least it was stepping forward when Jenny Shipley signed it in 1998, joining 191 countries and the European Community in signing that protocol, with Helen Clark ratifying it.

New Zealand has made it clear that it intended to do its bit, and subsequently we saw all kinds of behaviours as people prepared for the scheme to be introduced. We saw forests felled faster than they normally would be as those with interests in converting to dairying got on with that business before the emissions trading scheme was introduced. And then, sure enough, when the scheme was introduced, those activities dropped off, and we saw New Zealand starting to begin on a path toward a more sustainable future.

Since that time, since National came to office, we have seen backwards steps. We have seen, of course, under the global financial crisis the price of international emissions units drop—plummet exponentially. We know of the Russian hot air, which makes for very, very cheap units, and we know the effect that that has had on the international carbon price. With the global financial crisis, production has slowed in many industrialised countries. We know that that has meant that the carbon price is artificially low at the moment, and that if we are going to do our bit we need to find ways of ensuring that that carbon price is more realistic and is in line with long-term expectations of what it will cost to address climate change.

The science tells us that the probability of climate change being natural—i.e., not human induced—is less than 5 percent. There are still some who would doubt the science and who think it is all a conspiracy theory, but the scientists—I am not a scientist, but as a policy maker I am inclined to believe the scientists because there seems to be a strong consensus around the issue—say we should be taking steps now because it is cheaper to address these things now than to deal with the effects of runaway climate change later.

When we signed up to the Kyoto Protocol, New Zealand—under Jenny Shipley in 1998 and then subsequently under Helen Clark—had to then effect a mechanism to ensure that our obligations were met. There are basically three broad options for doing that. One is to have a carbon tax, and we know that that did not succeed politically. Subsequently, when the Business Roundtable proposed it, of course, we all smelt a rat. You know that when the Business Roundtable proposes a tax, there is something a little bit fishy going on. But what was sustained and supported by the Green Party and introduced by the Labour Party was an emissions trading scheme. That was better in the long run than having taxpayers subsidise polluters. Rather than taxpayers encouraging polluting activity for ever, there would be a scheme that ensured that we started to attribute the actual costs of pollution in our country, the costs that New Zealand incurs under the Kyoto Protocol, back to those who were generating them, so that their behaviour would change. A price incentive would encourage behaviour to change, so that those who were employing newer, cleaner, greener high tech mechanisms and business solutions would succeed, and those who were not willing to change would face challenges and be forced to change their behaviour and make future investment decisions that were smart and in New Zealand’s long-term interests. That is why the scheme was introduced.

But what we have seen from this Government, as those international market prices have gone into freefall, is a general acceptance of that hot air, of the limited change it brings, and of the way in which it slows down the transformation of our economy to one that is ready to tackle climate change and ready to lead the way in terms of research and development and in terms of introducing new technologies that are better for the planet, and to actually generate a better return for New Zealand. This is, I suppose, at least consistent with a Government that is not in any hurry, it seems, to get our economy back on track. It has got the worst economic record of any Government in the last 50 years. We see that it is not willing to step in and make the big choices to actually help us to transition to a low carbon economy. In fact, it is extending subsidies for the foreseeable future.

Moana Mackey’s Supplementary Order Paper 142 allows for New Zealand credits to have a significant standing in the market. It places obligations on participants to surrender credits for a minimum of 50 percent of their emissions units—

I move, That the question be now put.

Kia ora. Ngā mihi nui ki a koutou. Kia ora. In the last month we have heard extremely disturbing news from the world of science. We are hearing that the Arctic summer ice melt is happening faster and worse than scientists predicted. We have seen the impact of the super-storm Hurricane Sandy on the Caribbean and the East Coast of North America. There has been a huge economic cost and a huge people cost. Even the marathon has been cancelled there. Then in New Zealand we have seen our fair share of nature-related disasters, in part caused by the more extreme weather that scientists are warning us is happening from climate change. This is having real costs for farmers, real costs for horticulturalists, and real costs for the New Zealand economy.

