Climate Change Response (Emissions Trading Reform) Amendment Bill

I move, That the Climate Change Response (Emissions Trading Reform) Amendment Bill be now read a first time. I nominate the Environment Committee to consider the bill. At the appropriate time, I intend to move that the bill be reported to the House by 2 April 2020. I also intend to move that the select committee have the authority to meet on Fridays of sitting weeks, outside of Wellington during sittings, during sittings of the House, and during the evening after 6 p.m. on sitting days. I would also like to direct the committee to consider, circulate, and hear submissions on draft Climate Change Response Act amendments relating to agricultural emissions pricing, which I will send to the committee before Christmas.

This is the second of two bills that we are taking through Parliament to amend the Climate Change Response Act 2002: the zero carbon bill introduced in May this year and the bill I am introducing today, the emissions trading reform bill. Together, they put in place the architecture, the institutions, and the framework to support our transition to a low-emissions economy. The New Zealand emissions trading scheme (ETS) introduced by the previous Labour-led Government, and supported at the time by the Greens, is our primary tool for reducing climate pollution in Aotearoa. It operates on a simple premise. Businesses that are responsible for the greenhouse gases that cause climate change face a price for those emissions, and those that reduce emissions or plant trees to take carbon out of the atmosphere get a financial reward. But for the decade that it has been in place, it has not been allowed to do the job that it was designed to do—to cut climate pollution.

These reforms were initiated by the previous Government when Cabinet made a series of in principle decisions following a review in 2015-16. These reforms are the result of five years of hard work by officials, and I thank them for that. They have been well planned and well signalled to the market, and they will ensure that from now on, the emissions trading scheme can and will do the job that it was designed to do and cut climate pollution.

The bill will refocus the Climate Change Response Act to incorporate the goals of the Paris Agreement and the zero carbon bill. Our long-term emissions reductions targets in the five-year stepping stone emissions budgets will be set through the zero carbon bill. The settings in the emissions trading scheme will reflect these emissions budgets through unit supply decisions. These will ensure that we have a strong link between our climate change goals and the main policy tool for achieving them.

The emissions trading scheme is known as a cap-and-trade system, but ours has been operating with no cap. For the first time since it was introduced in 2008, we will actually be able to cap emissions covered by the scheme. This limit is likely to reduce steadily over time in line with the emissions budgets set under the zero carbon bill. This will create a predictable sinking lid on climate pollution. Auctions will be introduced to allow the Government to align the supply of units into the market within the cap. Auctioning will support but not disrupt the secondary market for tradable units that already operates within New Zealand.

Price controls will be enabled through the auctioning system to help manage unacceptably low and high prices. The current $25 fixed-price option will be replaced by a new cost containment reserve. Retaining the fixed-price option would prevent us from capping emissions because there is no limit on the extent to which it can be used. The cost containment reserve is a safety valve, but one that still allows us to cap and reduce emissions.

We need actual reductions in greenhouse gas emissions to meet our targets. The emissions trading scheme is currently closed to international units. These reforms mean that if the scheme were to re-open to international units in the future, their volume would be limited to maintain our focus on reducing emissions at home. The bill does not open our ETS to international units now, but it does help to clean up some of the mess from dubious international units in the past by allowing the Government to cancel units that don’t actually represent real emissions reductions. Other units with legitimate origins, but that are now out of date or of negligible value, will also be cancelled.

The bill will also start the phase out of free industrial allocation. Free allocation for some industries has been in place for nearly 10 years now to manage the risk of what is known as emissions leakage, when production moves offshore, leading to higher overall levels of pollution globally. A phase out was always planned but was suspended in 2012. These reforms will put us back on track. The bill will start reducing allocation at a modest rate from 2021 and increase the rate of phase down after 2030. The independent Climate Change Commission will be able to recommend changes to the rate of phase down after 2030. This ensures that robust, evidence-based analysis will drive decisions and will allow us to distinguish between industries with differing risks of emissions leakage.

This reform bill is not just about reducing the pollution businesses emit into the atmosphere. It is also about removing greenhouse gases from the atmosphere, both discouraging deforestation and encouraging afforestation. I want to acknowledge and thank the Hon Shane Jones, Minister of Forestry, for leading the development of the forestry changes in this bill. The bill will add a permanent forest option for post-1989 forests into the emissions trading scheme. This will provide more incentives for landowners to integrate permanent trees into their landscape, better use their less-productive agricultural land, and diversify their income.

Averaging accounting will be introduced as an option to eligible forests registered from the beginning of 2019. It will be mandatory for forests registered from 2021 onwards. Averaging accounting means that a forest owner will earn units as their forest grows up to a determined average level of long-term carbon storage. They will not face any liabilities upon harvest, provided that they replant. Forest owners using averaging accounting will be able to trade more carbon at lower risk. They will also have the flexibility to change the location of their forest and will not have to pay back units after adverse events such as fires—again, provided that they replant. The introduction of averaging and other policies that support this new accounting approach will incentivise new forest planting in New Zealand. The bill will also reduce the scheme’s complexity and provide foresters with flexibility for changing land-use needs. New forests will increase the value that the forestry sector adds to regional economic development; an outcome which benefits all of us.

New Zealand farmers have made many improvements in emissions efficiency per unit of production over the last few decades, but voluntary efforts to reduce emissions have so far not led to absolute emissions reductions at the scale needed to avoid a climate crisis. Therefore, this bill will put a price on agricultural, livestock, and fertiliser emissions from 2025. Livestock emissions will be priced at the farm level, so that the efforts taken by individual farmers to reduce emissions can be recognised and rewarded. Farmers will receive 95 percent free allocation, which reflects the Labour - New Zealand First coalition agreement.

Some of the more detailed provisions to deal with the interim period to 2025 have not been included in the bill upon introduction. These will become part of the bill through the select committee process. These decisions include that the Minister for Climate Change and Minister of Agriculture table a report to Parliament in 2022, setting out further details of an alternative farm-level pricing mechanism. The bill will also reflect a formal agreement between the Government and the agricultural sector. This agreement will work to encourage on-farm emissions reductions prior to 2025, and will collaboratively build the systems and capability for a workable and effective farm-level pricing system by 2025. These changes will bolster the level of accountability and enforceability of that agreement. This includes the requirement for the Climate Change Commission to report on progress on the commitments contained in the agreement in 2022, and the ability to start emissions pricing before 2025 if progress is deemed insufficient.

Our emissions trading scheme was one of the first in the world. There are now 20 emissions trading schemes around the world. This is an important stage in the evolution of our emissions trading scheme and will lead, I believe, to it finally living up to its promise and its purpose to reduce greenhouse gas emissions and to help avoid a climate crisis. I commend this bill to the House.

Thank you, Mr Speaker. It’s appropriate on this, the first Tuesday of November, with the running of the Melbourne Cup, that this is the second leg of the double, in terms of climate change, that Parliament is considering today.

This piece of legislation is complicated, it’s detailed; it runs to something like 200 pages of detailed policy analysis and work, and it’s going to take the Environment Committee quite a lot of time and effort, I think, to get their heads around the fine detail of the bill. So I’m pleased that the Minister has indicated that the bill needs to be reported back after a lengthy and appropriate length of time at select committee. I’m hoping that that will mean that the select committee will take plenty of time to hear submissions from interested and affected parties, particularly industrial emitters and business people who, I think, will be wanting to come to terms with what exactly the precise meaning of this bill is, in terms of their particular business or sector.

What is interesting about this bill is that it is the result of a long, detailed piece of work done by officials over a long number of years. The Minister’s made mention of that, and I too want to thank officials for the work that they’ve done. It was, in fact, work that was commenced by the last Government, and many of the provisions in this bill are provisions that would have been put in place had the Government not changed. But there are a couple that cause us, on the National Party Opposition, concern, and we’ll be looking to tease those out during the select committee process. We’ll be wanting to investigate and analyse the impacts, and see whether they measure up against our broad principles about climate change policy, and particularly the implementation of it.

