Climate Change Response (Auction Price) Amendment Bill

I move, That the Climate Change Response (Auction Price) Amendment Bill be now read a third time.

I’d like to start by thanking the Environment Committee for considering this bill over a shorter period of time than normal. When referring the bill to the committee at the close of the first reading, I said that the shorter turn-round time was necessary 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. By meeting this shorter time frame, the select committee played a very important role in building trust and integrity in the auctioning process, and for that I would like to thank them. I’d also like to thank those who took the time to submit their views on the bill, as well as the officials, both at the select committee and the Ministry for the Environment, who supported members in their consideration of what is, I acknowledge, a technical and complex piece of legislation. Finally, I’d like to thank members across the House for their contributions so far.

We know from scientific evidence that to have any chance of limiting global warming to 1.5 degrees Celsius, we must cut global emissions by at least 45 percent on 2010 levels by the year 2030. Staying below that 1.5 degree threshold is what the world’s leading climate scientists have said is the best chance that we have of avoiding climate crisis. It has been three years since climate scientists told us that. So here we are, three years further down the road, no longer with 12 years to cut emissions at the level required but nine years. And it’s not like the task is getting any smaller.

Last week, the United Nations Framework Convention on Climate Change, the umbrella treaty through which the Paris Agreement was negotiated, published its first assessment of country’s pledges to cut greenhouse gas emissions in the next decade. It showed that, right now, the world is on track only for a 1 percent cut in emissions by 2030—a fraction of the effort that is required in order to avoid a climate crisis. If things stay as they are, the planet our children will inherit from us will be much less stable. The increased frequency and magnitude of extreme weather events will pose an ever-present risk to homes and to livelihoods, to food production and to fresh water, and to precious ecosystems.

So to have any chance of avoiding these worst impacts of climate change, we have to dramatically accelerate action. At the very least, we need to get to the point where clean, climate-friendly technologies are more cost-effective than those that for so long have locked us into high emissions pathways. One of the best ways that we can do that is by ensuring that the price of pollution in Aotearoa New Zealand is consistent in meeting our obligations under the Paris Agreement and New Zealand’s own emissions reduction targets. Introducing a confidential reserve price to auctions in the New Zealand emissions trading scheme will help with that. This bill provides for a simple mechanism that will stabilise prices and improve the performance of the ETS, ensuring that it can play its part in building a low-carbon future for Aotearoa New Zealand.

Last term, the Government put in place the foundations for long-term, meaningful climate action in New Zealand. Reform of the emissions trading scheme was a key part of this. Having inherited a system that was not delivering on its primary purpose, namely to incentivise emissions reductions, we turned the ETS into one of our most effective tools that we have for reducing emissions. A series of rule changes were made that will, over time, incentivise New Zealand’s biggest polluters to invest in the transition to a clean, climate-friendly economy. Primary amongst these was the introduction of a cap on the total emissions allowed within the emissions trading scheme—a cap that is pegged to both our domestic and our international emissions reductions targets. To put it simply: the total emissions permitted within the ETS now has to be in line with our obligations under the Paris Agreement and the zero carbon Act. This is a significant change that will ensure that every part of the New Zealand economy plays its part in helping us to bend the curve emissions downwards—something that has never happened before in Aotearoa.

The cap also provides much greater certainty about future emissions within the ETS and will enable Governments to issue a supply of emissions units consistent with the climate change targets that we have put in place. Having provided this certainty, we can then ask the question of how best to allocate units within the ETS. There are typically two ways of allocating units: auction them or give them away for free. What we see most often in schemes around the world is some combination of the two, and that is what we now have here in Aotearoa New Zealand.

Auctioning is one of the most transparent methods for allocating ETS units and puts into practice the principle that the polluter should pay for their emissions. It is a complex system, but the premise is really quite simple: a proportion of units consistent with the cap and the number of free allowances available is allocated for auction. These are then sold on a specific date to emitters through a single round, sealed-bid auction, which then provides for an initial price of a unit. Once allocated this way, the buying and selling of units between emitters and other intermediaries can then take place on what is known as the secondary market.

Such trading is a well-established practice in a great many emissions trading schemes around the world. Secondary markets provide a means for auction participants to sell units or to purchase any shortfall and, as such, create a powerful incentive for organisations to reduce their emissions. But to do this, participants and other intermediaries trading in ETS units need to have the confidence that the price that they are paying and are basing their investment decisions on will remain stable. To create a stable and credible framework for the sale and purchase of New Zealand units, both the primary and the secondary markets need to operate in a way that is complementary, supporting stability, liquidity, price discovery, and transparency. This bill and the introduction of a confidential reserve price, below which no units can be sold at auction, will ensure that.

When the Climate Change Commission published its draft advice a few weeks ago, I said that I was more confident than I had ever been that a strong, inclusive, and climate-friendly economy that supports our recovery from COVID-19, creates new jobs, and encourages innovation was within reach. The institutional and legal framework that we put in place last term with unanimous support across the House laid the foundations for change at the last possible moment before the window of opportunity closes forever. The reforms also sent a critical message to the market place: that the future was low-carbon, and businesses are responding.