In my second reading speech on the Climate Change Response (Emissions Trading and Other Matters) Amendment Bill, I talked about my motivation for why I am voting against this bill, which is my kids. I want my kids to grow up in a world with a stable climate. But what I want to talk about in this contribution, dealing with Part 1 of this legislation, is my motivation for again opposing this bill, which is the economy. The economy is a strong reason to be opposing this bill and a strong reason why our country should be advocating greater climate change action.

The fact is what this bill does and what an emissions trading scheme does—and we all know it is incredibly complex; very few people in the country actually understand what it is. It is an incredibly thick piece of legislation. It is incredibly complex and incredibly bureaucratic, with incredible rent-seeking behaviour, which we are seeing from certain sectors of the economy in New Zealand. It is something hugely complex, but basically what it is is a fancy way of saying that we need a price on carbon. It is a fancy way for putting a price on carbon and trying to acknowledge that there is an economic externality, which is carbon and the other greenhouse gases that impact on the climate, impact on our agriculture, and impact on our economy. The whole point of a carbon price is to send an economic signal through our economy. It is trying to encourage consumers to invest in low-technology appliances in their household, or maybe to take the bus or walk or cycle instead of driving, or maybe purchase a more fuel-efficient car. It is trying to send an economic signal to people with capital to invest in economic development so that they can invest in more efficient technology, so that they invest in, perhaps, sustainable biofuels or woodchips for their milk dehydrator, rather than digging up more low-grade dirty coal. It is about trying to affect those investment cycles.

What we are seeing with the gutting that we have seen over the 4 years of the current Government is not the right signal flowing through the economy, which is consumers investing in efficient devices and reducing their consumption of greenhouse gases. We are not sending those signals to people investing in our economy to invest in afforestation or to invest in efficient appliances. In fact, we are sending the reverse message through these subsidies, through the very clear signal this Government is sending to them, to keep investing in dirty technology, to keep investing in old-fashioned technology, to keep polluting. That is the very strong economic signal this bill and the changes in this part send. Of course, we can see it, because we know our emissions have increased 25 percent above what our country promised—our Kyoto obligation. We are seeing it in our deforestation rates and our planting rates. We are seeing what should be a very rational, very well predicted—economists obviously can and have modelled it. We are seeing exactly what you would expect, which is when you send the signal to invest in old, dirty, polluting technology, people will.

So when we go through the history of this long debate in New Zealand, the fact is that everyone could acknowledge that climate change is a severe economic, environmental, and social problem, and a moral problem as well. We acknowledge that we need a signal on carbon to change some of those economic behaviours. We acknowledged—all the parties did—that it was a negative externality, and in 2008 Labour, in September of that year, passed the emissions trading scheme, with the support of the Greens. It was not perfect; I am the first to acknowledge that, but it was essential that we sent an economic signal to send people the message to do the right thing. The fact was it was not the only lever the Government was using. There was also the thermal electricity ban, work around biofuels, and work around public transport. Basically, the way we were and the way we are going to deal with what is probably the greatest security challenge and the greatest moral challenge of our generation is to use all the levers. You are never going to solve it with just one lever. You need to have a price on carbon, you need to have community action, you need to have strong regulation, and you need to have people making a difference. The fact is people are making all sorts of changes to do the right thing in their lifestyles, but their Government is telling them that it is not important and that it is going to continue to subsidise polluters.

So what we see in this legislation with the significant changes we see in Part 1 is a destruction, essentially, of the emissions trading scheme. My colleague Dr Kennedy Graham calls it weakening it to an irrelevancy. Brian Fallow says it is putting the emissions trading scheme into an induced coma. The Parliamentary Commissioner for the Environment calls it toothless and a farce. And Rod Oram, I think, says it most bluntly of all, which is: quite frankly, you are killing it. The fact is that what we are seeing in the changes in this bill in Part 1 is more offshore sham credits flooding our market. We are seeing some firms, if they are trade-exposed firms, covering only 5 percent of their carbon costs. So for a firm with, say, a million dollars in pollution-related expenses, the cost for it is $200. That is a subsidy. We can have a debate with the Minister for Climate Change Issues and the Government benches about what a subsidy is, but the fact is that the taxpayer is picking up the tab—the taxpayer is paying—and if that is not a subsidy, I do not know what is. We are sending the wrong message.