One of the primary concerns has been in relation to including agriculture into the emissions trading scheme (ETS). I’m delighted, if for no other reason than it now seems that for the first time in this Government’s administration, they appear to be dealing with farmers rather than dealing to farmers; that’s a small step in the right direction. By pushing out the introduction of agriculture into the ETS to 2025, I think that’s an acknowledgment by this Government of the practical difficulties with doing what they proposed when they were campaigning in this area. The Prime Minister, when she announced this piece of legislation last week, made a big deal of the point that New Zealand in 2025—by passing this piece of legislation—will be the first country in the world to include agricultural emissions in an ETS scheme, and she lauded that as something good and fantastic. Well, actually, the risk for New Zealand agriculture, the risk for our economy is still there, in that if that is the case, New Zealand will in fact be the only country in the world that disadvantages its domestic primary producers to a point where farmers in New Zealand—who are acknowledged as some of if not the lowest emission producers of food in the world—are disadvantaged competitively against less emissions-efficient competitors in the international marketplace. And we have real concerns about that.

It’s always been the view and the position of the National Party that agriculture should not be brought into the emissions trading scheme until there are sufficient tools and technology available for the primary producers to adopt that allows them to effectively minimise their emissions without the necessity of simply culling cows or lowering production. We don’t think that that is effective, and we don’t think that it is overall of benefit, not only to New Zealand but, indeed, the globe, because, simply, if New Zealand’s primary production is, through carbon leakage, replaced by dairy or meat or other primary products that are produced in other countries less efficiently, then there is no net benefit to global emissions reduction, and that would seem to be an obvious problem with this bill. So there’s no point, from our point of view, of disadvantaging New Zealand farmers simply on the basis of ideology and political slogan-making.

We’re also concerned about the issue of the planned phase down of industrial allocations, and the Minister alluded to issues concerning emissions leakage in this area as well. They are real concerns for some of the country’s top emitters who produce products like cement, like aluminium, like steel, like glass, like fertiliser. These are all sectors that—even if by 2050 we are at zero carbon levels in our economy, we’ll still have a need for steel, cement, aluminium, fertiliser, I suspect, and glass. I can’t imagine that those products will not be part of the New Zealand economy in the New Zealand that we are living in in 2050, at that stage. But there is, again, no benefit to the global total emissions reduction if we are simply then importing those products from countries that are less efficient producers and manufacturers of them than here in New Zealand. I can’t see the sense of that. And so there are issues around that that need to be addressed, and we will be investigating and looking at that as we go through the select committee process.

But we’ve had, as I said, in the National Party—and we mentioned it in the last bill—some basic principles around how to approach climate change policy. And until we are sure and convinced that the sensible, practical, pragmatic science can be applied to New Zealand producers, then we will have difficulty supporting this bill through to its conclusion. But I want to let the House know at this stage that it is the intention of the National Party to support this bill at first reading. We want to have an understanding of the detail that the Minister has included in the bill. We want to see the bits of the bill that have been left out because, as introduced in the introduction to the bill, it makes it clear that there are still details to be worked out, that there will be Government Supplementary Order Papers put forward, that there will be new material, other than what we have presented to us in the House today, presented at select committee. And so we’ll wait and see what that is, see what the detail is, and then we’ll make our appraisal of its merits going forward on that basis.

So we cautiously, but with optimism, support this bill at first reading. We do want to see the detail. We do want to have certainty and clarity, and we will, as we have done on the zero carbon amendment legislation, want to try and find a pathway through if we can. But we do have some policy perspectives that we want to make sure are in place to protect the future wellbeing not only of the New Zealand economy but the future wellbeing of New Zealanders as we transition to a low-emissions economy. Thank you, Mr Speaker.

Thank you, Mr Speaker. I look forward to working with the member Scott Simpson at select committee on this bill. This emissions trading bill is admittedly a complex piece of legislation, and what it really is doing is going back and revising the emissions trading scheme that’s been left in disrepair. What is happening here is we are putting an effective market in place for carbon. It’s well recognised that the most effective way in which to manage carbon emissions is to require people who are emitters to pay the true cost of those emissions, and that hasn’t happened to date, for a number of reasons. There have been a plethora of free units, there has been the use of corrupt offshore credits, and there has been a weak market. So what this does is it seeks to set up a market which has those features of any good market, one which has integrity—it is not flawed by dishonest practices, as was the case in respect of some of those offshore credits—it has clarity, certainty, and predictability.

That is exactly what’s going on here. We want to put a clear set of rules in place so that farmers, industry—across the board, people will know what will be expected of them into the future. It has stability. It’s not highly volatile, being able to be gamed and with unpredictable prices, and the bill itself sets out a number of techniques, including the removal of the cap but also the ability to intervene in the market, to make sure that it doesn’t run amok, in a very similar way to the powers of the Reserve Bank in respect of the currency, and also wide applicability. The fact is that you cannot have a workable emissions trading scheme unless all key sectors of the economy are included in it. So we’ve got to wind back some of those free units over time. Industries have to come up to speed and, over time, transition to being zero carbon and bearing the cost, because we know that if industries don’t bear the cost, if they’re given a free ride, they will, quite rationally and reasonably, take that free ride.

So, over time, it’s absolutely essential that the true cost of carbon emissions is borne by those who are creating those emissions and downstream, ultimately, consuming those goods, and that is going to include farmers, but a unique and innovative arrangement has been negotiated where farmers have been invited to self-manage. Here in the emissions trading scheme, farm emissions are included, as they must be, but if down the track we see that farm practices and reporting are robust, then farmers will be able to self-manage their own emissions, because this kind of intervention won’t be needed. But the onus lies very heavily on farmers, and I’m sure here in New Zealand our farmers are up to the challenge—the best farmers in the world.

So this really is about creating a market. It’s lining it up with the zero carbon bill, which we’ve just been debating, making sure we’re aiming for that Paris target of 1.5 degrees but also capping those emissions, saying that if we’re going to get there over time, there has to be a cap and a thinking cap on emissions, and that will drive the price of carbon units up, but that cap is absolutely essential, and also real caution about the use of any overseas emissions, because we’ve seen already that a laissez-faire approach, an entirely open market, led to an absolute corruption of the market, and it became pretty much a meaningless exercise.

It’s also important that we have a transparent market, that people can see what goes on. So there’s going to be clearer reporting and greater transparency so that people will be able to understand exactly what the carbon budgets are like and who’s adhering to it and who’s breaking the rules, and also, just in closing, better rules around compliance, which really fall into two categories: an infringement category, minor infringements, but then one where there’s a failure to trade and hand in emissions units. There will be real penalties which are linked to the price of carbon, and that sends, again, a financial incentive to businesses that work in this world.

So it’s absolutely appropriate that we have a framework, we create a market which has integrity, is transparent, has clarity, is stable, and is universally applicable. That will lead us to a zero-carbon future on the back of this excellent emissions trading scheme. I look forward to examining this before select committee. Thank you, Mr Speaker.

Oh, thank you, Mr Speaker. I too rise in support of this Climate Change Response (Emissions Trading Reform) Amendment Bill after an exceptional contribution from my colleague the Hon Scott Simpson and, prima facie, one that I would agree with from Dr Duncan Webb, but I note that while he talks about integrity and predictability of a system, the devil is in the detail, and that’s where the rubber hits the road with this following on from the Climate Change Response (Zero Carbon) Amendment Bill. This is where the rubber hits the road, and we really need to understand that detail in this 200-page bill that is about to go to select committee. We will support that and we will attend and undertake due diligence and be very interested to hear from those key stakeholders, such as those industries that emit carbon as part of their manufacturing process.

As Mr Scott Simpson and Mr Duncan Webb said, this bill is New Zealand’s main tool for reducing greenhouse gas emissions. It’s acknowledged that it’s not currently used to its full potential, but as the Hon Scott Simpson said, this was work that was commenced under the National-led Government, it is now being progressed, and we need to send it to select committee to look at that further. But one thing that piqued my interest was, of course, allowing for a cost containment reserve scheme and that the bill will remove the current $25 fixed-price option and replace it with this reserve, which will operate with the New Zealand Emissions Trading Scheme options. So there will be a limited reserve supply of New Zealand units, and the Government will release these only when the price reaches a particular point, termed the trigger level. The Hon James Shaw said that this will allow the mechanism to be adjusted when some polluters are paying an unacceptably low price and when some polluters are paying an unacceptably high price. Again, the devil is in the detail.

