Climate Change Response (Removal of Transitional Measure) Amendment Bill

As is the custom when we are under urgency, the Committee stage is an important part of the legislative process in which to ask some of the questions that may have otherwise been asked in the select committee stage. I would like to put on the record that although Labour is supporting this legislation, it is committed to cross-party approaches to climate change to produce enduring political solutions. I think all of us in this House understand that our response to climate change is going to outlast any Government. These are plans that we have to put in place that will take decades, and I do think it would be preferable that we could do this kind of legislation in a way other than under urgency, which is without a proper way for us to have good cross-party discussions about what good plans and good legislation would look like. That is something that we do hold dearly—to put in play our commitment to those enduring cross-party solutions.

Some of the questions that I have for the Minister in the chair, Paula Bennett, and which I would appreciate some answers to, are around the $25 cap that has been signalled with this legislation. The $25 price ceiling that was in the principal legislation is going to remain under this legislation. I would ask the Minister whether there is a time frame around that cap, whether there is a time frame around lifting that cap, and whether you have a plan in play for that to rise, because we know that industry and business are planning for a far greater and higher price on carbon than that. We know Business New Zealand’s energy report that came out showed that it was modelling on a $60 to $115 price of carbon per tonne by 2050. So this is certainly not what industry is banking on—a $25 cap. I would be interested to hear from the Minister the kind of time frame that she has around that.

I would also be interested to hear from the Minister whether or not there was any consideration of a price floor to be put in place to sit alongside the price ceiling, because if we want to avoid a situation such as we got into with the hot air credits—with the dodgy credits that made their way into our emissions trading scheme (ETS) in an earlier part of our history, which could have been avoided—a further protection we could put in place is by enacting a price floor. I would like to know whether the Minister received any advice on that and whether that was a consideration that she took on board.

I would also like to now turn my attention to clause 7 of this legislation, which is repealing the temporary suspension of allocation entitlement for eligible agricultural activities. I ask the Minister what the time line is for the anomalies that exist within the ETS. Forty-nine percent of the emissions in New Zealand come from agriculture, and yet clause 7 is entrenching the idea that we have eligible and ineligible agricultural activities. If New Zealand wants to address its greenhouse gases, then we have to address nitrous oxide and we have to address methane. There is very, very sophisticated work going on around the world about how it is that we might account for different gases. Under the Kyoto Protocol it was one gas, one price, but we know that there is significant scientific work happening around the world about how the short-run and the long-run gases behave and how we may account for those differently.

I would like to know the advice and the thinking from the Minister around when we are finally going to grasp the nettle of agriculture in our ETS, because this legislation entrenches the giant subsidy that industry is handing out to agriculture. We are continuing to subsidise agriculture through our other productive industrial sectors in New Zealand. That is not something that can continue if New Zealand is ever going to meet its emissions reduction targets. To claim that we have a unique profile is not a “get out of jail free” card. Our unique profile means that we must act quickly. Waiting for the silver bullet of science and technology to develop some way where when you put carbohydrate through a ruminant, it is not going to somehow produce methane or nitrous oxide, is sheer folly. The science is not going to solve this—we simply have to put in place some other measures—and clause 7 is a further entrenchment of that. Those are some of my initial questions for the Minister in the chair.

Before I call the next member, I think it is probably appropriate to inform the Committee that it is my intention to rule out one of James Shaw’s amendments, and that is the one to insert a new clause 4AA. It is—and I think the member is probably aware of this fact—outside the scope of the bill. All other amendments so far received are, in fact, within scope.

I raise a point of order, Mr Chairperson. Recognising that it may be unusual, the original 2002 Act does not actually state in its purpose that we need to reduce our emissions in line with commitments, because it predates our commitments. So the purpose of this amendment would be to amend the original Act because, otherwise, it would not give any effect to this bill. The purpose of this bill, as stated in the preamble to this bill, is to give effect to our commitment, but the 2002 Act gives no effect to our commitment, so we actually need to change the 2002 Act in order to give effect to this bill, which is why we have put this amendment into place. I recognise that is kind of circular, but the problem is that the current bill before the Committee would not actually have any force because the original 2002 Act is for a business-as-usual scenario, not a reduction in our emissions by 11 percent, below 1990 levels, by the year 2030, which is the Government’s commitment. Is that clear?

I can hear what the Minister said. I am told by someone beside me that she would like to say something.

If I am reading the amendment correctly, then what the member is proposing is that it actually align with New Zealand’s nationally determined contribution. As the member would know, we took an intended nationally determined contribution to Paris, and that is still an intended nationally determined contribution until that is ratified, and it has not been ratified, and, as a consequence of that, we do not actually have a nationally determined contribution as per the Paris agreement yet.

What I am going to do is reiterate my ruling. If the Government becomes convinced that the scope of the bill needs to be widened by the inclusion of a clause such as this, I am sure the Government will bring it back and seek the leave of the House to extend the scope of the bill, or, if it is possible, for it to amend it. I have ruled it out on the basis of the advice that I have received from my right and left—although, of course, it is my decision—and if that, as the member says, renders the bill ineffectual, then that is a problem that the Minister will have to sort out.

