Climate Change Response (Auction Price) Amendment Bill

I move, That the Climate Change Response (Auction Price) Amendment Bill be reported to the House by 4 March 2021, and that the committee have authority to meet at any time while the House is sitting, except during oral questions; during an evening on a day on which there has been a sitting of the House; on a Friday in a week in which there has been a sitting of the House; and outside the Wellington area, despite Standing Orders 193, 195, and 196(1)(b) and (c).

As I mentioned last night, the trade and purchase of emissions units in a secondary market is a well-established practice in a great many emissions trading schemes around the world. They provide a means for auction participants to sell surplus units or to purchase any shortfall, and, as such, create a powerful incentive for organisations to reduce emissions. The reason that this bill must proceed quickly is so that a confidential reserve price can be put in place before the emissions trading scheme (ETS) units are auctioned for the first time on 17 March. This is necessary not only to build trust and integrity in the auctioning process, but to put a stable price on emissions as a means to drive investment into clean technologies.

Absent these changes, we risk disrupting the emissions trading scheme’s secondary market and hindering the ability of participants to manage compliance costs and long-term investment decisions. We would also risk exposing the Crown to a fiscal cost if units are sold for less than the prevailing secondary market price. To create a stable and credible framework for the sale and purchase of New Zealand units, both the primary and secondary markets need to operate in a way that is complementary, supporting stability, liquidity, price discovery, and transparency. This bill, in the introduction of a confidential reserve price below which no units can be sold at auction, will ensure that.

This House has already agreed that the introduction of a confidential reserve price is necessary to the functioning of auctions under the emissions trading scheme. This bill simply enacts that intent. These changes were first signalled to market participants more than seven weeks ago. This was to allow market participants sufficient time to plan ahead of the first auction on 17 March. Even though it has been clear that these changes are coming, it is important that ETS participants and other interested New Zealanders are given the opportunity to have their say through a formal parliamentary process. That is why I am proposing that the select committee do consider the bill, albeit over a much shorter time period than normal. Because the setting of the confidential reserve price is not sufficiently complex or contentious, I have no doubt that the select committee can meet the time frames that I invite the House to support in this motion. Today I respectfully ask that the Environment Committee consider the bill thoroughly and report back to the House by 4 March.

Thank you very much, Madam Speaker, and I’d like to acknowledge the Minister, the Hon James Shaw, who—I did tell the House last night that I didn’t receive a copy of the bill in advance. He explained there was a bit of a mishap and I acknowledge that so thank you for coming and talking to me about that, James.

Look, one of the issues I have with this is actually we’re talking about this auction price and the confidential reserve. We acknowledge that there may well be a need for that. We really want the select committee to tease that out. I’m not certain we need it. I don’t know. I want to find out—and my colleague Andrew Bayly, who knows a lot more about bond markets than I do, explained the need for a floor price. My understanding was there is a floor price. This is a confidential reserve that goes between the floor price and the cap upper limit and at the point at which the other reserve units come into the market to even that price out. Now, I don’t know what’s happened there, whether this—we’ll find out in the select committee and I’m sure my colleagues on the Environment Committee are looking forward to hearing that. But we found out last night from the Hon Scott Simpson that back in March of last year, like a year ago, there was a paper that went to a Cabinet committee and considered by that committee, which said—

💬 Dr Duncan Webb: Referral motion.

This is all to do with the referral, actually—that said quite clearly that this was a low risk. They identified the issue. They said it was a low risk. So my submission to you, Mr Shaw, is that actually if it’s a low risk, missing one quarterly—or having the auction, but without the confidential reserve price is not an issue. It’s one—one—auction. That’s it.

I think that we’ve got to a point. Clearly, last year they must have had some other advice where panic set in, and I don’t think panic is a good way to come up with good legislation. We are now in a situation where this is being rushed through the House and then rushed through select committee. How are we going to get good law out of this? I don’t know. I don’t think we will actually. How do we know we’re not missing something? We heard from Mr Bayly what happens in the bond markets. We want to know what happens in other commodity markets as well.

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! Order! The referral motion is a very tight debate. I’d ask the member to stick to, essentially, the referral motion. Thank you.