As a Southlander, Mr Shaw should note that I would probably get a little bit excited about that given that Southland houses New Zealand Aluminium Smelters and now also Ballance Agri-Nutrients. So while the smelter is undertaking an audit of its affairs at the moment and is one of the smelters in the world that produces the cleanest aluminium, powered, of course, by hydro, and the only smelter in the world to be paying a carbon price, we’re getting a little bit excited at the fact that prices could go up again, notwithstanding that they’re struggling with regards to electricity prices and now, potentially, a higher carbon price. They’ve openly admitted that if the price goes from $25 to $50, then that will mean definitely out of business. Equally, then, you’ve got Ballance Agri-Nutrients, that is housed down at Awarua, employing around about 700 people—again, a significant contribution to the Southland economy. If that was to be penalised with high carbon emissions prices, again that could ruin the Southland economy and potentially put us and our livelihoods out of business well and truly. So we’re very interested in making sure that climate change is taken seriously.

But, again, we need to be looking at the economic impacts of this. We need to be making sure that we hear from these key stakeholders and that the framework is in fact fair and transparent, that it does have integrity, and that the pace at which we move is not so far out that we become green at the expense of people’s livelihood and wellbeing. We do support this bill at its first reading. But again, as I say, I am looking forward to the select committee to undertake due diligence and to see how it goes.

I rise on behalf of New Zealand First to support this Climate Change Response (Emissions Trading Reform) Amendment Bill—

💬 Hon Nathan Guy: Say what you really think.

—which, of course, amends the current—

💬 SPEAKER: Order!

—legislation, which has proved to be ineffectual at best and fraudulent at worst. I would like to take the majority of my time to discuss the agricultural element to this. This is a watershed day for New Zealand agriculture. The passing of the bill sees us once again lead the world, as we have so many times in the past, going back to probably that first frozen shipment of meat out of Dunedin in 1882. And of course, this reflects the significant challenge we have of meeting our Paris agreements. We are a country that prides itself on the international rule of law, and if we make a commitment on the world stage, we must honour it.

Previous attempts at this by the National Party, who I would remind everyone were the ones that signed us up to this agreement, had bordered on being morally bankrupt, looking to outsource carbon credit purchases—

💬 Hon Nathan Guy: You’re better than that.

💬 SPEAKER: Order! Second warning.

—with what were often fraudulent offshore carbon credits. So the issue with, of course, our agricultural emissions is: it is the inconvenient truth. Forty-seven percent of our greenhouse gas emissions do originate from agriculture and we cannot meet those Paris commitments without addressing this elephant in the room. I want to quote David Frame, who is our pre-eminent climate change scientist in New Zealand: “For too long, we have circled the drain[pipe] on agricultural climate change issues so it is great to see a sensible, practical, scientifically-defensible deal being worked out.” This Government deserves credit for listening to good scientific and policy advice and being prepared to reject outdated approaches, and this is a victory for common sense, because we do know that this will be a challenge for our agricultural sector.

Currently, there are no tools outside of destocking to meet our commitments, and we do have to work hard to make sure that those tools become available. And if we had gone to a processor-level levy, even at the modest sums that were negotiated in terms of the coalition agreement—where there’s a 95 percent discount for farming entering into any emissions trading scheme—that would have still totalled up to about $50 million annually for the farmers of New Zealand.

I just totalled it up roughly on my farm. It would have been about 3,000 bucks for a modest-sized family farm, which would have essentially been money that didn’t get an actual outcome. There would have been no motivation for me. It would’ve been a blunt tool. There would’ve been no motivation for me to really do anything, because even if I was efficient, more efficient than my neighbour, we would have been paying exactly the same amount of money. So credit where it is due to our farming leadership. They recognised the social expectations of the public of New Zealand, and they also acknowledged that there are rising consumer expectations.

I would like to pay tribute to the commitment of the 11 organisations that have supported and signed up to the He Waka Eke Noa proposal. I just want to run through them because it gives you an idea of the breadth of the support within New Zealand agriculture. The National Party need to listen to this as they grudgingly support this, because this has been signed up to by Apiculture New Zealand, Beef + Lamb New Zealand, DairyNZ, the Dairy Companies Association of New Zealand, Deer Industry New Zealand, the Federation of Māori Authorities, the Foundation for Arable Research, Federated Farmers, Horticulture New Zealand, Irrigation NZ, and the Meat Industry Association. I’d like to pay tribute to that farming leadership led in many ways by Andrew Hoggard, Andrew Morrison, and Tim Mackle, in the main, for the way in which they’ve negotiated with Minister Shaw, Prime Minister Ardern, and Deputy Prime Minister Peters to get this outcome.

This outcome allows for five years for the farming sector to develop an on-farm level emissions profile for farmers so that any pricing that might come in down the line is done on a case-by-case basis, so that we’re actually incentivising good practice and we can design a system that does account for things like riparian planting, soil sequestration, and we can develop our farming systems and the continual progress and supporting of technology.

There is some opportunity in this as well; considerable opportunity now. Actually, many sheep and beef farms would be carbon neutral now, I would imagine, if the accounting was able to take in all of those things. Merino New Zealand actually has a brand of carbon negative, where they have got extensive farming systems, and the woollen garments coming off those merino sheep—of course, there’s carbon in the wool too. So they’ve actually figured out that they’re carbon negative, and I think it’s that sort of innovation that is a major opportunity actually for us to monetise this type of legislation in this direction that New Zealand agriculture is going. It’s a provenance story.

We’re still—and I hear it across the floor—a little bit in that mindset of production and just total kilograms produced. It’s actually about the value returned to New Zealand. If we can do that in another way—there’s more than one way to skin a cat. We are up against these emerging artificial proteins, genetic modification, and the like, and the only way we can go is down that provenance line, in my view. Of course, one of the meat companies—a guy fairly high up in one of New Zealand’s largest meat companies—said that there could actually be somewhere between a 20 and 50 percent premium for red meat coming off a carbon-neutral farm. So that will be quite an incentive. It puts into perspective the size of the prize that we’re playing for here.

Just in terms of the farming leadership, there has been some suggestion, probably in some urban quarters, that maybe farming’s been getting let off. Don’t think that for one minute. There is, of course, the provision to re-check in here in 2022, but it will not be needed. I quote Tim Mackle, Chief Executive Officer of Dairy New Zealand: “Our future is now in our … hands as we work in partnership with the Government to deliver … [on] our commitments.” I think that says it all. In fact, actually probably what did say it all was the response from the National Party, which was: crickets.

Of course, the bill does a number of other things which are important. It simplifies the accounting for forestry, and, as Minister Shaw has pointed out, Minister Jones has worked well to make sure that that evens out and it has some flexibility in there. It also starts the phase-down of the industrial allocation, because what we really actually need to do is address our actual carbon dioxide—those long lived gases—and we have to have those levers in place to make that happen. So this does start that phase-down period, but it does have some flexibility in it to acknowledge the fact that there is the potential for carbon leakage.

As Sarah Dowie pointed out before, a business like the smelter in Invercargill may be unfairly disadvantaged when it is actually more efficient than others. So New Zealand First does have pleasure in supporting the bill, but I would like to conclude my contribution by commending Minister Shaw. This has been a longstanding conundrum, and the fact that you have found a way forward through all the noise and the competing motivations has been an absolute testament to your political skill as you lead New Zealand’s response to meeting our Paris climate change commitment. So we do salute you on this watershed day for you, actually, in terms of the both legs of the double, as Scott Simpson said. So New Zealand First absolutely support this bill. Thank you.

Thank you, Mr Speaker. I’m pleased to make what will be a short contribution on the Climate Change Response (Emissions Trading Reform) Amendment Bill. As my colleagues have previously mentioned, the National Party will be supporting this bill at first reading. We’re going to support it to select committee on the proviso that—look, the bill is 200 pages long, and it needs intense scrutiny. Now, I hope that we will get the time in select committee to undertake that process in a thorough manner, and that we won’t be, like we did with the zero carbon bill, racing through it at breakneck speed, and actually give it the time that it deserves to make sure that the detail in this bill is scrutinised, and that we have enough time for submitters to come in and tell us what they think. Duncan Webb, the chair of our committee, even said in his contribution today that it was a very complex bill, and I would have to agree with that, and I do hope that we won’t be given a couple of weeks prior to Christmas to race through this. I do look forward to scrutinising the bill at select committee.

The bill proposes various changes to the Climate Change Response Act, but the biggest one of these, in my opinion, is that legal backstop for the agricultural sector to be brought into the emissions trading scheme (ETS) by 2025. It, essentially, creates an interim period up until 2022—a bit of breathing space for the Government to work with iwi and the farming sector to develop an alternative mechanism to price emissions at the farm gate. Now, in 2022, the independent climate change commission will conduct a review. If that pricing mechanism hasn’t been developed, the bill creates the ability for agriculture to be brought into the ETS before 2025.

