Climate Change Response (Auction Price) Amendment Bill

Thank you, Madam Speaker. The analogy for this bill to be likened somehow to the sale and purchase of a house at auction is not a bad place to start. But it doesn’t really reflect the complexity or the importance of this piece of legislation, or, indeed, the mistake that has been made and overlooked by Minister Hon James Shaw who usually is better than he has been on this bill. Because what we’re going to find out in a minute or two is that there has been a long, protracted, tangled web of incompetence around this particular piece of legislation that dates back now well over 12 months.

Minister Parker is correct in a way; no property owner taking a valuable asset, like a house, to auction would in their right mind, I think, not set a reserve that was confidential to them and, indeed, the auctioneer, and that’s fair and reasonable. So what we have here is a Government that failed to pick up on a mistake during the passing of the original and primary legislation, the principal legislation, and actually missed it. Or did they—or did they? Actually they knew. They knew all along about this potential error, this potential mistake, and there was dithering. There was dithering on behalf of the Minister, who for a period of time said “Oh no, no, no, actually, we don’t need to worry about it. The risk is low. Let’s not do anything.” Then there was a range of activity that said, oh, actually no, the fiscal risk to the Crown accounts is actually very significant, it runs into hundreds of millions of dollars, is the potential risk to the Crown accounts.

I’m grateful to the editor of none other than a very good publication called Carbon News, Adelia Hallett, who wrote back in October of last year—in October of last year she wrote—that “The Government’s surprising decision, reported by Carbon News earlier this month, to press ahead with the auctioning of carbon credits without a technical reserve in place to stop units being sold at below-market-prices opens the door for that very thing to happen.” So there was commentary amongst the media that follows carbon issues, they were aware of it, and so too was the Minister.

Then Adelia Hallett goes on to write in her article dated October of last year, “And the price tag for taxpayers could be in the multi-millions-of-dollars. The new system, which starts in March [2021], was supposed to include a technical reserve to stop units being sold [at] substantially below the prevailing price on the secondary market.” So Adelia Hallett knew that it was supposed to be included, and yet listening to the Minister tonight, it would be just a question of hearing “Nothing to see here. Everything’s calm. Everything’s smooth. Everything’s right.” We’ve got the first auction on 17 March, suddenly we have to pass this piece of amending legislation under urgency.

“The technical reserve”—the article goes on to say—“would have been the lowest price the Government was willing to take for units in any given auction.”, and that’s exactly as the Minister used almost 10 minutes to describe in very, very technical terms designed, I think, to probably confuse anybody that’s listening at this time of the night about the process of this piece of legislation.

So what we do is we go back to Cabinet papers, and there were a number of them, setting out the options, the risks, and making Cabinet aware of this loophole and the hole and the potential risk to the Crown accounts. Cabinet agreed with its economic development committee in a decision in March last year, nearly 12 months ago—in March last year—that a technical reserve price must be set for each auction relative to the market price of New Zealand units (NZUs) using a prescribed methodology that is kept confidential. That was a Cabinet committee decision made in March last year. Can’t say, Minister, that you didn’t know, that you weren’t aware, that you didn’t bring it to the attention of colleagues—it’s all there in the Cabinet papers.

But then there was a more recent paper to the Business Committee in which Minister Shaw said that the auctions will begin without a technical reserve in place, and the second paragraph of that Cabinet paper says—and remember, this is March 2020 last year—that a technical reserve price to stop NZUs being sold at a price significantly below the prevailing secondary market would help ensure that the primary auction does not significantly influence prices in the secondary market.

So Cabinet knew, Cabinet was advised, and what happened? The Minister said in that very document, in the next paragraph—he said, before going on to say that auctioning would start without one, “However, I recommend the proposed regulations be set without providing … a technical reserve price at this time.”

Now, that’s not the impression that was given by the Minister in his speech to this House this evening. The speech that the Minister gave to this House this evening implied that everything was smooth, calm, and this was just a technical bill that just needed some kind of change to tighten it up. Actually, the Minister knew 12 months ago, and, what’s more, he was advising his colleagues around the Cabinet table 12 months ago of this loophole. He gave advice to his colleagues then that no reserve would be needed.