Thank you, I am actually making that point. This is a very short period for us to get the right submissions—and from people such as Fonterra who operate in this market or this type of market. We would then find out whether we are going down the right track or not. Unfortunately, what we are going to be faced with is a very short time for them to put their submissions together. Then the select committee has to hear it and consider it and seek advice on that evidence that we’ve heard. I don’t think we’re going to have enough time. One auction being missed is not going to be the end of the world. It doesn’t expose us overly because, in fact, the advice to Cabinet was that it was a very small risk. What’s changed? I don’t know. Perhaps the Minister could have told us that. We didn’t hear that and there’s been very limited actual contributions from the other side. Between us, the National Party, and ACT—that’s been the only real contributions of any significance. And this is yet a very, very important motion or bill that we are talking about here and has far-reaching consequences. We acknowledge that the emissions trading scheme is the right mechanism to lower emissions—and I know it might be quite a shock going from Waiheke to Taieri, but the weather is different in those sorts of places, and it can be quite a shock to people that don’t come from down that way what happens in those areas. But we shouldn’t—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order!

I’m referring—

💬 Hon Peeni Henare: The member is far more experienced than this.

It’s all a matter of opinion. I think it was quite valid, actually.

💬 Hon Louise Upston: Absolutely, 4 March. You guys serious—4 March?

The 4th of March is absolutely right and then a 15 March commencement date for a 17 March auction. It’s outrageous when the risk is so low, when the advice came from their own officials and the Cabinet committee accepted that in March last year. We know that that’s the case. If the Minister could stand up and tell us that’s not, that would be great. But I know that that is the case.

When are we going to hear a substantive argument from the other side about why we should rush this through, rush a select committee process? These things have been set down in Parliament for a very good reason. These time frames are not something that are made up where we laze our way through all these things, take our time. We take our time because we want to get it right, and had time been taken, perhaps, in the first instance, we wouldn’t be here fixing up a problem, a problem that’s pretty obvious to anyone who operates in these types of markets. Mr Bayly came in here very quickly and got his head around this very, very quickly—so someone who operates in that area. Why didn’t the Government, and particularly the Minister, get on top of this at that time? It is a mess. It is a mistake, and it’s wasting Parliament’s time and pushing select committees to make decisions that may not be right. Last night, we had a bill in here—I suppose we should be grateful. We should be grateful that we’ve got more than five days, which is what’s happened with the local government bill last night. I mean, that’s outrageous. And so perhaps three weeks is generous—I don’t know, maybe to this Government, but it isn’t to parliamentary democracies around the world. This is outrageous. I think it’s something that the Government will live to regret and, hopefully, the markets will actually react to this properly because who’s going to have confidence we’ve actually got it right? We don’t have the confidence that this is right and so we oppose the referral motion. Thank you.

I move, That the question be now put.

Thank you, Madam Speaker. Beware the ides of March—beware the Ides of March. Minister Shaw smiles and giggles a bit, but he needs to beware the Ides of March. And the reason is because it was in March last year that the die was cast in relation to March this year. The auction dates were set months and months ago. The first auction date will be 17 March, just after the Ides of March. This bill needs to be in place by 15 March this year, and the report-back date is 4  March. So March has a lot of marching to do.

Fortunately, fortunately for the Minister, the Environment Committee, which he’s referring this bill to for a very truncated, very short scrutiny process, doesn’t have a very big workload. There was a time in this Parliament when the Environment Committee used to be the hardest-working committee in the Parliament.

💬 Erica Stanford: The good old days.

In the good old days—in the good old days! But in this Government’s eyes, environmental matters aren’t important, and the workload on that committee is light, to say the least, so I don’t doubt that the committee will be able to provide some scrutiny, but it won’t be a fulsome scrutiny. It won’t be the kind of scrutiny that is deserving of a piece of legislation as important as this, and it won’t be the kind of scrutiny that is worthy of the seriousness of the financial risk to the Crown accounts that this bill poses.

I want to refer to March last year, because that’s really important in setting the scene for why this is now being rushed through the Parliament without full and due scrutiny at short notice, not giving submitters really an opportunity to give it full consideration. That’s because back in March of last year, the Minister was saying “It’s not important. The risk is low. It’s not necessary.” In fact, he took a Cabinet paper back in March last year to a Cabinet committee, where the risk was highlighted—the risk was highlighted—and the Cabinet paper made it clear. It said that the technical reserve price can begin without a technical reserve in place. That’s what Minister Shaw said in the Cabinet paper that he took to the Cabinet committee. He said the auctions will begin without a technical reserve in place.