Over the course of the last three years, I have seen examples of the sort of transformation that we need to take hold in many businesses around the country. I’ve met with business leaders and with innovators who are on the right path but just need policy certainty in order to continue making the right investments. Because of the many small but necessary decisions that businesses all over Aotearoa are taking every single day, I do not believe that the progress that we have made or can make will be reversed. The question then is not whether we will transition to a low-carbon economy but whether we can do it quickly enough; whether we can make the transition in time to cut emissions in line with what the science requires. Essentially, what we are doing here today is providing an answer to the question that says we can change, that we can do things differently, and avoid the worst impacts of the climate crisis and build a zero-carbon world that meets the needs of every New Zealander.

I acknowledge that this is a complex and technical piece of legislation. I’m sure that many New Zealanders will not be sat at home right now watching our progress this evening—not discussing a confidential reserve price over the dinner table. But victories of formal change, such as the passing of world-leading climate laws like the zero carbon Act or reforming the emissions trading scheme, must always be followed by detailed change. Even though it may not be noticed, it is no less important. With that, I would like to thank the members for their contributions today and over the preceding weeks. Nō reira, tēnā koutou, tēnā koutou, tēnā tātou katoa.

The question is that the motion be agreed to.

Thank you, Mr Speaker, and I would like to thank Minister James Shaw for his fulsome answers that he gave during the committee stage. It is helpful when we have the cooperation of a Minister who doesn’t sit there like a laughing clown and does nothing. He actually answers the questions in a full manner, and I think all due respect to you for that, Minister.

However, it is a great shame that we have arrived here tonight in what is a departure from what the tradition has been in this Parliament around climate change legislation, in that we now are departing from having a cross-Parliament agreement on such matters. The Minister talked about the market needing confidence in the process. Well, the Parliament needs confidence in the process, and, unfortunately, the failure to support my amendment to have the Minister have to consult with the leaders of the non-governing parties does not ensure confidence of this House in that process. It’s essential that we do have that, and it’s probably more important, actually, than the market having confidence in the process, because we are the people that actually have to answer to our constituents for this. As my colleague the Hon Scott Simpson said earlier in the evening in the debate, Governments are temporary. How temporary they are is the only thing we’re uncertain of, although we’re pretty certain there’s less than a couple of years to—

💬 Hon Scott Simpson: This one’s very temporary.

It’s very temporary—precisely. So to have this important legislation endure through those temporary Governments, it’s essential we have the confidence of the House. Unfortunately, we cannot support this through third reading. I think it’s outrageous. That very simple amendment would have given confidence not only to the National Party—the ACT members have also spoken in favour of it. This is not a big ask. It makes no imposition to the bill, and it really comes down, I think, to the advice that you’ve had, Minister. I think it’s quite poor, and I think that it really has trampled on that long-held principle that we, across the House, support such legislation. So it’s very disappointing.

The Minister asked about electricity markets and the emissions trading scheme (ETS) auction. He drew a parallel between them and asked why should the leaders of non-governing parties have a say on the ETS auction price, and he said they were the same. Well, there’s a very clear difference: the electricity market rules set the amount of profit that buyers in that market can make. This confidential reserve price sets the limit below which prices cannot go, and it raises revenue directly for the Government. They’re quite different. Perhaps the officials hadn’t thought of that, and if they haven’t, shame on them. I realise you’ve got a lot on your plate, Minister, but that is actually a pretty simple concept.

You talked a lot about the ETS. That is a marvellous mechanism, and I think that’s what we all support here. We want it to operate properly, and there was your example that you gave about not wasting opportunities to lower emissions and utilising the best signal to do that. But we’ve seen all around the world crazy policies that cost a lot, and I think the best example is the barrow bikes in Germany. Barrow bikes are a pushbike-type thing with a barrow on the front of it. People can cart their supplies from the shops on their bike, and the German cities thought it was a great idea to subsidise these barrow bikes. They abated a total of 7 tonnes at a cost of €20,000 a tonne. That is an example of a well-meaning policy attempting to lower emissions and, in fact, all it does is cost a lot of money.

I think what the problem we have here now is we’re getting mixed signals here with this ETS. We’re now going into a confidential reserve price. We need to know that this auction is going to work properly. We need to know that we can have confidence in that reserve price, and without our leader and the leaders of other non-governing parties knowing that, we don’t have the confidence that we would otherwise have, and I think that’s really important when we’ve got such a complex issue as the ETS.

As I mentioned earlier, I spoke to a group on the weekend who are very engaged in this issue. They are not newbies to it, and they had a pretty low understanding of how the ETS works. I think we have to be certain and clear in our messages. Everybody doesn’t need to know the intricate details of how the ETS works. They need to have a bit of an idea, but they also need to know that there is no smoke and mirrors going on in behind the scenes when these auctions are occurring.

I accept that there 120 million units surplus out there, and we will have to work through those. The chance of an auction failing: although we disagree on terms here, having an auction failing to clear and those units rolling over to the next auction—of course, if it’s the last auction of the year, those units then disappear. They don’t go on to the next one in the following year, so there are actual consequences if auctions fail to clear, and I think that didn’t really get addressed during the debate tonight. I think that’s certainly a big concern for us all.