I raise a point of order, Mr Chairperson.

The CHAIRPERSON (Hon Trevor Mallard): A new point of order, Megan Woods?

It is seeking your clarification, Mr Chairperson. Regarding the point the Minister made around that, she is quite correct when she says that New Zealand does not have a nationally determined contribution at this stage, until the Paris agreement is ratified by New Zealand. If that amendment was changed to an intended nationally determined contribution, would that make a difference?

I thank the member for her contribution, and I will go back to my original point, and that is that it is not the responsibility of the Chair to sort out the scope of a bill—to extend the scope of the bill—to make it effective. This amendment, even with its circular explanation, is outside the scope of the bill, and if the Government wants to sort it out, that is something that it will have to do, and we cannot do it by moving an out-of-scope amendment from the floor.

I take it, Mr Chair, that we are now all accepting your ruling that James Shaw’s amendment on the purpose—his particular amendment on the purpose—is out of scope?

The CHAIRPERSON (Hon Trevor Mallard): Yes.

So it is on the basis of that discerning understanding on my part that I had thought it was probably worthwhile to put forward a separate amendment, which does not seek to amend the purpose of the principal Act. What it does is seek to elaborate upon clause 3, or amend clause 3, to ensure that it is more explicitly clear—because what I have done here is look to the explanatory note, and the explanation in the explanatory note. The specific purpose is removing the one-for-two obligation, but the broader purpose of doing that is to improve New Zealand’s ability to fulfil its international obligations, and then with a view—and so what I did was I took the thrust of the explanatory note and entered it into clause 3. The original wording is: “This Act amends the Climate Change Response Act 2002 (the principal Act).” So this—

💬 Grant Robertson: Yep, keep going.

Well, I am just craving the attention of the—I am insecure enough to crave the attention of the Chair and the Minister, but I am confident that I can keep going. To improve the ability of—

The CHAIRPERSON (Hon Trevor Mallard): I just want to make it clear to the member that we were having a discussion as to whether your particular amendment is in scope—

Yes.

The CHAIRPERSON (Hon Trevor Mallard): —and I have ruled that it is.

Oh, good—thank you. Then that saves me 30 minutes of elaboration as to why I think it is in scope. So the purpose now is to amend “(the principal Act) to improve the ability of the … ETS to fulfil its statutory purpose of helping New Zealand meet its international obligations under the … Framework Convention … (1992) in light of the Paris Agreement signed by New Zealand on 23 April …”. The point of doing that is to make it more explicitly clear what the purpose of removing the one-for-two obligation is—namely, to improve our ability to meet our obligations under the 1992 framework convention, but in light of the updated conditions that are reflected in the Paris Agreement of only 6 months ago. So I put it to the Minister—through you, Mr Chair—and to colleagues that this is well worth doing because even if it were to just stand by itself, independent of Mr James Shaw’s other proposed amendments, which have some substance, it would still none the less register the point that the one-for-two obligation is one aspect designed to improve our ability to meet the 1992 obligations updated in 2015. I think that stands by itself as being self-evident and worthy of doing.

My interpretation would then be—and this now becomes a personal challenge—that the one-for-two obligation is inadequate by itself and that there is a range of other measures that will be needed for us to do that stated purpose, but I do recognise that if the Government is determined this evening to confine it to just the one-for-one obligation, we would support that. We have said we would support it, and I would accept that as well, but in doing so I would make the point that in our view it needs to be more than just the one-for-one obligation. As we develop more of a dialogue in the course of this year, leading up to Marrakesh and the implementing legislation—the treaty examination of the Paris Agreement—we will be making that point in respectful dialogue with the Government. So on the strength of that, I just recommend this amendment to the Committee.

I rise to speak to the amendment that has been put forward by Dr Kennedy Graham. I think it is a thoroughly sensible amendment and it brings the legislation into line with the need to start a process of carbon budgeting—of actually working towards our climate change goals. It specifies very clearly that that is where we intend to move, and currently the Government does not have that explicit link in its own legislation. So this seems like a very sensible way forward, and I want to thank Dr Graham for proposing the amendment. I think it is very helpful, Dr Graham. It is very helpful to this Committee.

Of course, we on this side of the Chamber have long advocated for an independent climate commission that would establish such a carbon budgeting process, which would shift us on to a path to achieving significant emissions reductions, which is what we all agree needs to happen. The rhetoric on that side of the Chamber is about achieving emissions reduction targets, but there is no plan. There is no way to get there. There is no intention expressed in the legislation to have a budgeting process, or to actually align the spoken intention with any action whatsoever. So that is why I think Dr Graham has done us all a service in putting that down in very simple terms that the Government, I hope, can agree with, because if the Government really is wanting to prove that it is true to its word, then it will have no objection to this amendment. I cannot see how it could object to this amendment that Dr Kennedy Graham has put forward if it is true to its word.

💬 Dr Megan Woods: If they mean to meet it.