And then further on in that paper, back in March of last year, Minister Shaw went on—there was a piece that was redacted, but after the redacted piece it says in the very next paragraph, “Minister Shaw explained that a technical reserve …” before going on to say that the auctioning would start without one. So he’s made it clear that his view amongst his Cabinet colleagues was that no reserve was required. But then in a further paragraph, and this shows how fluid and how mixed up the Minister’s thinking was back in March of last year—he then went on to say, “However, I recommend the proposed regulations be set without providing for a technical reserve price at this time.” He acknowledged that there was a risk without the technical reserve price, but he said officials, and this is a quote from the Cabinet paper, “Officials advised me that this risk is low and that the options are likely to still clear in line with recent secondary market prices.” He says, “Officials will be monitoring the first auction in March 2021 in order to develop advice for how to fix the technical reserve price in the next amendment bill to the Act.”

So what’s changed? What changed in that period of time between March of last year and late February this year and now the Ides of March that make it so important? Well, I suspect that what’s happened—that suddenly the Minister has had a road to Damascus revelation and a conversion on the importance of this—is that probably Treasury and/or the Minister of Finance have said, “Hey, look, Mr Shaw. There is some serious risk here to the Crown accounts. You better tidy it up, better tidy it up, and get it done soon and get it done pronto.”, and get it done within that narrow time frame that the select committee is now being asked to consider the legislation.

That’s not really a good process and, sadly, here we are back in the first week of the calendar year of this Parliament and due process is, again, being truncated, thrown out the door. The sorts of things that the Green Party used to rail against are being now championed by a Minister who I thought had probably better principles and was ready to stick more to them. Certainly that was his view when he was in Opposition, and it seems now that that is no longer the case. He’s quite happy to have a select committee process that is short, inadequate, and not going to be able to provide the full, proper scrutiny on such an important matter to taxpayers and to this Parliament.

So we are going to support to first reading, as we have done, the general thrust of the legislation. But as my colleague Stuart Smith has made very clear, we are not so sure that this needs to be done so quickly. The Minister himself wasn’t sure 12 months ago that it needed to be done quickly, and I want to know what’s changed. Well, something has changed. The Minister hasn’t made it clear as to what has changed to convince him that his thinking from 12 months ago should be diametrically reversed to this period of time, in less than 12 short months, to come to a completely contrary view.

So we will be opposing the motion that’s currently before the House, because we don’t think it provides adequate time. The Minister said that traders had been tipped off already that this proposal was coming, that they’ve had a nod and a wink from the Government that this is coming. Previously, that Minister and his colleagues in the Government would have been very, very unhappy with sending market signals of that sort, in a nod and a wink. And it seems now that that’s the way that legislation is managed through this Parliament—the people’s Parliament. It’s managed in a way that works on nods and winks and tip-offs from the Minister.

If you’re in the circle, that’s fine. You get time and a chance to prepare in advance your submission to a shortened select committee process. But if you’re not in that circle, if your organisation—if you as a trader are not part of that privileged little elite group that has the confidence to be given nods and winks and tip-offs from the Minister and his Government, then too bad, hard luck. You get the shortened version of time, the truncated version, and you have to do something that others have had plenty of time to think about, to prepare, to give consideration to, to write submissions, to get advice—legal, commercial, financial or otherwise—but some submitters don’t have that opportunity, and I don’t think that’s right.

I don’t think that’s good policy, I don’t think that’s good practice, and it’s certainly not good governance on a matter as important as this. I would have thought that a Government that once prided itself on being open and transparent would have done a better job. I think that those principles of openness and transparency, well, they went out the door very, very quickly. And now we find that the transformation has turned into something called foundation, or something along those lines, and the woolly sort of thinking and the waffle is now almost at peak waffle.

There was a time when this Government and the Green Party used to talk a lot about peak things. They don’t talk about that very often now, except peak short periods of time for the consideration of an important bill that is a fundamental part of the new emissions trading scheme and the carbon trading system. And we are being asked as a Parliament, as a select committee, to give it a very short consideration, with some submitters having been given a tip-off, a nod and a wink by the Minister weeks in advance that this was coming and others not.