We are seeing the changes in this part of the bill maintain those one-for-two surrender obligations past 2012. We are seeing that $25 price cap maintained indefinitely. We are seeing agriculture’s inclusion put off indefinitely. I mean, that is half of our country’s emissions. We can rail against what other countries are doing or not doing on climate change, but the fact is that in New Zealand, where half of our emissions are coming from the agricultural sector, we are not taking the responsible step. In fact, we are taking the wrong step, because we are not sending those signals to those farmers to invest in new efficient milking sheds or nitrification inhibitors or different ways of nitrogen and fertilising budgeting, and it is good to see Supplementary Order Paper 147, which deals with this. But the fact is that there is a whole bunch of negative changes weakening and destroying the emissions trading scheme. It is good to see that my colleague Dr Kennedy Graham has a number of very common-sense and smart incentives to actually put our economy on the right foot. I guess the first thing is his amendment to clause 5, which actually puts it on a science footing. What we are not hearing from the Government benches, of course, is the science rationale for why it is making these changes, or how they will impact our gross and net emissions, or what it is going to mean for the climate.

We are seeing that Supplementary Order Paper 147 in Dr Graham’s name inserts new section 69B, which is putting the trade back into what is called a cap-and-trade scheme. We are seeing in subsection (3) an actual floor—a $10 floor—to the price of carbon. And, of course, we are seeing a restriction on the international units. What we are seeing through our economy is in fact a worsening of economic conditions. Our current account balance is going to continue to deteriorate. We are sending New Zealand dollars—our hard-earned New Zealand dollars—offshore to buy these sham offshore credits. We are sending the message that we are going to purchase other people’s emission reductions, not ours. We are investing in less efficient appliances, meaning we are importing more fuel. I mean, this is the biggest strategic threat to our macroeconomic situation—this $8 billion fuel bill, which is just not going to reduce under this legislation. We are seeing a worsening of economic conditions.

What we are seeing through this bill is New Zealand losing, and continuing to lose, that green race, as our most successful business leaders are warning us. For example, I was reading about a wave-powered device that not the New Zealand Government but the US Department of Energy is funding and trialling off its coast. I was also reading today about the wonderful things New Zealand is doing for solar power in Tokelau. That is wonderful and I totally support it, but why on earth can we not do some good things about solar power in New Zealand? We are seeing changes to electric cars. I have just met a fellow last week who cannot get a meeting with this Government. He is a world leader in electric car technology. He is being flown by President Obama to meet him at the White House, but this Government will not do it. So the economic signals that this bill sends, and the direct actions this Government is taking, are sending Kiwis the wrong messages.

💬 Hon Trevor Mallard: Stick him in a red jersey.

Stick him in a red jersey and he might get a call with the Prime Minister—maybe an apology. The fact is that we spent a billion dollars in the last financial year on these subsidies, these emissions trading credits. All the seismic surveys, all the picking winners—in the oil and gas sector, the fact is that we are flogging off the energy assets.

We could actually be addressing climate change. We could be using the amendments that Dr Kennedy Graham has put forward to switch our economy. We could keep our assets, super-charge them, and we could be a world leader not only in addressing climate change but in exporting clean, green technology. The world is crying out for it. In fact, in the last year, international investment in clean energy outstripped that in fossil fuels. It is like we are looking to the past for our economic rule book, when we should be looking to the future. The clean energy market is predicted to be an $800 billion industry, yet we are moving away from it. We are doing everything possible to tell New Zealand businesses and Kiwis not to invest in clean energy and not to develop the expertise to export and manufacture what is surely going to be the 21st century’s economy. We are telling them to continue to pollute. It is bad for our economy. It is bad for our environment. It is bad for our kids and their future. We should do the right thing because it is the right thing, but we should also take action on climate change because it is in our economic self-interest. Kia ora.

I move, That the question be now put.

The question is that the question be now put.

💬 Charles Chauvel: I raise a point of order, Mr Chairperson. I said during my earlier contribution that I would seek leave to table a letter, and I omitted to do so. I seek that leave now.

After I have put the question, the member can. The question is that the question be now put.