You mentioned also, Minister, the EU’s ETS and how good it was. Well, I think that’s actually a Clayton’s ETS, quite frankly. It doesn’t include transport and it doesn’t include agriculture, and nor should it. Nor does ours, and it shouldn’t either, until such time as our trading partners do. I think we too often take the EU as a shining example when we’re the market leaders in this, not the followers, and I think we should be proud of our ETS. It is quite well constructed, particularly now it’s capped. We can manage our emissions down, and I think that this auction is of course an important part of that.

I accept that you want to get this up and running ahead of time so that the market is familiar with how the auction system works. Any bugs that are there can be ironed out with the day-to-day running, and we just hope that there are no bugs in the legislation. This has been a robust process, and while it’s not a very thick bill and it’s only a few pages, there certainly is a lot of room here for mistakes—mistakes that could have serious consequences.

We’ve done our best through the select committee process. Everyone across that select committee did their best, and there was a lot of cooperation across the Environment Committee. We worked very hard and collaboratively together. I wish the public could see more of what goes on in select committee and the collaborative way we work. Even if we don’t support the legislation, we want to make sure that it’s the best that it can be. We did support this to the point where we couldn’t support it, because it’s not one, simple step, but an important one that we on this side of the House have confidence in the methodology.

As I mentioned, section 20 of the Intelligence and Security Act is a principle that could be utilised here, where the Leader of the Opposition is actually consulted on security matters. This is, I would argue, not as sensitive as those principles, those things, that are being consulted with the Leader of the Opposition, perhaps not on a daily basis, but certainly on an as-need-to basis, and I think we should be doing the same thing with this auction bill.

We did talk about the price of emissions being the best way to lower emissions, and I talked about that earlier, but my colleagues will all have more to say on this as we go through. My colleague Erica Stanford’s amendment also would have brought quite a bit more rigour to the bill, and it should have gone in. Simon Court’s Supplementary Order Paper 15 also, I thought, was quite necessary. We thought about it in the select committee and we debated it. It should have been there, and the reasons for it not being there were not convincing for the select committee, but it got through anyway. I congratulate the member, who’s a new member in the House, for putting such a good Supplementary Order Paper together.

So, unfortunately, we cannot support this bill in the form it’s in. Thank you.

Thank you, Mr Speaker. I’m so pleased that everybody in this House and everybody in the select committee agrees that we need a really good emissions trading scheme (ETS). And I agree with Stuart Smith, who’s on the Environment Committee with me, that we did have a very good process and everybody worked hard to understand and then comment on what is a very narrow bill. So we’re not discussing all of the ETS here, just this very small part of it.

There’s been quite a bit of discussion today about who the Minister consults with, and that’s important. So one of the things I’m very proud of in the select committee is this amendment that means that, as well as the Minister of Finance, the Minister can also consult with an auction monitor. Minister Shaw mentioned in the committee of the whole House stage—he referred to section 30GD of the Act, and this is the bit about what an auction monitor is or can be. So they’re to be independent. They have functions that include validating auction results, publishing reports on the results of auctions, and they can also monitor conduct of the auctions. They can make periodic assessments and report back on those and make suggestions, and they can do calculating of metrics. So that’s a good, independent role. The Minister’s got to consult with them as well as the Minister of Finance.

Many submitters—we heard in the committee stage in particular about submitters who opposed this bill, but there were also many who supported it. One from OMF said, “A carbon auctioning system without a confidential reserve price … is flawed.” So I’m very happy to be supporting this bill today. Thank you.

Thank you, Mr Speaker. Listening to that Government member, Rachel Brooking, and also to the Minister, one would be led to the view that this was all part of a planned and coordinated strategy—that it was always in place and it was supposed to be part of a bigger agenda. Actually, this has been a Government stuff-up from go to whoa.

💬 Barbara Kuriger: Another one?

Another one—another stuff-up of quite significant proportion, actually. In a week, last week, when the wheels were starting to well and truly fall off this Government, here we start this week in urgency, and another Government stuff-up—sadly, I have to say, from a Minister who’s usually not known for stuffing things up; a Minister who is usually better and across the detail of his portfolio; a Minister whose judgment some of us in this Parliament have come to respect. But tonight that respect has been dimmed more than a little because he’s let his better judgment be overruled, I think, by poor advice—not for the first time on this piece of legislation.

A year ago, exactly 12 months ago, the Minister knew that there was a problem with this legislation—took Cabinet papers to Cabinet committees, offering a plan forward and advice and a structure and a way forward, but with the caveat that, actually, the risk to the Crown accounts at that stage, 12 months ago, he saw as being minimal, as being very small, as being slight. So, notwithstanding the fact that the Cabinet committee agreed to a process to make the changes that, tonight, we are making under urgency—only a few days before the first auction comes to take place—the Minister said, “Oh no, we can wait until there is a substantive amendment to the principal Act before we fiddle and tweak with this last little piece of the reserve price auctioning system.”

And then something must have changed. I suspect, probably, that the Minister of Finance, or indeed Treasury officials, woke up to the risk to the Crown accounts, and they were able to give the Minister some late but probably good advice that said, “Actually, you do need to do something about it, and you’d better do it blimmin quickly, because, if you don’t, there is a risk to the Crown accounts.”—to the tune of close to $100 million if it all went wrong. So a rushed piece of legislation, sent to select committee having been introduced under urgency—poor process, poor form, poor strategy, poor House management, and poor oversight by a Minister who’s usually much better than this. And then a truncated, short select committee process where some privileged few were tipped off in advance about the progress of this bill through the House—

💬 Angie Warren-Clark: In a public document.