That’s not good Government. That’s not good process. It’s very, very poor. And I think that this House, that members in this House, even the ones that come via Waiheke, deserve something better than that. They deserve something better than simply to be given some talking notes from the Labour Party research unit and then sent down to the House to just read those notes, read the bullet points, without actually understanding what it’s all about. I don’t know how things operate on Waiheke. Waiheke’s close to my Coromandel electorate, but it’s not part of my electorate. But on Waiheke, I’m sure that even the good people of Waiheke will be very unhappy with this process, and they will want to see a full Government process, and they’ll feel short-changed, as do we on this side of the House.

Thank you, Madam Speaker. The ACT Party opposes referring this to select committee, and under urgency. This bill was introduced due to mistakes—mistakes that clearly were well-signalled by the advisers to the Minister of Climate Change and to Government.

Despite the assertion that the select committee doesn’t have a full programme at the moment, it’s still a waste of Parliament’s and the select committee’s time. It’s unacceptable. The select committee will be thinking about looming Resource Management Act reforms and other business, like looking closely into the very complex nature of Crown pastoral leases and the people that that affects. This is a distraction and it’s unnecessary, and the reason it’s unnecessary is because the emissions trading scheme is a market and most markets I’ve been to, if you go and buy your fruit and vegetables, or even if you go to the supermarket, don’t require the Government to tell you what the minimum price is, what the maximum price is, and what the secret price is. I’ve never been to a market like that, but my learned colleague who taught, at Auckland University, for many years taxation law who also sits on the select committee may be able to enlighten me about the kind of markets that she’s experienced which have those type of controls. I’m not familiar with them, and I don’t think it’s worth wasting the select committee’s time on that.

But the Minister who’s left the Chamber because, I understand—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! The member will resume his seat. The member must not refer to the absence of another member.

Thank you, Madam Speaker, for clarifying that. But it is difficult to hear home truths, and when you’re between a rock and a hard place I understand that it must be difficult to bring this type of legislation under urgency to the House, essentially asking forgiveness on one hand and asking permission on the other: “Please can we take it to select committee for another go at this thing that we didn’t get right?” And the reason that the legislation that we are amending is so flawed is because it addresses a problem that is entirely of the Government’s making. There are businesses in New Zealand that are exposed to international markets. They produce things here, they do very well, they minimise their emissions here in New Zealand, and they export them to other countries which probably don’t have the same level of environmental controls that we do. So it’s very important that New Zealand continues to have those businesses here to support jobs and communities. But the issue with the emissions trading scheme, as it’s been set up by this Government, is that in order to preserve those export-exposed businesses and those import-exposed businesses which make things like cement and steel here in New Zealand, and to protect them from the risk that a high carbon price, which is the thing that this Government has said it wants to achieve, to protect those businesses they need to drop a whole lot of carbon credits on to the market. But, of course, as those familiar with markets will know, if you suddenly release a massive supply of a commodity on to the market you’ll tank the price, and that’s why the market that this Government has set up is rigged and that’s why they have proposed to amend it in this way.

New Zealand is looking at a coming storm of legislation to deal with climate change, and the ACT Party believes that most of that legislation, and most of the House’s time in debating it and select committee’s time, will be wasted because those organisations, businesses, and communities which are able to actually transform our economy and decarbonise it have been ignored. I understand there’s been no survey of, for example, the investments that existing electricity generators are intending to make in renewables. None of that has been taken into account when bringing this amendment and the legislation it seeks to reform to the House. It’s almost as if the Government is happy to exist in a vacuum of selective information because that helps them avoid having to have the honest conversation with New Zealand businesses and communities about costs of the reform package that they’ve proposed to address the real risks of climate change, rather than letting the businesses and communities which are affected and most exposed tell us what the important changes are—

💬 Dr Duncan Webb: Point of order, Madam Speaker. I’m reluctant to do it to a newer member, ma’am, but I’m yet to hear a reference to the motion which is on the table. The previous two speakers were bad enough, but the substance of the bill is not the matter of the debate.

ASSISTANT SPEAKER (Hon Jacqui Dean): Thank you very much, thank you. The member is a new member, just as I am a new Speaker; however, it is a requirement for speaking to a referral motion to stick very much to the motion itself. There is a narrow debate.

Thank you, Madam Speaker, for clarifying that, and thank you also to the patience that those members on the other side of the House have shown me this evening, I do appreciate it.

Because there is nothing more important than making sure select committees have the opportunity to debate and consider good law. The ACT Party opposes referring this to select committee because we believe it’s already flawed legislation, it can’t be fixed, and it should be ditched. That’s why we oppose it, Madam Speaker.

I move, That the question be now put.