If it means to meet the targets, it will sign up to this amendment. So I am very interested to see whether the Minister for Climate Change Issues rises to her feet, seizing the moment of opportunity to speak in favour of this simple amendment, because then she would be saying that what the Government has said is credible and it understands that this is a way of getting there, and, of course, the amendment leaves it the discretion to set out the carbon budgets and the targets itself. It leaves the Government the freedom, of course, to do that in the way it sees as being most meaningful, but it says: “Actually, we intend to back our words with some actions.” So that is why I wish to speak in favour of Dr Graham’s amendment.

I do not intend to take a long call. I just have a couple of questions that I would like to ask Minister Bennett, and I hope that she can answer them. Clause 6 makes reference to “an eligible industrial activity”. I am just asking what the definition is for that term, because in the principal Act there is not one. What is the meaning of “an eligible industrial activity”? My concern there is whether it is anything to do with burning coal or anything to do with diesel-generated activities. That is the first question.

The second question relates to the regulatory impact statement. It makes reference to a number of organisations that the department consulted, but it does not name those organisations individually. It just lumps them all together. I am interested to know whether the Minister would be prepared to reveal who the market intermediaries would be, and who the individuals are in the non-governmental organisations and community groups concerned.

I want to get a sense as to who was consulted by the organisation. Like I said, there are no individual names from the organisation, and because we have not been able to forward this to a select committee, I am interested in whether the Minister would be able to make that information available. If she cannot tonight, then she might like to table it before the final reading.

On a not completely dissimilar note—and I shall be very short in my contribution; I can see my colleagues looking at me, wanting to make sure that I am indeed adding something substantive to the debate—as my colleague Su’a William Sio has pointed out, there has not been a select committee process. I am interested in knowing—clauses 4, 5, 6, and 7 all refer to the date of 1 January 2019. That date is, I suspect, something that has been consulted on in the emissions trading scheme review. I am wanting to know what business has said about that date and the particular transition that is on offer. Obviously, we have not had a full select committee process so we have not had feedback from business on the concrete proposal at the end, as best I know, but Minister Paula Bennett may have consulted in some capacity or may have had a separate process previously. I am interested to know the process and what the feedback was as to how this measure, this timing, was received by business as compared with other timings on offer—which could have been anything—and other transitional measures. We have got only one in this bill, and that point has been made many times, but how was this transitional measure and this timing received as opposed to others?

This is just a response to a couple of things. One, in response to the member David Clark, is that, certainly, 75 percent of submitters supported the one-for-two measure going. In general, what we got from business was that they wanted certainty. That was the most important thing, and, most definitely, their ideal was that it was phased out over time—over 3 years and beyond, to be quite honest. From their perspectives, it gave them time to budget, it meant that they could really look longer term, and for a lot of them—we did look at all the options, to be quite frank. I think I had three that I looked at very carefully: one was just all over in one shot, to 100 percent; another was phasing out over 2 years; and then there was the 3-year option. Businesses were certainly interested in the 3-year option, and the biggest reason that we went with what we did was in line with dairy, to be quite honest. Dairy farmers do take a percentage of cost because of their transport and electricity usage, and also because of Fonterra. Fonterra has still got a couple of coal-fired drying units, in the South Island in particular, that really do make it one of the biggest business emitters. It would pass that cost, I am sure, on to farmers, and so we wanted to be considerate of that. At this time, when we can see so many under so much financial pressure, we did not want to be putting undue pressure on them in addition to that.

The other thing is in response to the member Dr Megan Woods, who earlier asked a couple of questions around the price caps and the price floor. Certainly, the advice I have had on the price floor was that it is highly, highly unlikely that the price will go down again, and that is because of the markets, how many are out there, and the different prices that are going on. To the kinds of questions that the member had on when we will look at the cap again and when we will look at a whole lot of other measures: to be quite frank, a lot of that is about when the world starts coming a bit more on board. At the moment, as members know, we have got only a few countries that have got an emissions trading scheme (ETS), and some different states in America.

What I will say is that when I was in New York for the signing of the Paris Agreement there was a lot of talk about emissions trading schemes, what they meant, and the lessons that they learned from ours. Members in this House, and in this debate, have raised the point that ours ain’t perfect, and there have certainly been times when the price has been so low that it has actually made no difference, to be quite fair. So we have learnt some lessons—we have learnt lessons in what we will accept as units. We have learnt some lessons, and we will take a hit for that, I suppose, in this debate, but, at the end of the day, (a) we will not make them again and (b) I hope that we can pass on some of those learnings to other countries that are now seriously looking at introducing an ETS. But, while you have businesses that are seriously trade exposed—I must admit, before I started learning about this, I was in one boat about how you wear the cost of what you do, and you make decisions like that. Some of our businesses may not be perfect but, actually, the way they produce some of their goods is more efficient and less emission-polluting than some of their counterparts overseas, and putting so much cost on them that they close down here would not mean that we would not have those goods still manufactured, but that they would be manufactured in a less healthy way, if you like—or a more polluting way—overseas, and actually do more damage to our planet.

I want to encourage other countries to look at an ETS. I want them to learn from some of the things that have happened as we have progressed it. It started under Labour and I am sure the architect, who is not here right now, would have a look and say there are things you would do differently. But we need to encourage other countries to equally take this really important step.