In a—tipped off. This is what is really bad about this process: a small group of people who happen to subscribe to a worthy and credible but niche publication called Carbon News, which is not one of the most well-read publications in the country, those subscribers had—well, in legal terms, you potentially could say malice of forethought, but they certainly had advance notice that this legislation was coming to the Parliament, notice well ahead of members of the general public, notice well ahead of other players in the market place, well ahead of commercial interests and businesses that might want to be participating in this process. Unless you were a subscriber to this worthy and credible but very niche publication, you didn’t have the inside running, you didn’t have the inside knowledge, and you weren’t able to prepare in advance for a very truncated, short select committee process.

Now, the select committee did, I think, do its very best. They did a good job under difficult circumstances, in a very, very tight time frame, but it was not what this Parliament has come to expect from a fulsome and complete analysis of legislation as important as this. Because it’s fundamental, as my colleague Stuart Smith has said, to the cooperation, to the confidence that both members of Parliament have in this overall climate change initiative legislation—the emissions trading scheme (ETS) is fundamental to us achieving our broad and agreed objectives. But if the Parliament doesn’t have confidence in it, and if the people who are participating in the programme don’t have confidence in it—and what’s worse, if the people of New Zealand, if the citizens, the families, the communities, the businesses, the councils don’t have confidence in it—then this is just grist to the mill to those who say, “Oh, well, the climate change stuff is all a fantasy.” and “We shouldn’t be doing anything; it’s going to cost a whole lot of money.” and “I don’t understand it.” That just gives them ammunition.

So the Minister, I think, has missed a real opportunity tonight to extend a hand, in a way that would have been meaningful, that would have shown cooperation, collegiality, and true bipartisanship on a key piece of climate change legislation, by adopting and accepting the three very reasonable, very rational, and very sound amendments presented, too, from my colleagues Stuart Smith and Erica Stanford, one each, and from Simon Court in the ACT Party. Each of those amendments would have added value, confidence, and a sense of true bipartisanship to this piece of legislation. I think our Parliament is the worse for the Minister not having taken up that opportunity, and it has put my party in a position where we are now no longer able to support this legislation at third reading, having supported it at first reading, having worked collaboratively and collegially through the select committee process, having supported it at second reading, and then having put forward very sound, constructive ideas in the committee of the whole House, only for them to be rejected out of hand by the Minister, who was receiving, I think, poor advice that could have been so much better for the progress of this piece of legislation.

The Minister, as I said, is usually better than this, and I would imagine that tonight he will be going away somewhere soon to probably talk and do a little bit of a debrief about how he could have done better on this legislation—how could he have presented to the Parliament a year ago a piece of legislation that didn’t need to be put through the Parliament under urgency, without full and proper scrutiny of select committee, where submitters across the nation who had not been the privileged few who had been tipped off could also have participated in this process.

So here we have, frankly, a comedy of errors, and if it wasn’t such a serious business, it would be laughable, it would be comical, it would be the sort of thing that—if the political commentators weren’t already so charged with so much ammunition against this Government and so busy filling the columns and the airwaves of the country with scorn and derision, this would be just another thing. It would be just another thing to add to the list. Some of them may pick it up, but as the Minister said tonight, probably there will be very few New Zealanders listening to this, because I’m told there is a documentary screening at the moment, something to do with the Royals, which may be drawing the attention of citizens who are more interested in matters of that sort than they are on fine detail, somewhat pointy-headed, nerdy stuff about how effectively our emissions trading scheme works.

And it’s a real pity, I think, because it’s been a missed opportunity, where the sort of good work that was envisaged by none other than the Green Party MP Dr Kennedy Graham, who did so much good work to form a collaboration across the Parliament in terms of a bipartisan approach—I hope that tonight Dr Kennedy Graham is totally immersed in the Meghan and Harry saga, because he would be mortified to be watching the actions of this Government as they squirm and slither around and try to tidy up what has been a complete botch-up from go to whoa—tried even at one stage to blame the officials, when actually what was very clear was that the Parliamentary Counsel Office had not been briefed adequately on the Cabinet decisions made.

This is fundamental stuff. This is fundamental stuff towards our democracy, and this Government has let themselves down, they’ve let this Parliament down, and, what’s more, they’ve let the people of New Zealand down. They speak so highly and in such grand terms about their ambitions and their goals, but they deliver nothing, and when they make mistakes, they don’t have the good grace to stand up and admit they’ve made a mistake, and they do it time and time and time again. Well, this will be just one small, further nail in the coffin of hopeless and despair that this Government wreaks upon the populace of New Zealand, but it’s a small one, and some of us who are not watching television tonight—

Order! The member’s time has expired.

Thank you, Mr Speaker. The member for Coromandel needs to cheer up—cheer up! And I would suggest that maybe he wants to go and find something to go and watch. Maybe he wants to go and watch Harry and Meghan, and maybe that’s the reason that he’s so fired up about this. But he needs to cheer up, because this is a positive thing and, in fact, I’ve heard time and time again from the other side of the House that the time frame is the issue. But, you see, that’s not the issue. The issue is climate change. The issue is that we have islands around the world that are sinking—not too far from us, actually. And, actually, we need to treat this with the urgency that people that are going to be affected by climate change—e.g., the people of the Coromandel—deserve.