Now, we have a number of concerns about this, which I will outline in the body of my speech, but I should acknowledge at this point that we are pleased to see that the Government are finally getting alongside farmers. For two long years, they’ve basically beaten them with a big stick, and it’s nice to see that they’ve finally learnt their lesson in that, actually, you can work with and alongside the sector to get the results that you need. This is one of National’s key tenets: incentivising and collaborating with the industry. It’s better late than never that this Government has finally decided to sit down with the farming sector after uncertainty around the freshwater proposals. Farmers are being hammered. They’ve had pressures from the water reforms, flooding, Mycoplasma bovis, farm debt, and it’s all well and good that this legislation buys the sector a little bit more time, but ultimately, they still have the threat of being brought into the ETS hanging over their heads as well. We all know the impact that this has had on our rural communities, their families, and, in particular, the mental health of our farmers.

Despite all the scapegoating that they’re often victim to, it’s worth remembering that our farmers are actually world leaders when it comes to producing fibre, dairy, and meat that is low emissions—amongst the lowest in the world per kilo of meat, milk, or fibre. So reducing production here and either importing it or having overseas farms exporting to the world what we’re not will have the exact opposite effect of what we’re trying to achieve. Let’s remember that no other country in the world is putting agriculture into the emissions trading scheme. It’s no excuse for our inaction—we need to do something—and it’s not up to us to rest on our laurels and say “Well, look, we’re already the best in the world and we shouldn’t have to do anything else”, but I think that it is important at this point that we note that farmers do care about their environmental footprint. We actually need to give them the credit that they deserve, and we also need to acknowledge that there are opportunities in this sector for New Zealand to be world leaders and sell some of that knowledge to overseas.

But to bring down our agricultural emissions, we need to incentivise behaviour change, and it’s all great that this Government is starting the conversation with the sector, but we still have very serious misgivings about the ETS and its ability to drive down emissions. We don’t think that this is the right way to go. Every farm has different stock numbers and different feeds, and, ultimately, this means different emissions profiles, and there is no current ability for us to effectively measure that at the farm gate. If the agricultural sector is brought into the ETS without the technology and the tools to measure emissions at farm level, then we’re stinging all farmers, regardless of how efficient or inefficient they are. Furthermore, if there’s no technology to actually reduce their emissions, then we’re in trouble.

At the select committee stage, like I said earlier, it’s really vital that we hear from farmers about their ability to get environment management plans in place. Anecdotally, when I’ve been out on farms, I have heard from the sector that, you know, they don’t just come up with these themselves; they have consultants that come in, and often there is a shortage of these people to actually come and put these plans in place, and it takes some time. So, look, I don’t know, but it will be really good to get these people into our select committee to let us know if this is going to be an issue or not, because there’s no point in telling farmers that they need to have farm management plans and environmental plans when they, in fact, can’t get the people in to do that for them.

These are just some of the issues we need to tease out and explore at the select committee stage. But we need to design policies that actually deliver emissions reductions, and there need to be mitigation options available to farmers that don’t involve just culling cows and herd reduction or shifting production overseas, which will, ultimately, lead to carbon leakage and the increase in global emissions.

The other point I’d like to make today is the potential effect this bill will have on our trade-exposed industries. Under this proposal, we’re potentially putting our steel, cement, fertiliser, and aluminium industries at a competitive disadvantage. We will be potentially closing down industries which are huge employers and contributors to regional economies. We still need those products and we will be importing them from overseas—and, again, from countries that potentially have higher emissions. It’s something we need to be very mindful of and spend significant time at select committee getting our heads around and understanding the risks to key industries.

This 200-page bill needs a thorough and detailed examination, which is why we are tentatively supporting it today. But we are very concerned about the potential effects on our trade-exposed businesses and the need for on-farm management tools to incentivise changes. So while we support the bill, we look very much forward to examining it thoroughly at select committee over many weeks. Thank you.

Thanks, Mr Speaker. It’s a pleasure to rise. This has been a great day for the environment, hasn’t it? I’m really enjoying myself in the House, even though I didn’t manage to have lunch today. It’s wonderful to be part of the Government, doing and taking care of the long-term issues that have failed to be addressed by nine long years of neglect from the Opposition.

💬 Hon Members: Oh, stop it!

Nine long years of neglect from the Opposition. I would like to acknowledge the Minister, the Hon James Shaw, for this bill—

💬 Simeon Brown: Reading those researcher’s lines.

—and for actually pushing forward and getting this piece of legislation—

💬 Simeon Brown: Reading the research lines.

—very complex legislation—into the House, something that the Opposition failed—failed—to do. So I’m really proud of our Minister for doing that—

💬 Simeon Brown: Read the next line.

—and I’d also like to acknowledge, as well—

💬 SPEAKER: Order! Order! The member will resume her seat. Can I say that I am getting a little bit sick of repetitive reflections on my chairing of the House, and if it happens again, the member will be out. Angie Warren-Clark.

Thank you, Mr Speaker. So where was I? That’s right—nine long years of neglect. No, moving on. I just want to acknowledge our actions in this coalition confidence and supply Government as being tremendous. We’re doing a whole pile of work, and, of course, we’ve just heard about the zero carbon bill, and we just spoke to that in the previous sitting.

What I would like to say in regards to that, though, is we hear often that this side of the House knows nothing about agriculture. I grew up on a farm, I grew up with lamb and beef, and I grew up in forestry. My father has been in the forestry business for over 55 years. I get a little bit tired of hearing constantly that we know nothing about the agriculture industry and that we have—

💬 Kiritapu Allan: This lot all live in the cities. They can tell you all about it.

—no, that’s true, actually; most of them do live in the cities—no idea and that we don’t care about our farming or our agriculture industries. Well, the reality is we do—we do. Thank you, back to the bill.

In this country, we saw an estimated 170,000 people marching around climate change. We’re really privileged to be on the right side of history here in this House. We have signed and agreed with—and the member Mark Patterson has articulated this very well—a world-first plan for farmers to reduce emissions. We have a mechanism in the Climate Change Commission for monitoring progress. Where progress is not being made and not being achieved at the farm gate, we have a mechanism to bring farmers into this scheme earlier. This plan provides the primary sector with certainty and it puts the responsibility of reduction into the hands of the primary production community. That is a wonderful, wonderful thing, because, actually, our farmers want to do this, and we have seen that.

This bill aligns the purpose of the emissions trading scheme with the zero carbon bill and the Paris Agreement to limit global warming to 1.5 degrees. I like that the entire Paris Agreement is contained in Schedule 2. I like that because whenever the Opposition talks about the Paris Agreement they often misquote and confuse us. It’s sitting in this bill in order to support us following and referencing the Paris Agreement. It puts a cap on emissions to align a five-year emissions budget with the zero carbon bill. It enables auctions of units, which enable the Government to control the amount of units.

Something highly complex—and I’m awaiting a briefing on this, which, apparently, we will have this week—is the transition away from the fixed price option price ceiling to a cost containment reserve. This is a big bill, and it is complex. It also provides transparency by publishing more emissions data so people will be able to tell where they’re at, and then it also updates the compliance and penalties regime.

I’m interested, absolutely, in what submitters are going to say about the culpability measures that are contained in this bill. There are a whole pile of percentages based on culpability of understanding and of not filing, etc. I think that that’s going to be very interesting and I look forward to hearing from the submitters around that.

Finally, another thing that this bill does is introduce averaging accounting. Now, I have explained that my family is involved in forestry and my sister is a forestry accountant, so she specialises in forestry. I rang her and I said to her, “What on earth is averaging accounting for forests about?” And she explained to me that it’s looking at the average growth of a block versus small samples, and then you get the average of the growth rate, and that’s the calculation you use at that point to then, when you sell or your forest is cut down, reforest under.

I got a little confused. I became a lawyer because I’m not very good at maths, and this stuff confused me. It is complex. One of the things, I think, that will be very interesting is the number of pages that we have to go through with a number of calculations on where this gets to. So I think we’re actually going to have a very complex and detailed examination of this bill. It is not going to be fascinating, but it is very important.

So today I’m proud that we’re getting on with the hard work. I’m proud that we’re daring to tread where National has failed to go. A real Government is about doing hard things, and we are taking on those challenges. Doing the hard thing, with compassion, with collaboration—these are the things that will get us there as a community. I commend this bill to the House.

Thank you very much, Mr Speaker.