I want to respond to a few points of the Minister Paula Bennett’s just then. She said that only a few countries have an emissions trading scheme. This is correct, but one of them is China, which—as we all know—is a pretty big market and should be able to sustain any kind of interaction with it that we want. There are more countries that have got carbon taxes in place than have emissions trading schemes in place, and one of the things that we have argued for some time is that a straightforward carbon tax, where you recycle all of the revenue in the form of tax cuts to people and to businesses, would actually be a far more transparent and predictable model. It does not necessarily exclude countries from working cross-border with each other to try to work out ways to reduce their emissions.

There is a growing number of countries that have either carbon taxes or emissions trading schemes in place. This is moving at extreme speed, so if we wanted to introduce this, we would ask why we have to take 3 years to do this, because in 3 years’ time the world will be a much, much more different place than it is now in reference to these kinds of mechanisms. I mean, it is a very different place now than it was 3 years ago—3 years ago, China did not have an emissions trading scheme or any carbon taxes in place, and it does now.

I also want to just mention, in reference to the question about a floor price, that, yes, the advice is that it is unlikely to drop below where it is now. If that is the case, why not put a floor price in place to be sure and to absolutely secure it—to remove that likelihood completely? You would only not put one in place if you felt that, actually, there was a chance it would drop below the current price. Of course, the current price—I think it is trading at about $14—is not yet enough for farmers, foresters, and other businesses to be making investment decisions about putting their money into lower-carbon, and therefore cheaper, forms of industry, so the price has to rise if it is going to have any real effect. I cannot remember the study, but there was one in the last 6 months that said that the price would need to be about $50 a tonne before people started really making major choices about where they directed their investment in the economy. I just want to note, again, that France last week put in place a NZ$50-a-tonne price for 2017, which is just next year. They are moving very, very quickly, so it is disappointing that we are not.

I do accept the difficulty of trade-exposed industries and, of course, New Zealand Steel is a really obvious one. It is a major employer in South Auckland. It has got 1,000 people working there, and, I think, an extended community running into several thousands of people, and it is in very difficult times, with or without a price on carbon. But one of the options that the Minister could explore is to remove the subsidy and bring trade-exposed industries into the emissions trading scheme, and then put a border adjustment in place so that imported steel—in this case—was subject to the same carbon price as domestically produced steel, and that would mean that they could compete on an even basis. It would mean that the consumer of that steel actually has to carry that price and the consumer is therefore making decisions about whether they can get more efficient with their use of steel or could they be looking at other lower-carbon goods, for example, laminated wood beams, which are as good as steel in some circumstances.

So we would argue that there are ways of managing those kinds of considerations, which would actually move us in the direction of a lower-carbon economy, whereas continuing to leave those sectors out of the emissions trading scheme and continuing that subsidy actually continues to fuel growth in emissions, and it does not move those industries towards actually doing anything to reduce their emissions.

I thought one of the interesting admissions from the National Government today in reference to the Climate Change Response (Removing of Transitional Measure) Amendment Bill was when the Minister of Finance, Bill English, admitted in his speech that closing this loophole in the emissions trading scheme is going to have an impact on the Crown’s operating surplus to the tune of about $300 million over 4 years. Effectively, what we are learning from this is that any deferral of payment that we grant to industries that are polluting—whatever they are—so that they do not have to pay the full price, means that taxpayers are picking up their tab.

So now taxpayers are going to benefit from the closing of this loophole, which is great. I thank the Minister for Climate Change Issues for bringing this small change to the House today—we absolutely support it—but we need to go further than that, and we need to be honest about the fact that there is a cost involved in this pollution and that if the polluters themselves are not facing that cost, there will be more pollution than there would optimally be. It is taxpayers, but not just taxpayers here in New Zealand; it is actually all of us as inhabitants of planet Earth who are paying this cost, particularly future generations.

What I notice in the regulatory impact statement work on this bill, which we have not had much time to look at—I regret that this legislation is having a shortened process, because it would have been interesting to see whether in going through a more full select committee process we could have made additional improvements to this bill—what I see in here is this fundamental tension that I think the National Government is facing, which is how to make the emissions trading scheme work when it is supposed to put a price on pollution, and how to make it work without making polluters face the cost of their pollution. That seems to be embedded—the risk and cost associated with actually putting a price on pollution. That has been the fundamental problem with the whole approach.

If we want to truly take action on climate change and if we want to reduce carbon pollution and transition to an economy that is not reliant on increasing carbon pollution, polluters are going to have to face the cost, and that is what is going to drive the innovation. Yes, the Government can supplement that with investment in low-carbon infrastructure that gives businesses and households more choices and ability to avoid paying the cost—which, unfortunately, I do not think this Government is doing enough of. Yes, the Government can help smooth the transition, but we should have started sooner. We have to be more ambitious now because we are running out of time for this transition to take place, and the longer we put it off, the more expensive and difficult it is going to be.