Talk to our rangatahi—talk to them, the ones that are striking out there in the streets. They’re the ones that are passionate about this, and they’re the ones that are saying that we’re moving too slowly as a Government. So I take issue with the idea that we’ve moved too fast. Some people say that the wheels of Government move incredibly slowly, but we are nimble enough to be able to move, and this is one example. Again, the big picture—what is the big picture? That we tackle climate change and the effects that it’s going to have on all of us. We want a sustainable future. We want to be able to invest in renewable resources. It is a very small—today’s bill that we are pushing through Parliament is a very small part of a very big equation, and we need to be focused on the big picture right here. So for that reason, I commend this bill to the House.

Thank you, Mr Speaker—unexpected. I’m pleased to rise in this third reading. I’d like to start, though, by just pointing out Mr Tāmati Coffey’s comments about how we need to cheer up; “This is a good thing.”—a continuation of this Government’s complete spin in turning what is a complete stuff-up into “Hey, something positive—this is great. Look over here at this shiny thing. Don’t look at what actually is going on”.

Because, actually, what we’ve found out tonight through the committee of the whole House stage is somewhat of the truth of what actually happened. We haven’t heard that before tonight, and I’m still actually really confused about what went on, because we’ve got clear evidence showing that as far back as March last year, this issue was raised in Cabinet papers; it wasn’t considered to be a big issue. Then the next thing we were told: Cabinet thought that it was going to be in the legislation, and then it wasn’t in the legislation. Again, another example of Cabinet thinking that something was happening that actually, in reality, wasn’t—something that’s happened more recently that we’re all aware of. I won’t go into that, but it is becoming a trend of what this Government thinks is actually happening actually, in reality, isn’t, because they’re not on top of things.

As my colleague Scott Simpson said earlier, it was from a Minister that we would usually expect more from. But what we’ve seen from whoa to go in this whole thing has been, as Scott Simpson said, a comedy of errors, a complete stuff-up from beginning to end, and they never, ever owned up to that, even through committee stage, where the Minister—who was giving nice fulsome answers, and I do appreciate that from him—was still dancing around the issue, when he should have just owned up and said, “We made a monumental stuff-up, and here we are trying to fix that up.”

The points that we made throughout these first, second, and now third readings is that the Minister had plenty of time to fix up these monumental stuff-ups far earlier than right now, a week before the very first auction, in fact. He admitted that he knew—although we believe it was probably earlier, but he admitted that he definitely knew in September. We had weeks and weeks of House time at that point to be able to bring this to the House and have a far more fulsome debate and much longer committee stage, where we could’ve had far more input from the public.

Instead, what we got was a process that was highly truncated, rushed through. We hardly heard from any submitters at all, not giving the public the confidence that they deserve in what is a very difficult, complex piece of legislation—probably the most complex piece of legislation that sits in front of this Government. They had the opportunity last year to be able to put this through the House in the proper manner and they didn’t. Here we are, just over a week out from the very first auction, and we are still fiddling around with the rules.

Now, we made it very clear all the way through, and I mentioned it in my first reading speech—I said, at that point, when I hadn’t had a chance to fully take in this bill, that I did consider that there might be a problem around the Minister, effectively, setting the base price at the auction, and whether or not that was the right thing to do. We again argued those points throughout our committee stage and second reading speeches, where we did say that this is not a pure emissions trading scheme (ETS); this is something that is moving far more towards a carbon tax. Although it’s not there, the waters are definitely muddied. What we’ve ended up with is very much a hybrid situation where we’re not quite at pure ETS; we’re not quite at carbon tax, but we’re certainly moving in that direction. What we’re talking about is hundreds of millions of dollars’ worth of revenue, which is, effectively, being paid for by the people of New Zealand in many ways, but especially at the fuel pump and through electricity prices.

We have a longstanding principle in this Parliament that it is Parliament that sets the tax rate, not the climate change Minister and not the Government. For that reason, we put up what I thought was a very sensible tabled amendment, argued very well by my colleagues, to say that at the very least—at the very least—the Minister should have to consult with the leaders of the Opposition over the mechanism that he uses, which will eventually determine the price. He decided that that was far too difficult. A simple conversation with the leaders of the Opposition parties was far too difficult. I did point out that there is no skin off his nose and that in the spirit of collegiality around this bill and bipartisan nature of climate change, it was the very least that he could do, and yet he decided not to. So he puts us in a position tonight where we will have to, unfortunately, oppose this bill. It wasn’t a big ask. I implored him at the committee stage to reconsider his decision not to support our tabled amendment.

We had the opportunity last year to make a good go of this. We knew that the Minister knew in at least September. We had weeks and weeks to have a good fulsome process around this, yet here we are at the last minute, rushing something through in urgency when we didn’t need to be doing it. Even the Minister himself had conceded earlier in the piece that, actually, we could be doing this closer to the third auction; we didn’t need to be doing it right now. Something changed his mind. We’re not sure exactly who or what, but here we are again at the very last minute, rushing through, under urgency, another bill, another stuff-up from this Government from a Minister who usually has his eye on the ball but clearly does not. It is with great sadness that we cannot support this bill tonight.