💬 SPEAKER: The member has the call now.

Yes, I appreciate it. It’s going to be a very good call: quite succinct.

💬 Todd Muller: Oh, that’ll be a change.

Yes. This is an important bill. In fact, I had a good read of it before. This bill here is extremely technical. Here are the supporting documents. Now, I sit on the Environment Committee.

💬 Todd Muller: Lucky you.

Yes, that’s right, Mr Muller, lucky me. Thanks for swapping jobs with me and putting me on that committee. We have got a huge amount of work ahead of us. This is a very technical bill. For a lot of people, even members of this House, they won’t understand the detail about what is proposed. We’re going to, I think, have a period where we’re going to need to get up to speed on the emissions trading scheme (ETS)—what exactly these changes actually mean for New Zealand, for farmers, for trade exposed industries, and for the foresters. So this bill is going to, indeed, require a lot of input, not only from members of the committee but from officials over at the Ministry for the Environment and the Ministry for Primary Industries.

Before we talk about what is included in this bill, I want to talk about the politics of it, because that’s what I find fascinating. So the National Government kicked off the review of the ETS, and then the ICCC—Interim Climate Change Committee—did some work on whether agriculture should be brought into the ETS, and had a look at processor level or whether it should be somehow incorporated at a farm-by-farm level. I read their report—and it was a fascinating report. It was long, it was in-depth, and it was well-considered. They summarised by saying that they believed agriculture should come into the ETS at processor level, but most of their report said it’s very hard to do at farm level, and that’s why they ended up saying at processor level. For those listening, that means kilograms of milk solids or kilograms of carcass weight—basically, a tax on farmers for their stock or for their milk.

So that was the proposal. Now, Minister Shaw received this advice, and then he started socialising it with his coalition parties. Of course, there was an allergic reaction from New Zealand First, because they realised that we’d just had the debate about the capital gains tax. In the end, the coalition, for whatever reason, backed away from the capital gains tax, and then New Zealand First were worried about the cost of living and the cost of production. The most efficient producers of food come from here in this country. We are the world’s best. Then they realised—and Mark Patterson didn’t cover this off in his contribution—that “Holy moly, we can’t do this processor level tax because it won’t change behaviour inside the farm gate.”

So we knew that there were several occasions where Minister Shaw was going to stand up with people and say, “Here’s the report. We’re bringing agriculture into the ETS and it’s going to be a cost to farmers at processor level.” But something happened in the murkiness of politics and around the Cabinet committee and the Cabinet room, and suddenly it all went quiet. Then industry worked away—11 organisations, our future in our hands, in this document. It’s a good document, led by Mike Petersen, leading the Farming Leaders Group, in touch with Prime Minister Jacinda Ardern. They said, “Well, if you bring in the processor levy, it’s going to change nothing on every individual farm.” And industry stepped up to the plate and said, “Let’s not forget we’re investing $25 million a year in trying to reduce our overall emissions.”—not well understood. And, actually, there needs to be more invested not just from the primary sector industries but from the Government as well.

So what finally happened is that the Government realised they needed to accept the goodwill of the agriculture industries, to say, “Give us five years, we’ll have a go at doing it ourselves.” I commend the industries that have stepped up to the plate and said, “Give us five years, but we’re going to need some help.” The help that the agriculture industries are going to need are these environmental farm plans. Now, in a lot of cases—in fact, most cases—there is an environmental farm plan required for the dairy company, for the dairy farmers’ supply, and for the regional council. So I think it would be a great opportunity to combine all of those plans into one document.

Are there enough people to go out and do the audits? You need people, whether it’s farm consultants that are going to need to be approved, that are going to need to do the audits; how is that going to work? I’m looking forward to understanding that through the select committee process.

But, importantly, what is missing in this debate so far is that the Government is going to drop a Supplementary Order Paper (SOP) either in the select committee or in the committee of the whole House to say that we are going to change the law, and agriculture is coming into the emissions trading scheme (ETS) at 2025. That’s not in the bill at the moment, but the Prime Minister’s already said—and the Minister alluded to it—that there’s going to be an SOP coming, that’s going to be attached to this bill, that is going to force the agriculture community into the ETS. And the agriculture community is saying, “Well, hold on, aren’t you going to take us at our word that we can do all of the things that we’ve proposed in this working document?” And the Government said, “No. To appease the Green Party, we need to put it into law.”

So my challenge back to James Shaw, the Minister for Climate Change, is: will he put the SOP into the committee—which he can do—so that we can ask for submissions on the SOP? I’d like to hear from the Minister now: will the SOP go to the select committee so that we can ask for the public and industry to have their views heard? Brilliant, thank you; thank you, Minister. I appreciate the nod and the thumbs up that you will do that—not you, Mr Speaker, the Minister—because I think that that part of this process is going to be really important. Full transparency—and I commend the Minister for that.

So in summary, this bill is going to be one that’s going to require quite a bit of technical advice for the committee to get their head around it. It’s an important bill. And, fundamentally, I look forward to seeing the SOP, because that is really going to be where the rubber hits the road. I look forward to industry having their voices heard through this process. Thank you, Mr Speaker.

It’s always a delight to follow the previous speaker, Nathan Guy. I quite like him at a personal level, if I can say so myself. He’s full of charisma and he can be quite compelling. But if there’s anything that previous speech just informed this House, it is that whilst the member may be on his way out, it’s very important to listen to the things that are being said in this House in order to not perpetuate misinformation.

Now, when the Minister for Climate Change, James Shaw, introduced this bill into this House this afternoon, he was very clear on his instructions that the Supplementary Order Paper—that discusses all those matters that the prior member wanted to have discussed—would be put before the select committee. So I want to commend the Minister on his foresight and, I guess, ensuring that the broader public have the ability to do that.

The second statement—or “misfact”—was my colleague from New Zealand First Mark Patterson’s position when he gave his remarks in this House.

💬 Mark Patterson: Right the record.

Now, he was—yeah, I’ve got to right the record because your good name was thrown under the bus there a little bit, Patsy, so—sorry, Mr Mark Patterson; not known as “Patsy” to anyone. [Interruption] You’re welcome; Ha, ha! He was very, very clear in his remarks that the blunt tool of a processor fee was not useful and it would not assist to change behaviour on farm, and he gave a number of examples from his own farm about the tangible costs and why the current proposal, as set out here [Holds up document] and designed by the primary production leaders and that has been worked through with the Minister James Shaw and other Cabinet colleagues, sets out a plan that will ensure that we can bring the net emissions down in a reasonable time frame.

And, I think—if I reflect on the remarks—the Prime Minister and the Rt Hon Winston Peters, when they made their announcements about the way that Ag would be brought into the emissions trading scheme or not, there was a really strong emphasis that, actually, you know, he waka eke noa—that the future is in the hands of those that have to develop the solutions.

My colleague, just prior, as well, alluded to the fact that we do have to be pretty blunt about the fact that 47 percent of greenhouse gas emissions in Aotearoa do come from the Ag sector. That’s a fact that we all have to just accept on its face.

When you go through the detail of this plan, it’s a five-year working plan that really does ensure that there is an incentive scheme, that there is a regime that enables those farmers who are working diligently—and there are so many of them all throughout my electorate, throughout the work, and it’s not just farmers; it’s food producers, and we are exceptional food producers—and it puts the power back in the hands of those that are doing things on the land.

There’s a range of investment, as well, that’s already going into, I guess, trying to mitigate the impacts of agricultural emissions. Even some of the smaller industries, like Horticulture NZ, they’re setting aside 1 million bucks per annum to focus on R & D to ensure that they can bring down their emission footprint. Beef + Lamb: they themselves are setting aside $5.4 million every year to reinvest into ensuring, again, that we can bring down those net agriculture emissions.

Look, this is a world-leading position. It’s one that hasn’t come about by sitting on anybody’s hands. The Opposition may laugh but it’s an actual fact that for nine long years we sat with a Government that did sit on their hands and failed to take action. This side of the House—

💬 Nicola Willis: Do better.

—is taking action. Nine long years, to the member; she was actually working on the precinct so she knows that particularly in areas around—for ages they were doing this—climate change, you know, there was a real hesitancy. They signed us up to the Paris accord, and had no infrastructure there to support us actually meeting those objectives. But, anyway, that’s a story for another day.

I’m really proud of the work this Government’s done. I can only take my hat off to the Minister in charge of bringing these reforms through. It’s a monumental piece of work and something that we can all, as a generation and this House, be exceptionally proud of. So I commend this bill to the House.