It is wonderful that we have this tiny move in the right direction by closing the subsidy. I personally think phasing it in over 3 years is too long. It is too slow and it is too much of a concession to polluting industries, which have fought paying the true cost of their activities for over a decade now. They will continue to do so, and they will continue to say they are going to be disadvantaged, but just because they are disadvantaged does not mean the economy is disadvantaged, because there will be new jobs created in clean industries, and that is what every piece of environmental regulation and legislation that has been put into place has shown. Everybody screams bloody murder and says that there are going to be job losses left and right, that it is going to be the end of the world as we know it, and that it is going to be the end of the economy.

No. What happens? People in business adapt and they innovate. If we really backed New Zealanders to innovate, then we would not be deferring a price on pollution for industries that are polluting. We would be putting it there and saying: “How are we going to now fix this problem and reduce our pollution and provide real options to consumers?”. That is the real world—that is how it works. That is entirely in line with economic theory, but it does not work, I think, for this National Government because, ultimately, it is defending the status quo and it does not believe in change and transition enough. It does not back New Zealand enough to say: “We will rise to the challenge of climate change and come up with better solutions.”

As my colleague James Shaw said earlier, a better way to deal with trade-exposed industries is border tariff adjustments, but another thing to do is to be leading in our international trading negotiations and making a fair price for carbon pollution a priority in any international trade negotiations, because the fate of the world rests in our hands. If we are sitting around talking about the future of trade, the future of the economy, and negotiating deals like the Trans-Pacific Partnership agreement and other trade agreements, the Government needs to be responding to climate change first.

I just want to pick up, perhaps, where Julie Anne Genter has left off and just draw the attention of the Committee to the regulatory impact statement in a little bit further detail. We have not had much time, as has been pointed out, to explore it. But the Minister for Climate Change Issues has said—and probably only she could say it with the grace that she did—that the Government is no doubt about to take a few hits here and there along the way to restoring the one-for-one. That is all good fun in the Chamber here, but I do not think she needs to look to Opposition members, necessarily, for those hits. She has got it right there in the regulatory impact statement, I suggest.

The Ministry for the Environment has not spared the Government much in its own analysis of things. The ministry’s regulatory impact statement does recall, in paragraph 10, what we all ourselves recall, which is that the transitional phase and the changes to the original emissions trading scheme back in 2009 did a number of things. It introduced the one-for-two, it deferred agriculture—the primary ones—and it continued free allocation. Those were probably the three, and then the fourth, which was not changed, but should have been, was that it allowed the continuation of these semi-fraudulent credits, which lack environmental integrity, to come in, allowing this country’s policies to become one-quarter corrupt.

I think that is, arguably, in terms of our own integrity, the single biggest mistake in our policy over the last 7 or 8 years. That has got us into the strife that we are in, but if we then turn to page 43 and look at the heading that the ministry has identified here, “NZ ETS design and operation is inefficient in light of changed circumstances”, that, to me, is the single most significant point made in the regulatory impact statement.

What it is saying is that whatever the merits of those transitional phase changes we did to the original Labour emissions trading scheme back in 2009—whatever they were, whatever the merits—they are obsolete now in light of the changed circumstances and, especially, with what is encapsulated in the Paris Agreement. And if you look at paragraph 7, the ministry is, essentially, scolding the Government: “In the absence of clear aims for the carbon market established by the Government, this means unit supply for the NZ ETS over the long term is unclear. This does not allow participants to form expectations about the future emissions price path and factor this into investment decisions.”

In paragraph 8 it talks about “the NZ ETS being over-supplied by 150 million units over the period 2021-2030. On the demand side, one-for-two undermines the principle that one unit should equal one tonne of emissions. Its presence is a barrier to aligning the NZ ETS level of ambition with the national target, which is on a one for one basis.” We could probably get a common denominator across the parties here and just conclude that the benign interpretation is that things have changed so fundamentally that those 2009 transitions are now immediately rendered archaic and obsolete.

I sense that the Government, and especially the Minister, is recognising some fundamental things have to happen. OK—restoring one-for-one tonight is a very good first step and we are going to vote for it, but it is a baby step, and there is a need—hence my amendment. But, beyond my amendment, I would just implore the Government, through the Minister, when the time comes for the Paris Agreement to come down the track and into this House, to recognise that that is the ultimate and, arguably, the most critical opportunity for this House, cross-party, to get its act together as a country, and to move forward.

I am sure I speak for the Green Party when I say that we will be very much prepared to bring a constructive and positive approach to a cross-party dialogue pertaining to the Paris Agreement, including the implementing legislation. Let us not shy away from that challenge. Let us do it altogether, and let us take a constructive approach to it. Thank you very much.

Just following on from what my colleague Dr Kennedy Graham was suggesting, I would like to introduce two further amendments in my name. One of these is to amend the title of the bill so that the title clause would read: “This Act is the Climate Change Response (Removal of one Transitional Measure) Amendment Act 2016.” It has been noted on a number of occasions during the debate that there are in place a number of transitional measures that are not being removed as a result of this bill. What we are suggesting is that a more accurate title for the bill would be that this is the removal of one transitional measure, rather than all of them or rather than several measures. If the Government is not comfortable with that, I would be happy to have that changed to “Removal of a Transitional Measure”. The point is that it is a single measure rather than a plurality of measures, and, of course, that it is a specific single measure, which is to remove the one-for-two subsidy transitional measure under the emissions trading scheme.