Thank you, Madam Speaker. Tonight we’ve heard some wonderful platitudes about the collegiality of lawmaking in this house, and I’m new to Parliament and I must say that I have been impressed by some of the positive behaviours.

What I want to say is that ACT is a party that believes in free markets, private property rights, and we also believe that polluters should pay—they should pay their fair share. Not five times or 10 times or 20 times what our trading partners are paying to mitigate their climate emissions—they should pay their fair share. Even the Climate Change Commission says that New Zealand business should have access to emissions credits, carbon credits, from international sources. Because if we are going to dramatically accelerate our emissions reductions in New Zealand, as the climate change Minister mentioned before, then we have to ask at what cost, and to whom does that cost fall, and why should that cost fall excessively on New Zealand when our trading partners and our competitors—sometimes they’re the same, like the European Union or Australia. Why should the cost fall almost exclusively on New Zealand businesses, on New Zealand consumers, and New Zealand taxpayers, when carbon dioxide emissions are a pollutant that affects the planet? It’s a global issue, it’s not an issue simply for New Zealand to solve.

So what ACT says is that creating a confidential reserve price at auction, while it may go some way towards making the emissions trading scheme (ETS) more functional, in fact simply is another way for the Government to set an artificial price for carbon emissions, and that’s an artificially high price that could be five or 10 or 20 times what our competitors and trading partners are paying. And it doesn’t need to be that way, because there are mitigations for climate emissions available at much lower cost per tonne than what is available in the New Zealand airshed.

Our international trading partners, in many cases, would welcome a green investment, an environmental investment, an investment in sustainability. The examples that have been offered to us during the select committee process are that of the Amazon rainforest cleared in the 1990s in the most destructive of fashions, devastating land-use changes, loss of biodiversity, sedimentation of major rivers, and destruction of indigenous communities. There are places like that which would benefit from a New Zealand investment in reforestation. Because it doesn’t matter whether we mitigate our climate emissions here in New Zealand or in South America, or anywhere else in the world. What should be available to New Zealand business, New Zealand consumers, and New Zealand taxpayers is an opportunity to mitigate their climate emissions at the lowest possible cost—and the Climate Change Commission agrees. They believe that these international opportunities to mitigate climate emissions should be available to New Zealand.

So looking at our emissions trading scheme and this proposed amendment, very late amendment—an amendment to a scheme that had been in place for over a year and which is due to hold its first auction on 17 March, just a few days’ time. This bill was rushed into the House under urgency after a late error, a major concern, was identified, a risk was identified by officials, and a risk that could potentially have quite devastating consequences to the New Zealand Government’s coffers, because 4.75 million units currently trading at close to $40 each is a significant amount of money. We’re talking potentially hundreds of millions of dollars, billions of dollars in cash, raised from New Zealand businesses, and then by extension from New Zealand consumers and New Zealand taxpayers, paying at the pump, paying through their food prices at the supermarket, farmers paying through transport and through all the other ways that goods and services get to and from farms and towns and cities and supermarkets and homes—every New Zealander paying.

So when this bill was rushed into the House only a few weeks ago, it had the effect of creating a deep uncertainty and a concern amongst those organisations which rely on the emissions trading scheme so that they can buy New Zealand units and then hand them back to the Government in order to fulfil their climate emission obligations. They came to us. Many of them were only able to submit over Zoom because they couldn’t travel to Wellington in the time frames that had been offered to them—just a few days to make submissions. Some of the people who offered their perspective have been involved in the design and establishment of emissions trading schemes going as far as back as the 1980s, when one of the submitters—who has worked at Victoria University developing better public policy—was one of the first people to propose an emissions trading scheme. When that submitter saw what was being proposed, they said, “Look, these minor tweaks aren’t enough. They’re not going to deliver the functioning emissions trading scheme that we need so that New Zealand businesses can make the right decisions.” Other submitters said, “Look, we don’t need a confidential reserve price at all. There is already a floor, there’s already a ceiling, and, again, those rails aren’t needed. What we need is the opportunity to be able to go outside the New Zealand market and offset our emissions in any way that works, that actually sequesters carbon and stores carbon. We shouldn’t be limited by the artificial constraints.”

So we now have the situation in New Zealand where, because of the Government’s poorly thought-out climate policies, such as banning oil and gas exploration and signalling that gas has no future in New Zealand beyond 2050, we see a chilling effect in the market. We know that natural gas supplies are dwindling much faster than even the Government anticipated when that proclamation from the steps of Parliament was made in 2018, and that is having a huge and significant effect on electricity prices, which have spiked up to $500 per megawatt hour in the past few weeks. That is a direct result of the massive amounts of coal currently being imported and burned at Huntly, and that is just to keep the lights on in what looks like it will be a dry and cool winter.

Now, the businesses and the organisations and those concerned environmental groups which submitted on this bill raised genuine objections as to why either the confidential reserve price was unnecessary or it would be just another meddling in the market, another lever that was unnecessary, creating confusion and creating uncertainty. What they are really asking for is a functioning emissions trading scheme that is transparent, that allows businesses to see in the long term what the likely price of offsetting their carbon emissions is so that they can make better investment decisions.