I rise to speak on the Climate Change Response (Emissions Trading Reform) Amendment Bill. I think it is worthwhile remembering a little bit of the background of how this bill came to be introduced into the House, because, of course, the ETS—the emissions trading scheme—is a piece of legislation that has actually endured through Labour- and National-led Governments. It’s a piece of legislation that, yes, National’s made reforms to through the years, but there has been agreement that an emissions trading scheme is a useful way of encouraging the reduction of emissions across the economy. The way it’s been seen is that it creates financial incentives and it ensures the efficient reduction of emissions because it encourages the least cost mode of reducing emissions to be used. So in that regard it has been a useful mechanism.

Now, of course, National kicked off a review of the emissions trading scheme in 2015. That has gone on. There was public consultation in 2018, and some of the goals of that are really laudable: providing certainty to business, improving the administration of the thing, making the scheme more accessible, strengthening the compliance regime—and we can see some of that coming through in the 200 pages of this bill. These are complex, technical matters. These are things around the accounting treatment of forestry, technical improvements around the cost—

💬 SPEAKER: Order! I apologise for interrupting the member, but it is kai time. The House will be resumed at 7.30 p.m.

Sitting suspended from 6 p.m. to 7.30 p.m.

When we took off, I was going through in some detail some of the technical aspects of this amendment bill, which are many and varied, but the aspect I hadn’t yet dwelt on was its way of dealing with agriculture. Of course, previous speakers have talked about the fact that the Minister for Climate Change and the Minister of Agriculture have agreed that agriculture wouldn’t enter the ETS until 2025. At face value, National thinks that that’s a good thing because, actually, we don’t think that farmers should be facing a tax for something that they can’t actually mitigate on-farm because there isn’t yet the technology to do so. We would go back to the Paris Agreement, which was very clear on the need for the world not only to work together to reduce emissions but also to do so in such a way that it didn’t threaten global food production. We on this side of the House think it is not productive in any way to ask farmers to reduce their own production by culling herds or making other changes of that sort simply to meet an ETS target while others are farming in less sustainable ways in other parts of the world.

But I want to draw the House’s attention to some technical aspects of this bill which I think are going to require a lot of further examination during the select committee process, because even though there are 200 pages, there’s quite a lot of detail that’s yet to be worked through and which the select committee will need to investigate thoroughly. What the bill currently says is that it requires the Minister for Climate Change and the Minister of Agriculture to report back on the development of an alternative farm-level pricing mechanism in 2022, which is quite different from 2025—it’s not too far away—and in the meantime, it uses the New Zealand ETS as a fall-back option for emissions pricing. Essentially, what that sets out is that if an alternative farm-level price mechanism isn’t found, then the ETS will kick in. So we on this side of the House are very interested in how that will be worked through.

We’re also interested in this question that’s posed where it says that “Some of the more detailed provisions to support decisions during the interim period to 2025 have not been included in the Bill on introduction. [They,] among other policy decisions … will be incorporated into the Bill through draft text provided to the select committee or via a Supplementary Order Paper.” I was in the House earlier when the Minister for Climate Change acknowledged the question from the Hon Nathan Guy, who said, “Well, this is going to be pretty important to the way this ETS operates and the way that this functions.” Will the select committee have the opportunity to examine that Supplementary Order Paper (SOP), because, unfortunately, as members will be aware, there have been previous occurrences where the Government has introduced SOPs late and has not taken the opportunity to avail itself of the advice of the select committee nor to hear submissions from the public.

So it was very pleasing to see the Hon James Shaw nod his head in agreement that, yes, that SOP would be presented to the select committee, because what is very important here, I think, is that the decisions that are made on the ETS are done so with good evidence and they are done so with full awareness of the impact on these economic actors downstream, because in the end, what we are talking about here is communities, livelihoods, and how much money people can take home and how much money they can spend in our local towns. That stuff’s really important, and it’s important that the Climate Change Response (Emissions Trading Reform) Amendment Bill gets adequate attention from the select committee. Thank you very much.

Thank you, Mr Speaker. I rise on behalf of the ACT Party in opposition to the Climate Change Response (Emissions Trading Reform) Amendment Bill. It’s difficult when speaking on this bill and having had the zero carbon bill debated earlier today not to have some admiration for the bill’s sponsor, James Shaw, and the for the way that he has come into Parliament and worked assiduously to change public policy in a way that, in his view, is essential to the future of New Zealand. Nevertheless, when I look at this bill and the provisions within it, it’s not one thing or the other.

The intention of it, I’m sure, is to introduce a truly market-based system that will allow New Zealanders and their families, their businesses, and exporters to find a way to meet their carbon reductions, or at least their emission reduction obligations, at least cost, in the most efficient way, and with the least political distortion of economic decisions in New Zealand. That’s a noble intention—a market-based solution for people to be able to solve a problem without politics getting in the way—and it’s an important way to do it, because our small, open economy at the bottom of the world relies on people being able to make commercial decisions and being able to invest their capital, decide where to work, and decide what to buy and sell without political interference. Our country has been down the other path of having a Government that attempts to control almost every aspect of the economy before, and it nearly bankrupted us.

Well, unfortunately, this bill, while promising to be a market-based trading solution, fails in a couple of important areas. The first is that it sets a cap on the total supply of New Zealand Units—in effect, the total number of tonnes of carbon dioxide that can be emitted—and already in that is a presupposition about how much carbon-emitting activity should happen in New Zealand versus the rest of the world. Well, the easy way to solve the problem is actually to allow New Zealanders to buy credible units on an open market from the rest of the world. It may be that there are things that are better off happening in New Zealand from a global perspective and that New Zealanders would like to buy units—the right to emit a tonne of carbon—from offshore. Well, this bill is designed to make that, if not impossible, then extremely difficult.

So we start off with a cap on the total number of tonnes emitted within New Zealand, and that might be OK if there was a true market place with no politics inside it. The problem is that the bill gets worse. It says that there will be a cap but that the Government will regulate what the cap is. So you’ve already got a political decision about the total amount, and then it says, “Actually, if we think that an industry has nowhere else to go and there’s no danger of leakage”—i.e., activity they do being done elsewhere—“then we’ll whack them harder.” Then it says “If there are industries that are going to lose out to international competitors, then we’ll relax things a little bit.”, and how are those numbers really going to be decided?

Well, the only way is politics, and so, again, we go backwards 35 years to a world where if you want stuff done and if you’d like your industry to survive and prosper, then one of the most important inputs you can have—being carbon credits—are going to be awarded based on whether or not the Government has regulated this five-year period that your industry should have more or less. That politicisation of the economy is not only unnecessary in order to have a truly market-based emissions trading scheme but it does enormous damage in repoliticising the New Zealand economy—something that we moved away from a long time ago.

In summary, this bill does things that are not necessary that introduce additional political control over the New Zealand economy, and yet it doesn’t achieve better environmental outcomes for doing it. That is a reason why all New Zealanders should be opposed to trying to do climate change policy this way. Thank you, Mr Speaker.

I rise with real pride to support this piece of legislation, because one of the things that this piece of legislation does, among several, is acknowledges the importance of working in partnership with our agricultural sector. That is just one of the things that this piece of legislation does, but more importantly it’s about tackling New Zealand’s long-term challenges, and we know that climate change is one of our biggest challenges that we face in today’s day and age. It reforms the New Zealand emissions trading scheme (ETS) to drive emissions reductions and help New Zealand meet its domestic and international climate change targets.

I’d like to acknowledge the Hon James Shaw for bringing this piece of legislation to the House, when it is such an important issue that we cannot ignore. As Minister Shaw said earlier, the emissions trading scheme was not being used to its full potential, and we know that the emissions trading scheme is actually a key tool to tackling climate change. We can no longer sit on our hands. We can no longer put our heads in the sand and say “It’s all too hard.” and put it in the too-hard basket. We must act now.

What we have here is a progressive Government that is working hard towards making real and meaningful change and is not afraid to make some of the hard decisions. But I am really pleased that we have seen the Government has listened to the concerns of the agricultural sector and has put into place a sector-led plan to reduce emissions at the farm gate, which means that each farm will get the benefits individually for their reduction of emissions, and I think that is extremely important. We do know that agricultural emissions are going to be brought into the ETS by 2025, but this does allow the sector time to develop the tools and systems that they need to account for on-farm emission in 2025, and I have every confidence in our agricultural sector that they will achieve this.