The Ayes are 64, the Noes are 55. The question will be put. Point of order, Charles Chauvel.

Thank you, Mr Chairman—

I am sorry; my apology. I did say I would put the votes first.

The question was put that the amendments set out on Supplementary Order Paper 145 in the name of the Hon Tim Groser to Part 1 be agreed to.

We move now to Dr Kennedy Graham’s amendments as set out on Supplementary Order Paper 147. These have an impact on the Government’s fiscal aggregates and were not lodged 24 hours before the House met, and so are out of order.

The question was put that the amendments set out on Supplementary Order Paper 142 in the name of Moana Mackey to Part 1 be agreed to.

I raise a point of order, Mr Chairperson. I would be very grateful if you are able to explain the distinction between Supplementary Order Paper 144, which involves changes to the price cap, which obviously in the Chair’s opinion is not to be ruled out of order because it did not attend to fiscal issues, and Supplementary Order Paper 147, which is regarded as addressing fiscal issues.

Yes, the Minister has advised that there is a fiscal implication in Supplementary Order Paper 147 in the member’s name. That is not the same as Moana Mackey’s Supplementary Order Paper 144. That is why the member’s Supplementary Order Paper has been ruled out of order.

💬 Dr Kennedy Graham: I raise a point of order, Mr Chairperson.

The CHAIRPERSON (Lindsay Tisch): Well, there is really nothing to talk about, but I call Dr Kennedy Graham.

With respect, I would query the fact that Supplementary Order Paper 144 involves changes to the price cap and therefore has implications for fiscal policy.

No, these are debating points. In terms—[Interruption] These are debating points. In terms of the Standing Orders, if we were to refer to Standing Order 325 and also to a number of Speakers’ rulings, the point that I made earlier was that the Minister has said, in the case of Supplementary Order Paper 147, that there is an impact on the Government’s fiscal aggregates, and so that has been ruled out of order. That same advice was not given on Supplementary Order Paper 144 in the name of Moana Mackey.

I raise a point of order, Mr Chairperson. Just to confirm for the member, the way that the Standing Orders work is very much dependent on decisions on the part of the Government to make declarations. If it fails to make a declaration on a particular amendment and just chooses to vote against it, that is its call and the Chair does not have the ability to override—either to rule something out or to rule something in—if a Minister says so in this way.

The other point to bring to the member’s attention, which I made in my initial ruling, is that amendments have to be lodged 24 hours previously. In the case of amendments on Supplementary Order Paper 147 in the member’s name, that was not the case, and it was the case with Moana Mackey’s Supplementary Order Paper 144.

💬 Dr Kennedy Graham: May I speak once more to that, without—

The CHAIRPERSON (Lindsay Tisch): Well, it is not debatable, because I have ruled.

💬 Dr Kennedy Graham: I understand that. I accept that.

The CHAIRPERSON (Lindsay Tisch): I will let the member, because he has a number of these amendments.

I accept the decision, and I understand the necessary condition of 24 hours was not met. My question pertains to Supplementary Order Paper 144, which did meet the condition of—

It had 24 hours’ notice, and the other point—

💬 Dr Kennedy Graham: Yes, I understand that.

The CHAIRPERSON (Lindsay Tisch): The member will sit, please. It had 24 hours’ notice and, as I said, the Minister had no comment on Supplementary Order Paper 144, but did have on Supplementary Order Paper 147.

The question was put that the amendments set out on Supplementary Order Paper 146 in the name of Moana Mackey to Part 1 be agreed to.

The question now is that Part 1 as amended stand part. Those of—

I raise a point of order, Mr Chairperson. Notwithstanding Standing Order 325, the Committee is still the master of its destiny. I seek leave of the Committee for Supplementary Order Paper 147 in the name of Dr Kennedy Graham to be considered for a vote.

No, I cannot do that. I have ruled it out of order and that is the end of the matter.

I raise a point of order, Mr Chairperson. I seek leave—

I am sorry to interrupt the member. It is time for me to leave the Chair. This debate is interrupted. I shall resume the Chair at 7.30 p.m.

Sitting suspended from 6.08 p.m. to 7.30 p.m.

Part 2 Miscellaneous