Some of these businesses who manufacture cement in New Zealand are absolutely vital to our infrastructure and building construction to deliver more homes, to fix the broken pipes, to fix the cities, to unlock transport connections. They want to keep working in New Zealand. If they price of carbon, if the price of buying units through the New Zealand emissions trading scheme gets too high, they will simply shut up shop—we know this; it’s called carbon leakage—and they will transfer their production to other facilities. One of New Zealand’s former major cement manufacturers, Holcim, based down in Westport, declined to proceed with any further infrastructure investments in New Zealand. They now import all their cement from Vietnam and other locations. That is New Zealand’s future: less economically resilient; our communities in the regions gutted as these major industries leave. All of these things are not just a mirage on the horizon; they are likely consequences of poor public policy and poor Government decision-making around climate.

We’ve heard about the European emissions trading scheme. That is simply a facade. They don’t include transport, they still subsidise their farmers to plant hedges, and they call that environmental mitigation. New Zealand has so much more to offer, leading the way with an emissions trading scheme that is truly functional. That’s why ACT opposes this bill, because we want a functioning, proper ETS for New Zealand.

Thank you, Madam Speaker. It’s always a privilege and an honour to stand in this House, but in this particular kōrero about the Climate Change Response (Auction Price) Amendment Bill, I take it seriously to stand and make a short call, because I feel like all has been said tonight, and I want to make a short call. So I want to acknowledge the Minister for his leadership on making it his priority to bring this into the House before 17 March, when the auction kicks off. I want to acknowledge the chair of the Environment Committee for her eloquent leadership of the committee.

We’ve heard today from the other side that it is a collegial committee and that we are very respectful and understanding of each other in these matters, and then, on the other hand, they disagree with the bill, the final reading. So I’m saddened to hear that we are no longer collegial in that part. I acknowledge that there were over 20 submitters that had made submissions to the select committee, and I want to say thank you for making those submissions, even though, in this unprecedented time, they had to be agile in using technology.

So can I just remind—the purpose of the confidential price is to ensure that a particular auction does not clear significantly below the secondary market price, to ensure the auction does not unduly influence the market. So it went to select committee, and from the select committee it improved the bill. So there are some arguments saying that “Well, we needed more time”, but, actually, the select committee, after hearing from officials, after hearing from submitters—we actually did make some improvements to the bill. It ensures that the Minister, in setting the methodology, consults, when that person is appointed, the independent auction monitor. And if at secondary market the auction goes—the confidential reserve price is not met and they are not sold, the Minister must review it. Well, actually, one step further—the Minister must consult the Minister of Finance, and then, if it’s unresolved, the Minister must review it.

So that’s what happened at select committee—that we improved the intention of the bill. And as was said by members of the committee, we were all very collegial and we all agreed to it. So I want to thank them for that agreement at select committee. I think that all has been said, and I want to—the words that have been used around indigenous, the words that have been used around the trees—all those things. The word that comes to mind when we talk about climate change is he waka eke noa. The thing is that in contributing to that, we must—we must—make sure that we set a fair price, that we do not undersell what rightly belongs to everybody. So on that note, I want to commend this bill to the house.

The next call is a split call.

Kia ora, Madam Speaker—thank you. Can I thank members of the Environment Committee for the collegial approach to the Climate Change Response (Auction Price) Amendment Bill. I am really disappointed that the National Party is choosing to vote against the bill at this stage, because I had understood that they supported the concept of having a confidential reserve price and that they recognised the benefit that that would bring to the auction system. It does seem, just because of the amendment having failed, they are now voting against it. So that is very disappointing.

I would remind the National Party that while they and ACT are objecting to this bill, it was the major work that Minister Shaw as the Minister of Climate Change did last year with the Parliament to actually rectify the major shortcomings in the emissions trading scheme (ETS) that National had failed to fix—the fact that we had all of these international units coming in, totally undermining the integrity of the emissions trading scheme, so that the reforms that this Government have put through have been about improving the scheme. Everyone recognises—except ACT—that we need a confidential reserve price, so why not support it?

The whole basis of this bill, the basis of the Government’s reforms to the ETS, is ensuring that we have a predictable price on emissions so that business can have that stability, can then invest long-term in the technologies and in the manufacturing methods to reduce emissions. Under National, the ETS was not working to reduce emissions. If we are serious about climate change, which this Government is, we needed to reform the ETS, and that is what this Government has done at the earliest opportunity.

This bill, through the introduction of a confidential reserve price, through the changes that the select committee has recommended and that have been put into the bill, having the Minister consult with the auction price monitor, having to review the methodology if the units don’t clear because the confidential reserve price means they don’t go above the clearing price—these are good changes. This is a good improvement to the ETS. This Government is about being serious about climate change, getting our emissions down, and this bill helps to do that. I commend it to the House.

I rise in support of this bill. I want to respond to some of the comments that were made by the ACT member Simon Court. He said he would prefer an emissions trading scheme (ETS) that had no floor price, no ceiling price, linked to international markets. We used to have one, and the ACT Party voted against it. That’s how the ETS was originally designed, at a time when Kyoto was still alive. We had a market that was attached to international markets. Now, why that went wrong and why we’re not ready yet to re-enter international markets was there was a huge oversupply of units in the world market caused by the fact that the US did not ratify the Kyoto Protocol, and their allowances for their emissions were still in the international system. That was followed by the collapse of the Kyoto Protocol itself and the failure of the successive protocol to set international limits to world emissions. What that meant was that the remaining Kyoto-compliant units that were surplus in the system—sometimes called Russian or Ukrainian hot air—had nowhere to go except the New Zealand ETS, because every other functional ETS in the world banned them from their system.