We know that our farmers are innovative and practical people, and I have no doubt in their abilities to achieve this goal. They are already doing so much work on farm to care for the environment, because they understand that climate change affects them and actually affects our ability to keep our reputation as a country that provides exceptional quality and sustainable produce to the world. They know the importance of what this piece of legislation means.

There’s going to be a backstop measure to bring agriculture into the ETS earlier, in 2022, if there isn’t enough progress being made, but I have every faith in our agricultural sector’s ability, and I am certain that we are not going to need to use this backstop. There will be no need for this at all, because our farmers care about the environment, they care about agriculture’s global reputation, and the majority out there are actually already doing the right thing.

As my colleague Angie Warren-Clark said earlier, sometimes I think the Opposition underestimates the knowledge that this side of the House holds around the agricultural sector and just assumes that none of us care about agriculture. They think we don’t care about the farming sector, we don’t care about farmers, we hate farming, and all the rest of it. That is actually completely untrue. They would be very surprised to know how many of us on this side of the House come from rural agricultural backgrounds, and we do care deeply about our farming sector, our agricultural sector, and acknowledge absolutely the work that they are undertaking in caring for not only their farms and their productivity but their environment.

I visit farms regularly within the electorate that I live in, and I am so thrilled to see how many of them are working so, so hard on their environmental footprint. They are family farmers and they want to leave the land better than they found it. They are working so hard because often they pass their farms on, generation to generation, and they want to leave it in better condition than they inherited or bought it themselves, for their children and their community. So I absolutely commend this piece of legislation to the House.

Thank you, Mr Speaker. I rise to speak in favour of the Climate Change Response (Emissions Trading Reform) Amendment Bill—the second half of the quinella—following on, of course, from our zero carbon bill discussions earlier today.

Mr Speaker, I’m sure you will understand that I would like to bring, in particular, an agricultural perspective to this debate tonight, reflecting the role that I have in the Opposition. Listening to the Government’s approach to talking about the merits of this bill, I’m struck by that saying that someone on our side said—I can’t recall who exactly—that this Government doesn’t meet a problem that it doesn’t think tax is the solution for. I’d just like to step through why I say that, in the context of agriculture and their exposure to the emissions trading scheme.

The genesis of agriculture being included began when the Government, under the Minister for Climate Change, James Shaw, instructed the Interim Climate Change Committee to reflect, initially, on whether and how agriculture should be included into the emissions trading scheme. For some reason, the “whether” part disappeared from the brief, and it ended up being a report back to the Minister on how agriculture could be put into an emissions trading scheme. It said, “Look, it would make sense if you were to proceed down this path, to do it at a farm level.” And that sat in the Government’s good offices for a number of weeks while the Government parties debated between themselves how, actually, they were going to respond.

Eventually they put out a discussion document, and it included in that some good thinking that the industry leaders had put on the table. That thinking is worth reflecting on. That thinking—and I acknowledge here the leadership of DairyNZ and Beef + Lamb New Zealand and the other peak bodies of our primary industries—said to the Government that if you are actually seeking to genuinely make a difference with respect to emissions reduction in an agriculture context, first give us the ability to measure them accurately. Secondly, give us some tools in a co-investment context—innovation and tools underpinned by science—to be able to apply, and if we have those two, we back ourselves to reduce emissions over time.

That was the premise of the industry’s response to this issue. So I found it quite interesting when I looked at the language that surrounded the Government’s announcement that they had reached a historic first with the agricultural leadership of this country to price emissions in 2025. If you actually look at the responses from the various industry bodies, that was not included in their response to the public. What they were focused on was the ability to work with the Government around the sensible initiatives of Farm Environment Plans having the capacity to measure emissions, getting tools in place to be able to mitigate, and, over time, making the difference.

The Government, however, framed that up in the context of a world first of pricing emissions by 2025. That is the core, and it is included and enabled here in this legislation. That is the core difference of philosophy between that side and this side in terms of the journey that we need to go on in primary industries to reduce our emissions.

For a start, this side holds the view that the efforts of our farmers, the 23,000 of them around this country, deserve to be celebrated and acknowledged—for the work they have done over many, many years in reducing emissions. I see New Zealand First immediately shaking their heads because they know, typically, that my point here is accurate. They are putting a huge amount of effort into being able to reduce their environmental impact. Climate change is a part of that journey, and they understand the importance of being able to apply the best of their capacity to be able to reduce it over time.

That is what farmers are expecting in terms of this journey, but what the Government focuses on as a priority, and what is included here in the bill that we are debating tonight, is a framework that is yet to have flesh put around it—and I acknowledge the Minister for saying that we will get to see that through the select committee process—that frames up a complex tax arrangement to incentivise farmers to make the change.

On this side of the House, we see success in, firstly, acknowledging that we are the best in sustainable food production in the world, that that should be amplified, and it should be amplified through investment by Government in support of the industry, and the ability to measure emissions, and over time, manage them with tools—that is success. For this Government, success is having a piece of legislation that taxes farmers to ensure that they make that difference. We don’t think you need to. We actually believe that if you invest with farmers, give them the tools, align them with the obvious commercial imperatives to be able to respond, and to continue to be world leading in terms of emissions efficiency, that will drive the change.

The Government do not believe in that philosophy. They think change can only happen if you tax it. It is a punitive view on how to partner. It will not sustain itself. They don’t understand the realities of farming, they don’t understand the realities of our global supply chain relative to the rest of the world—and yet again, New Zealand First looks to the heavens. Well, when has New Zealand First gone over and had a conversation with a European farmer and said, “Let’s compare our systems. Let’s actually look at the efficiency of New Zealand versus the subsidisation of yours.” They do not—they absolutely do not. That is a core difference that we are calling out here tonight.

In this bill is a fundamental philosophy that change comes when you punitively tax individuals to make the difference. In our view, change will come and continue to progress—because let’s acknowledge the work the farmers have done already—when you partner in a genuinely collaborative way with your farmers, acknowledging the work that they have already done, being clear around the information and technology and capability gaps that exist, and have a plan around how to close those gaps, and give the industry the best chance to continue to lead in a world context. That is how you actually make change. This Government has a fundamentally different view in terms of how to incentivise that change in an agricultural context.

To conclude, with respect to agriculture and to the emissions trading scheme and the particular components that sit in this legislation, when it goes through the select committee I have a very high expectation that this committee will ask some pretty pointed questions of officials around what is the capacity for our farmers to be able to measure the carbon sequestration that occurs on their farm. What is the capacity for farmers to be able to measure their riparian strips, their shelter belt, and potentially their soil? There is absolutely no excuse for a weak Government response coming back saying it’s too hard. You cannot ask of farmers to lean in to the challenge of reducing their emissions and at the same time take off the table technology to apply to reduce their burden and the opportunity for them to truly capture and benefit from the carbon sequestration that occurs on their farms today. Anything less than that will be letting farmers down in a materially serious way. We will hold you to account because, as a Government, you have to listen to farmers’ expectations on these matters.

I look forward to hearing how the select committee progresses, and I will have every confidence that our National Party colleagues will ensure that the farmers’ perspectives are front of mind as we land the final version of this bill. Thank you.

Thank you, Mr Speaker. So the previous Government signed us up to the Paris Agreement, which was good. They did so, unfortunately, without having the framework in place to actually achieve the reductions that were required. So what this bill does is put in place that framework that will allow us not only to achieve our commitments under the Paris Agreement but also the carbon budgets and the targets under the zero carbon bill. But it also creates that ability to work in partnership with the farming community, agricultural community, to develop new pricing mechanisms for our agricultural emissions. And unlike the framing of the previous speaker, this is a true partnership. It’s working alongside the primary industries to develop that way forward.

So this is a substantive bill, 225 pages. I silently apologised to the trees as I hit print on my computer. But what I want to do is talk a little bit about some of this partnership with the agricultural sector before I move on to talk about what the bill will do in terms of allowing us to meet some of those emission budgets and targets under the zero carbon bill. What this does is create a new agreement with the agricultural sector to develop a new way of looking at agricultural emissions and looking at whether we can, indeed, price them on farm, which is critically important.