Related to that, I have a further amendment, which is to change clauses 4, 5, and 8. What that would do—if we were to do it as read, and I am happy to read it out—is instead of phasing in the removal of the two-for-one subsidy, it would, essentially, bring it back to its original starting point, which is that it would simply happen immediately. So the two-for-one deal would be removed immediately, rather than get phased out over the course of 3 years. I know that there has been a number of very similar speeches tonight about how it is pragmatic and reasonable and responsible—and some other adjectives—to phase it in, because of the woeful burden, apparently, that business will have to suffer as a result of removing the two-for-one deal. But, of course, what we know is that the removal of the two-for-one deal will carry a total cost to the economy of 0.1 percent of GDP. I think it was said that it is essentially 8 hours of productivity. In other words, we can all take a day off for climate change.

If we were to remove it immediately, that would mean that those 8 hours of productivity—we would carry that cost immediately rather than a third of that each year, which is, I guess, just under 2½ hours per year. It is a minor cost, and the reason I am suggesting it is the urgency with which we need to act on climate change, because we have done nothing about it for 2½ decades. It has been 24 years since the introduction of the United Nations Framework Convention on Climate Change. We have been negotiating globally for more than half my entire life about what to do about climate change, and we came up with the Paris Agreement last year as a result. Earlier today somebody asked why it was that we needed to introduce this bill under urgency, and I wanted to say that it was urgent 24 years ago when the world created the framework convention. It was urgent 2 decades ago when National Government Minister for the Environment Simon Upton proposed to his Cabinet that there be a price on carbon and his Cabinet voted that proposal down. It was also urgent when Bill English, in Opposition, drove a tractor up the steps of Parliament to protest the introduction of a—

💬 Hon Members: Shane Ardern.

—sorry—Shane Ardern drove a tractor up the steps of Parliament to protest the introduction of a levy that would have paid for research into how to reduce agricultural greenhouse gas emissions. It was urgent last December when we signed up to the Paris Agreement, and so it is urgent tonight.

The Chinese have a saying, which is: “The best time to plant a tree is 20 years ago, but the second-best time is today.” We did not take action over the past 2½ decades. New Zealand’s emissions and our contribution to climate change have grown inexorably over the course of those 2½ decades, and so we would suggest strongly that this amendment to the bill, because it is such a minor contribution to what we need to do, should be introduced immediately rather than phased in over 3 years. Thank you.

I do want to speak briefly to the title and the amendment put forward by Mr James Shaw. The suggestion that we call it the “Climate Change Response (Removal of one Transitional Measure) Amendment Bill” is entirely accurate and emphasises the point that this is a timid first step by the Government on a journey to address climate change. As we have seen, there seems to have been universal agreement breaking out around the Committee about the need to take some measures. We have got a strong disagreement about how much should be done, and on this side of the Chamber, of course, we would like to see real and genuine progress, but the suggestion that we change the name of the bill to be “Climate Change Response (Removal of one Transitional Measure) Amendment Bill” is something that we could support. We could insert words like “Merely” or “Not More Than” or a number of other phrases to emphasise the point, but that would certainly be a more accurate way of stating it. So in that vein, I would like to support that very sensible suggestion put forward by Mr Shaw. Thank you.

💬 Hon Members: Mr Chair.

Oh, here we go! I call Denis O’Rourke.

Mr Chairman, thank you—good choice. I rise to take just a brief call to comment on the three amendments that I have before me from the Green Party. The first one is the simplest one, which just refers to the change of title. It is a very good suggestion that it should refer to the “Removal of one Transitional Measure”, simply because that is actually what it is, so I expect that everybody in the Committee would want to vote for that. New Zealand First would certainly support it.

I wanted particularly, though, to speak in support of James Shaw’s amendment that effectively would abolish the phase-in period. I spoke to that in my second reading speech, in which I said that I saw no reason for such a very long phase-in period, or indeed any phase-in period at all. I also said, and I say again now, that many businesses, local government, and the people of New Zealand generally want to see strong leadership on this. They will not understand or accept or wish to support a 3-year phase-in period for any of the reasons that were given by the Minister for Climate Change Issues when she spoke about this a few minutes ago. There is, in fact, no justification that I can see for such a very long delay in implementing this actually very simple measure.

The reason for that is quite simply that businesses have known for a long time now that the current arrangements were transitional, so if they have not seen the writing that is on the wall, then the fault is theirs. But I think they are ready for it. I said that I have been recently to a forum in Christchurch, in which I was pleased to hear businesses talk about their readiness to take actions that they can to assist in the achievement of New Zealand’s objectives in reducing greenhouse gas emissions, to avoid sea-level rise and all the other adverse effects, and to achieve the obligations that this country has signed up to in the Paris Agreement. So the upshot of all that is that, actually, no time is really needed. All it does is show the Government’s weakness when it comes to the implementation of even this very minor, very straightforward, and obviously needed measure to end those transitional arrangements. No more time is needed, and, in fact, a little bit of a shock to the business community would not do any harm, because it would galvanise it into action. I do not accept that there would really be any significant harm to those businesses or to New Zealand’s trading position as a result of doing that. So for those reasons New Zealand First would have no hesitation in supporting this amendment to abolish the phase-in period.