Now, the National Party cynically allowed that to continue, because it was a rules-based market. But the rules should have been changed given that change in reality, because for a price-based mechanism to cause the economy to adopt choosing the lowest-cost pathway to reducing emissions, you have to have an effective price. The price went to close to nothing. The price went to close to nothing, and therefore the ETS was nothing but a sham. Therefore, what this new Government had to do—in fairness, Paula Bennett stopped the Russian hot air units coming in, but then they put a price floor in without a cap, which is very unequal. So we’ve now got to the point where we know that we cannot rely upon international markets, because they’re not mature enough.

We also know that if we expose the New Zealand market to those units, the price in New Zealand will be very low and it won’t change our emissions profile. That’s what the ambition of emissions pricing is to do: expose through that market—and it is a rules-based market—the lowest price mitigation that you can do. You want to do most of it at home, because otherwise what you would end up doing is send cheques overseas and still have the future challenge of reducing New Zealand’s emissions. So you’d get to the periods when we made promises and we still wouldn’t have reduced our emissions.

So these suite of changes that have been made to the ETS in response to the collapse of the Kyoto Protocol and the oversupply of units internationally have been absolutely the right thing to do. It’s right that we have a confidential reserve in an auction. It’s really no different to the confidential reserve that the seller of just about any item at auction uses to protect their interests. There are additional protections that the select committee have put in place, which I think are good, and that’s the involvement of the Minister of Finance, which others have explained. Accordingly, I think it’s clear that this is desirable.

The final point I will make is that there was an error in drafting. We’ve acknowledged that at the first reading. The Minister has acknowledged that. During the election cycle, when the House had risen, I was one of those who was contacted by people who are active participants in this market, and they recommended to me—and I won’t name the person, but I trust their judgment in these matters. They said it was very important for the stability of the pricing mechanism and the long-term effectiveness of the emissions pricing regime that we had a confidential reserve. There are a relatively small number of large participants in this market. It would have been open to collusion between those people in a way that could have disrupted the market. That is not in the long-term interests of New Zealand’s emissions reduction market, because that’s what this is meant to be. Accordingly, I recommend this bill to the House.

Thank you, Madam Speaker. I rise to take a very brief call in regards to the Climate Change Response (Auction Price) Amendment Bill. Now, we’ve heard a lot from a lot of people in this House. We’ve been in urgency for quite some time, so it will be a brief call. However, I do want draw the attention back to climate change, and I want to quote Sir David Attenborough. He said, “Many individuals are doing what they can.”—that’s many individuals are doing what they can—“But real success can only come if there is a change in our [society] and in our economics and in our politics.” I think this is what this bill is doing. It is indicating or heralding a time where we are going to make a change to trending towards a low-emissions economy.

It’s so important, because climate change is one of our biggest challenges that we have. We have stood and many of us spoke on the very complex zero carbon bill in the 52nd Parliament. I have to say that this is another one of those very pointy-headed parts of legislation that are not necessarily enjoyable when you are participating in the process, but they’re really important. They’re really important as a price indicator for us all. They’re really important about giving some alternative options around the alternatives around finances.

So this bill amends the Climate Change Response Act 2002 and the Climate Change (Auctions, Limits, and Price Controls for Units) Regulations 2020. It is a good bill. It is based on making a real and active change for our society, and I commend it to the House.

Thank you, Madam Speaker. Look, I’ve been sitting here listening from—

💬 Andrew Bayly: Very good.

Well, yes. I don’t know what the other side are doing, perhaps, but over here we’re listening and active. And what I would say is that I have been listening from go to whoa, and the contribution that I’ll make this evening is that between second reading and third reading, it for me has just consolidated my initial view and contribution from second reading, and that is that this proposed piece of legislation that the House is dealing with this evening will provide value, it will provide currency, and it will provide integrity in the auction process—integrity in the auction process when it concerns units in this country’s emissions trading scheme (ETS). But I agree with my colleague Angie Warren-Clark in that, actually, it will help deliver a strong and confident ETS as we head towards becoming that low-emissions economy.

The reality is that this particular bill has actually taken on board the changes that had been suggested by some submitters through the select committee process. That does demonstrate, actually, that the process is working—members on the other side of the House might disagree with that, but that is the stark reality. And I also agree that it means that it has made the bill better.

It’s unfortunate then that members opposite feel as though they cannot support the third reading of the bill, because right up to this point, perhaps from some members opposite, that was not the case—

💬 Hon Member: Very disappointing.

Yes it is very disappointing in that sense.

This technical change will be timely, as we head in just over a week for the auction, and I have to say that New Zealand and international markets will be watching us with some interest. So it’s important that when that auction does take place, naturally we are in the best possible place as a country, and the confidential reserve price and the methodology that lies behind that will ensure that as well.

So tonight’s third reading is simply another step in the journey that is important towards Government working in partnership with individuals, with communities, with businesses up and down the country to tackle the issue that my colleague Tāmati Coffey pointed out: that young people around this country have made very, very clear to us that we need to do something about it. I commend this bill to the House.