All the farmers that I know care about the environment—absolutely care about the environment. What they’ve been telling me is this is the way they want to go, on-farm carbon pricing, because what it allows them to do is all those investments they’re making in their farms at present—particularly looking around water, around just environmental plans—it allows that to be acknowledged and the work that they’re doing. So this is particularly important in making sure that we can develop those mechanisms for taking into account riparian strips, shelter belts, and on-farm carbon sequestration, so taking those into account in terms of on-farm accounting. It also, basically, puts in place a mechanism where we can look at our farm environmental plans, working out the detail on this, and thinking about how we can look at greenhouse gases at the same time as thinking about our plans for water quality.

So what the aim of this is is to look at farm-level pricing of livestock emissions and process a level pricing of obligations for fertiliser emissions from 2025, but also looking at starting reporting for livestock emissions at farm level from 2024, so putting in place that framework to make sure that this is working well. This is incredibly important because of the huge contribution that the primary industries make to our economy. But also taking into account that this is also incredibly important because just under 50 percent of our emissions are coming from agriculture. And so the work we do here is not only going to be significant for us as a country but it may well be significant on a global scale, developing up that way of looking at on-farm carbon pricing.

So what will happen, as people have already mentioned, is the Ministers of climate change and of agriculture will be required to report on progress in 2022, and basically having a look at the NZ emissions trading scheme (ETS) being the fall back option if the Climate Change Commission provides the advice that not enough progress is being made. But with the goodwill and the commitment of the primary sector out there, I know that there’s a real commitment to making sure that this works.

So while some of the detail of this hasn’t been worked out yet, we’ve already had an undertaking that that further information and detail will be provided to the select committee so we can look at this in the select committee process, because this is incredibly technical and a detailed bill—as I said, it’s over 220 pages. And so I’m really looking forward to the submissions that we’re going to be receiving from our agricultural sector and from others to talk about how we get this right.

But looking at some of the other key elements of this bill—because it’s also important that we’re meeting our targets under the zero carbon bill and also those emission budgets year on year. So one of the important things that this bill will do will enable the NZ ETS to be capped. What it does is introduces this decision-making framework that can restrict the overall supply of units into the scheme. Then what’s accompanying that is regulations that set the overall limit each year. But then they always have to be out for five years, so that provides certainty in the sector about what’s coming further forward. That not only provides that certainty for the sector but it’s also a key mechanism for looking at meeting our carbon emission budgets under the zero carbon bill.

So the other thing the bill does is it removes the current $25 fixed price option and it replaces that with a cost-containment reserve. So what happens there is if those prices start to rise, what can happen through the ETS auction is that the Government can release some more NZ units into the auction when things hit a particular level. So, basically, it allows the Government to look at managing supply of units in much more detail.

The bill also looks at phasing down our industrial allocations from 2021, because under the Act at the moment, a number of activities are either specified as 0.9 or 0.6. What this bill does is between 2021 and 2030 it allows for about a one percent reduction each year, and that has got the capacity to actually speed that up after 2030. But it also has mechanisms to make sure that the Climate Change Commission can then recommend that we go faster or slower because what we don’t want to do is end up in the situation where we get emission leakage, because if we end up having industry moving offshore, we may well, paradoxically, end up with higher emissions if they move to countries which, basically, don’t have the access to a lot of the things we have here like a lot of renewable capacity and generation in our electricity sector.

So, basically, what this bill does is not only create that framework for being able to meet our targets and our budgets under the zero carbon bill but it also allows us to start developing in partnership with the agricultural sector some on-farm pricing of emissions. But it also does another range of things, looking at strengthening compliance and transparency. It also introduces averaging accounting for forestry and also has the new permanent forestry activity in the ETS. So there’s a whole range of other things that this bill does, but it’s an incredibly important bill and is particularly significant for us as a country. I’m really looking forward to hearing those submissions during the select committee process, so I commend this bill to the House.

I move, That the Climate Change Response (Emissions Trading Reform) Amendment Bill be reported to the House by 2 April 2020 and that the committee have authority to meet at any time while the House is sitting (except during oral questions), during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House and outside the Wellington area, despite Standing Orders 191, 193, and 194(1)(b) and (c), and that the committee have authority to consider and, if it thinks fit, adopt amendments to the Climate Change Response Act 2002 relating to agriculture emissions pricing, despite Standing Order 292.

I understand that this is a debatable motion, so I wouldn’t mind just saying a little bit about why I’ve moved for unusual sitting hours. I have to point out that the report back date of 2 April 2020 is within the Standing Orders, but the reason I’m asking for, essentially, the unusual hours, which are debatable, is because the bill—as has been pointed out most eloquently by the Hon Nathan Guy when he lifted up the regulatory impact statements—is quite complex and quite technical and, I think, will take some getting through.

If I had the option, then we would take more time, but the issue is there are a number of things that are time-bound which this bill would give effect to when it passes into legislation. For example, we are setting up an auctioning system for units inside the reformed emissions trading scheme, which is due to start at the end of next year. In order to start auctioning at the end of next year, we need to have the regulations in place. In order to have the regulations in place, we need to have the legislation in place, and we also need to actually build, test, and roll out the auctioning platform. So for those reasons, I am asking for the unusual hours to be given permission of the House. Thank you, Mr Speaker.

I’d like to speak in opposition to the shortening of the select committee process. If climate change legislation is worth doing, then it’s worth doing well. We know from long and hard experience in this House that legislation that is made in a rushed manner ends up being bad legislation. There is a reason why we ask the public to submit and allow select committees to seek advice and deliberate over a period of time, and that is because often the public know things that we in this House do not. Often, the public are able to provide advice that actually helps us as members of Parliament make better laws than we would otherwise. I draw on a typically impassioned and very good speech made earlier in the House today by Chlöe Swarbrick where she lamented that politicians are unable to tackle long-term problems because of the fact that too often we are focused on short-term electoral cycles rather than what is good public policy for generations of New Zealanders to come.

In this instance, by reporting back, as the Minister in charge, James Shaw, has asked, on 2 April, well, it mightn’t seem so bad standing here on 5 November. It mightn’t seem that five months was too bad. But, in actual fact, this is a place—the only place in New Zealand I’m aware of—where the workers are allowed to vote for their own holidays. This coming summer, members of Parliament have elected to be in recess from 18 December—or perhaps 19 December if we sit the full term—all the way through to, if I recall correctly, 8 February.

💬 SPEAKER: Order! Order! The member will resume his seat. I’m going to draw the member back to the motion, which relates to the select committee and not the sitting of the House.

I don’t wish to depart from the motion, but I feel it is important to note that while there are nominally five months, the real time that Parliament will be able to operate, that it will be hearing submissions from the public, and that a select committee will be able to deliberate is going to be much shorter than it might appear from the report back date itself, because the sittings of the House are adjourned for quite a long period over the Christmas break.

💬 SPEAKER: Order! I’ve now warned the member a second time. We are debating when this should go to the select committee, for how long, and the conditions when the House is sitting. We are not debating how often the select committee will sit during the recess, and it can sit every day but Sunday and Christmas Day by way of the Standing Orders.

Well, Mr Speaker, I feel I’ve made that point, and I’ll say no more about it.

I think it’s clear that if we wish to do climate change policy and it’s worth doing, then it’s worth doing right, and I think it’s a mistake for the House to shorten the time taken making quality policy so that, as the member says, it can be ready in time for the trading scheme to be implemented one year earlier than it otherwise might have been. So, in conclusion, we could have the opportunity to follow due process and make better law. I think that if the House supports this motion, then it is making a mistake for the quality of law and the procedure of the House, and it would be much better if we stayed with those procedures, if we gave the full six months normally due for consultation by select committees on bills before they report back, and, if we were prepared to accept that perhaps—and sometimes things can be done faster than expected—there will be a one-year delay in implementing good legislation rather than legislating too fast and risking getting it wrong. Thank you, Mr Speaker.

I rise to speak against this motion of the select committee timings that have been outlined. The issue from our perspective is the similarity in the approach that is being proposed in this select committee timing regime to what we had in the previous select committee process around the zero carbon bill, which, from our perspective, and as we have spoken and mentioned today, was, we felt, unnecessarily truncated.

We think the risk is that we will not provide the opportunity for appropriate considered deliberation of what is, as the Minister said himself, a particularly technical and challenging piece of legislation. And the tendency to be able to meet the time frames will be to, I suspect, separate into a number of subcommittees to enable it to happen. The experience that we saw unfold through the select committee process on the zero carbon bill is you end up with too few MPs trying to grapple with particularly technical details of law and not giving the appropriate due consideration of the technical submissions that are before them. Thank you.