The other amendment, which we would also support, is Kennedy Graham’s one relating to clause 3. The alternative words that are used there, “to improve the ability of the NZ ETS to fulfil its statutory purpose of helping New Zealand meet its international obligations under the United Nations Framework Convention on Climate Change (1992) in light of the Paris Agreement signed by New Zealand on 23 April 2016.”, are a good and proper statement of the purpose for this measure and point to the way things need to go in the future. So I will end it there, but New Zealand First, for those reasons, will have no hesitation in supporting all three of those amendments, and I hope and expect the Government will see the light and do so as well.

Tēnā koe, Mr Chair, thank you. It is bizarre that we are debating this bill under urgency when it does not come into force until 1 January 2017, and Part 2 does not come into force until 1 January 2019. Why are we debating it under urgency? Is that because the Government was too scared to call for submissions and have a public debate on the lack of any decent progress towards tackling our emissions to reduce climate pollution? Because one of the most inspiring Government-organised meetings I have been to about climate change was the Government’s consultation meeting last year on New Zealand’s emission targets before we went to Paris. It was not inspiring for the video that the Ministry for the Environment showed, which was incredibly defeatist about the obstacles to a low-carbon future, but it was inspiring because hundreds of people came and hundreds of people there were still wanting to speak at the end of the 2-hour meeting. They had plenty to say about what we could be doing to reduce climate pollution in New Zealand.

That is where the Government totally fails to get it. As James Shaw said, it does not get climate change. It also does not get the desire of New Zealanders all around this country of ours to do something definite—to have a plan about reducing our emissions. People want a stable climate. They want to protect our future and the future of their children and their children’s children. They want to protect the basis of our economy. People want a plan. This Government, with this damp squib of a bill, is failing to provide that leadership. People all around New Zealand are getting loud on the climate. We have seen that with the break-free actions to move away from fossil fuels that we have seen over recent weeks. Yet this bill will reduce our emissions by only 0.7 percent. That is not good enough when we have got a target of reducing emissions by 11 percent.

It was really interesting to have a look at the regulatory impact statement. One of the reasons for this delay in implementation is because of what has been described as the risk of increased cost to the dairy sector. Because agriculture is totally exempt from the emissions trading scheme, those costs, of course, are to the processers—Fonterra and the milk processing companies—because they use coal to dry the milk. Those costs are passed on a wee bit to the suppliers. The regulatory impact statement estimates that there will be an increase of costs between $1,500 and $5,000 a year for the average dairy farmer. Because of the losses that dairy farmers are expected to make in the current season, this is seen as one of the factors in delaying the implementation of the bill. But that sums up what is wrong about the Government’s whole approach to climate pollution. It is not giving the incentives to change.

There was a very good presentation in Parliament last night—or, in the building, outside the Chamber—from Apiculture New Zealand. Its plan is to actually plant mānuka over large areas to increase our bee industry, to increase the income we get from honey exports, and make that a billion-dollar industry. Yet this bill and the Government’s failure to lead on climate mean that we are not getting that encouragement for a change in land use—to move away from climate pollution - land uses such as agriculture and dairying, with the major methane and nitrous oxide emissions that we get from cows. Bees do not produce nitrous oxide or methane. If we had a decent climate plan, we would get a shift in land use away from dairying to much more sustainable land uses across Aotearoa New Zealand, but by failing to lead the Government is stifling innovation. It is leaving us stuck with climate-polluting activities like intensive dairying. That is why this bill really fails.

We are supporting the bill in the Green Party because it is a baby step, but it is completely timid and it fails to listen to New Zealanders around the country who want leadership on climate change in the same way that we have led in terms of being nuclear-free and have led in terms of women getting the right to vote. This bill fails to lead.

I wanted to stand up and take another call to just reframe this a little bit for the Government, perhaps, in a way that National would understand better, because I think it is very easy—[Interruption]—I am sorry, I am not saying that—

The CHAIRPERSON (Hon Chester Borrows): Yes, you are.

No, I am not. I am not trying to be condescending. I am really not—nobody believes me!

In the Green Party it is natural for us to say that we want to protect the planet and we care about future generations. We really care about that. That is a core value. I know that is an ancillary value for some National Party people, like the Bluegreens, but core values for the National Party, I think, are doing well, competition, and being successful in business. If I could just put it this way: climate change is the biggest economic opportunity of the 21st century—responding to it, that is. It is also potentially the greatest economic threat to human civilisation—the entire history of it. You can look at it as a threat or you can look at it as an opportunity, but either way, if humans are going to continue to thrive in the future, we are going to have to change the way that we do things.

The economy is not something that we serve; the economy just describes how we spend our time and how we allocate resources. Right? We cannot continue to allocate resources and spend our time in ways that continue to put carbon emissions into the atmosphere. It is just not possible. The scientists have told us that. If we went to a doctor—you go to the doctor and the doctor tells you that you have got to change your lifestyle, because you have got diabetes and you are at risk of a heart attack and you are at risk of dying. You might like to continue doing the things you are doing—that might be more comfortable in the short term—but if you want to save your life, you are going to have to do some things that in the short term are a little bit difficult but in the long term are going to enrich your life and give you a better quality of life. They are things like changing your diet or your exercise regime, or whatever it is the doctor is telling you. Basically, it is exactly the same thing right now. Scientists are telling us that we cannot continue to put carbon emissions and greenhouse gases into the atmosphere.