So the questions that my colleague Stuart Smith asks are absolutely right: why the change? Why the change in demeanour, why the need now? Why did Minister Shaw change his mind, and what were the factors that led him to change his mind? Back in October last year, the price was about $35 that NZUs were being traded at, and that meant that there could have been a potential risk to the Crown accounts back then of something like $71 million per auction, or a total of $285 million a year. That’s why the Minister is bringing this legislation to the House under urgency, because finally, at long last, some sense was prevailed upon him to bring it to the House now under urgency.

How good is it to be part of a Government and part of a country that is grasping the nettle of climate change. Over the last year, this House has actually worked together very collaboratively to set New Zealand on a path to tackle the most significant challenge of our times. Under the leadership of the Minister, James Shaw, who I acknowledge, we’ve reformed the emissions trading scheme (ETS) to make sure that it does have a cap that helps us to leverage down carbon emissions.

We’ve set up a world-leading independent climate commission, which put forward its interim report—its draft report—at the beginning of this year that encompasses all sectors and gives New Zealand a road map to reduce our emissions to net zero by 2050.

If I can be sector specific for just a moment, we’ve had major reforms announced to reduce our transport emissions over the last month by bringing New Zealanders a clean car standard to clean up our fleet, biofuels into the fleet, and making sure that we electrify our public buses so that we bring down emissions in that sector, the second most polluting sector in our country at the moment.

In early March, we will have the first ETS auctions stemming out of that reform work that happened last year. What I think everyone across the sector—and, actually, it would appear so far everyone across the House—agrees is that having a confidential reserve price is an essential part of ensuring the robustness and integrity of that system. The previous speaker, the Hon Scott Simpson, tried to construct something of a conspiracy theory about how we’ve got to where we’ve gotten, but the reality is that everyone agrees that we need this change to make sure that that auction system works appropriately and the ETS system works appropriately.

What we say in this House is that in the face of a climate emergency, it’s time to get on with the job. Let’s pass this piece of legislation and carry on with this important work to reduce our emissions and meet our obligations to future generations. Thank you, Madam Speaker.

Thank you very much, and a great analysis from the Minister of Transport on the huge strides being made in climate change. So far, from the other side of the House, all we’ve heard is that this is a great bill and perhaps it would have been nice to capture it the first time around. Well, I sat on that select committee, and it was one of the most complex pieces of legislation that I’ve had the pleasure of going through. And whilst we didn’t catch it first time, there is absolutely no excuse to not tidy up now so that we have an auction system which is robust and has integrity, isn’t open to manipulation, and that the coffers of the Government are properly looked after. I commend this bill to the House.

Thank you so much, Madam Speaker, for your patience tonight. ACT opposes this bill, but, unlike my colleagues here, we are not pleased to be here debating this arcane and complex piece of legislation, under urgency no less. ACT opposes this bill for the same reason we opposed the 2020 regulations: because it prohibits purchasing credits on an open market, which is how markets in the real world actually work, and it’s a needless complication to an already complicated system, devised by the climate Minister and the Government. We heard how complicated it was. It sounded pretty complicated.

That Minister’s explanation confused most market analysts, and maybe that is what is intended, but it won’t help New Zealand reach a target of net zero emissions by 2050, either, which is what New Zealand signed up to in Paris. It will create uncertainty and discourage New Zealand businesses to innovate. That’s the fastest way to solve the problem about how to mitigate our emissions.

ACT’s position is this: New Zealand business should have the ability to purchase high-quality credits from any willing seller, and New Zealand business should not be subject to the invisible hand of a Government Minister who will have the power to set a confidential reserve price at an auction, especially from a Government led by a Prime Minister who once declared that she would lead the most open and transparent Government ever.

This bill entrenches a damaging culture, a culture that pervades this Government’s lawmaking—this culture of urgency and once-over-lightly and “She’ll be right”. Well, it’s not right. This bill continues to politicise the New Zealand business environment at a time when business needs certainty and a steady environment from which to grow out of COVID and all of the economic and social issues that that has caused.