It is a false dichotomy to say we cannot afford to do what we need to do to reduce emissions. We cannot afford not to. We needed to start 20 years ago, but we still can start today. Maybe if you consider it as an economic opportunity—the sooner New Zealand moves, the better off we are going to be because we are going to seize this transition to a low-carbon economy. We are going to seize that opportunity because we know we have to do it. We know we have to do it. So why do we not start now? It is not the industries who are going to you, saying: “We cannot afford to pay this yet. We are trade exposed. We cannot do this. We cannot do that.”—they are not the ones who are going to lead us into the economically successful future.

The CHAIRPERSON (Hon Chester Borrows): We are in the Committee stage. It sounds like a third reading speech.

Completely understood, Mr Chair.

The CHAIRPERSON (Hon Chester Borrows): A number of us wish it was.

Completely understood. I just think that within the regulatory impact statement for this bill, it demonstrates the kind of to and fro that the Government is having with the business community. The reality is that this bill is not going to reduce emissions more than 0.7 percent, which is not enough for us to meet the Government’s weak target, let alone the target we need to meet to avoid dangerous climate change. We have got a choice here as a country about how we confront climate change, and this bill is leading us down the path of doing nothing meaningful and waiting too long, and ultimately we are going to pay the cost for that.

I just want to, if I may, conclude my remarks in support of my typescript amendment with the following comment. At the end of the typescript amendment, I do make the point of explicitly saying “in light of the Paris Agreement signed by New Zealand”, and I think that is the critical point I want to bring to the attention of the Committee. The Paris Agreement, dated December 2015, is the one that is directly relevant to how we, as a global community and a national community, now plan our transformational pathway to a low-carbon economy over the next 15 years and the next half century.

But the Paris Agreement makes one other thing very, very clear, and that is that the current intended nationally determined contributions are insufficient. I do not have it in front of me, but the wording is pretty close to “current intended nationally determined contributions fall well short of what is required for a 2 degree pathway”—well short of what is required for 2 degrees. The agreement also says that global emissions need to get down to neutrality sometime in the second half of the 21st century. The experts tell us that that really means—because it was fudged a bit by the governments at Paris—that we are really taking about 2060 to 2080, and the general agreement consensus is that it is the 2070s. So we are talking about global neutrality by 2070.

The Paris agreement also says that, notwithstanding the universality dimension of Paris, which was the major and qualitative step forward, “developed countries must continue to take the lead”. Most, almost all, experts recognise that that means that developed countries have to get close to carbon zero around about 2050-60 so that the developing countries can follow. I have heard one breath-taking theory that New Zealand could allow itself carbon neutrality around 2090, and still be consistent with the 2 degree pathway—it is true—thereby implying, if that were the case for all developed countries, that the other 160-odd States parties would all fall into line brilliantly in the 10 years 2090 to 2100.

But set that aside for the moment. The general consensus is that the developed countries have to aim for carbon neutrality—and some are formally stating that now—by the middle of the 21st century, and then the developing countries in the latter part of the 21st century. If you take that, we have to then recognise, in all humility, and I will share the humility with the Government, that a 50 percent target for New Zealand in 2050 is demonstrably inadequate.

For what it is worth, I will conclude on this: the Green Party did make it clear last year that we believe that a 40 percent cut by 2030 is entirely possible. That rests on research that we have commissioned from experts around the country that makes it clear that if you adopted a set of benign assumptions, if you assumed the best of all worlds in New Zealand—policy optimality, political consensus, private-public collaboration, linear improvements in technology, best practices in the farms, the firms and the households; just an optimal, benign scenario for New Zealand—you could get way beyond that. “So what would be the theoretical maximum potential mitigation in that situation?”, the experts say, and then you bring all those figures together, and you can go way beyond 40 percent. You can, perhaps, get as far as 60 or 70 percent.

In the real world, we are all realistic enough to know that that may not happen, but it is worth exploring the theoretical potential in the best of all worlds, and then challenge ourselves—every political party, every individual MP, the Government, every individual Cabinet Minister, and every individual New Zealand citizen—to aspire to that. Let us start the dialogue. Thank you.

Members, James Shaw’s tabled amendment inserting new clause 4AA is out of order, as it is outside the scope of the bill.

The question was put that the following amendments in the name of James Shaw to clauses 4, 5, and 8 be agreed to:

replace clause 4 with:

(4) Section 63A repealed (Modification of liability to surrender units to cover certain emissions);

repeal section 63A;

replace clause 5 with:

(5) Section 64A repealed (Modification of entitlement to receive New Zealand units for removal activities);

repeal section 64A;

replace clause 8 with:

(8) Section 84A repealed (Temporary suspension of allocation entitlement for eligible industrial activities) and

repeal section 84A.