Now, the Minister already controls the supply of carbon credits to this closed market that the Government created and, therefore, has the power to influence emissions up or down. So why doesn’t the Minister simply reduce the supply of credits rather than hiding behind the veil of a rigged market? Well, that’s because this Government has shown a willingness to race far ahead of our trading partners by setting unrealistic time frames for New Zealand to reduce its absolute emissions.

The Minister even said recently that those unrealistic targets set at Paris are not enough to satisfy the Government’s agenda and that New Zealand businesses should expect their assets to be stranded—I repeat, “their assets to be stranded”—and jobs to be lost in order to meet the Minister’s targets. You can imagine what those targets will do to communities up and down New Zealand—like South Auckland and the thousands of workers at the Glenbrook steel mill and all of those supporting industries, and the communities that they live in.

In the central North Island in the Bay of Plenty, where pulp and paper are made and from there exported to the world, those communities where those high-paying jobs are essential for the health and wellbeing of the people who live there. In Northland, cement manufacturing at Golden Bay will be put at risk, and in Taranaki, already suffering from this Government’s flawed policy agenda, where fertiliser and other raw materials are made—that’s where we will see the impact of this kind of flawed policy rushed through under urgency. Now, all of these materials can be imported from countries which have no intention of matching New Zealand’s unrealistic time frames, and based on this Government’s trajectory it looks like the loss of those industries will come sooner rather than later.

So the Minister must believe that the market system won’t be enough, and that’s why we need these extra controls allowed for in the bill—this rigged market proposed by the Minister. Now, we’ve seen other examples about how markets work all the time. We’ve seen the housing market. There’s an awful lack of land supply; therefore, the price of land has gone up far beyond what we could imagine. So we know a market price encourages changes in behaviour. We’ve seen those changes in behaviour. We’ve seen intensity; we’ve seen high-rises going up; we’ve seen new dwellings being built which don’t even have car parks. They don’t need car parks because we know that—

💬 David Seymour: The beauty of the market.

Oh! There’s behaviour changes coming from price signals from the market. So we understand that the Government’s climate change interventions are designed to change behaviours.

Now, ACT’s opposition to the original bill and to this amendment were well founded. These regulations that the bill seeks to amend were flawed in the first place, and this amendment only complicates things. ACT opposed Government’s meddling in markets and creating more uncertainty for business at this time, when business needs certainty more than ever as we slowly recover from the effects of the COVID-19 pandemic on our economy and society.

We support an ETS, an emissions trading scheme, which gives New Zealand business options—options to mitigate the effects of carbon dioxide emissions on the climate at the lowest possible cost to their businesses and to society as a whole. This regulation does not do that. ACT supports an ETS which allows for trade-offs between businesses which emit carbon dioxide as part of their process, like a steel mill or a power station, and a willing seller, those which take up carbon dioxide as part of their business activity, like growing trees or some other capture and storage technology, because ACT trusts New Zealand scientists and engineers to work out how to mitigate carbon dioxide.

This debate is interrupted. The Government has indicated to me that it does not wish to continue in urgency.

Point of order, Madam Speaker. You may not be aware, but the Standing Orders Committee has changed the Standing Orders so that a debate can either end five minutes early or continue for an additional five minutes, so that a member does not have his speech interrupted as you’ve just interrupted this member’s speech.

The Speaker said at the end of last year that it would be helpful for all members to read the Standing Orders Committee report, and I think it’s really helpful if we can actually let the member finish his speech. I ask that you allow that to happen.

Speaking to the point of order, if the member had have read the Standing Orders Committee’s report he would have understood that those provisions do apply but they are at the discretion of the Speaker.

That was actually the point I was about to make, David Seymour, that the decision is at the Speaker’s discretion. So, if I may, the Government has indicated to me that it does not wish to continue in urgency. Therefore this debate is interrupted and is set down for resumption next sitting day. The House stands adjourned until 2 p.m. tomorrow.

Debate interrupted.

The House adjourned at 10.01 p.m.