Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill

on behalf of the Minister of Climate Change: I present a legislative statement on the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill.

ASSISTANT SPEAKER (Hon Jacqui Dean): That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill be now read a second time.

I’d like to begin by saying that it’s great to see this bill back before the House. I would like to thank the Environment Committee for accommodating the reduced time frame that the bill requires. Notwithstanding its long title, this bill serves an important function by ensuring that small forestry participants in the New Zealand emissions trading scheme—the New Zealand ETS—are safeguarded from possible disproportionate outcomes if they were to incur the three to one penalty. For context, the three to one penalty, set at three times the price of carbon—with no ability to reduce, despite the regulator—came into force for most New Zealand ETS participants at the beginning of 2021.

For forestry participants of the New Zealand ETS, this penalty usually arises when forests are harvested, deforested, or deregistered from the scheme, and the resulting unit liability is not paid back on time. Its application was deferred for small forestry participants—being those with liabilities of less than 25,000 units, on average, per year—until the end of this year, in recognition that it could cause serious financial harm to these participants. This is due to the size of the three to one penalty, compared to the cash flow, meaning that their personal assets—for example, the home or the farm—could be at risk if they were unable to pay their liability by the due date and, therefore, incur the penalty. Two years on, and the risk to small forestry participants remains and increases as the price of carbon rises.

I’m pleased to report that the work on a revised penalty that is more proportionate for small forestry participants is under way and will be progressed through separate legislation. This bill contemplates and supports that work by, number one, extending the period of the existing transitional provisions, which will give effect to the transitional arrangement for small forestry participants to align with the scheduled commencement date of a revised penalty, being 1 January 2025, and, number two, ensuring adequate time for participants to be educated on what the revised penalty for small forestry participants will mean in practice before it comes into force, making for a smooth transition.

The bill has been reported back to the House with no amendments. The committee received just one submission, which did not address the substance of the bill.

The shortness of my speech reflects the nature of this bill: a simple amendment to the existing transitional provisions in the Climate Change Response Act 2002, to maintain a layer of protection for small forestry participants in the New Zealand ETS until a more proportionate penalty is finalised.

To conclude, it is great to see this bill making swift progress through the House. I look forward to the discussion today and to debating the bill in more detail during the committee of the whole House. I commend this bill to the House.

The question is that the motion be agreed to.

It’s a pleasure to take a call on this bill with a very long name. I think, interestingly, we supported this bill at the first reading. It’s come back to the House in exactly the form it left the House—to go to the select committee—which is very unusual. So it’s quite difficult to manufacture a long speech on a bill that’s come back, having spoken on it at the first reading; the bill has come back to the second reading in exactly the same form.

The Minister just explained very well what this bill does, but I guess the issue that I want to talk about, really, is—the fact that we’ve had to bring this bill back to the House points to the very complicated nature of the emissions trading scheme (ETS) and our response to climate change initiatives in New Zealand, and the challenges that some of our response is going to create as a result of the legislation we put in place. And I’m not criticising that legislation, because I guess we’re in uncharted territory to a large extent. We’re the only country in the world that really only has one mitigating factor in our emissions trading scheme, and that is the sequestration of carbon by trees, and I’m not arguing with that—

💬 Simeon Brown: What about mangroves?

Yeah. We could have—we could have dandelions and all sorts of things as well, Simeon. But I’m not arguing with that, because I think, in New Zealand’s circumstances, we’ve gone down that path, and I think that, having gone there, we need to stick to it and we need to make it work for New Zealand as best we can. So having gone down that path, it’s a great shame that in the early days of this discussion—and I think that would take us back at least 10 years—we didn’t get to a point where we had a plan and a road map as to how we intended to use trees, for example, to manage our climate change challenges and to manage the ETS. So this bill is one little feature of the myriad of issues that arise as a result of our management of the emissions trading scheme and of our challenges around climate change.

So the Minister explained very well what happens in this situation. And the simple essence of the reason for this bill is that there’s a myriad of small land owners in New Zealand—and these are foresters affected by this bill—what are termed “small holdings” or “small forests”, basically. Interestingly, the value of those small forests is quite significant if you put it into carbon form—and, in fact, even on recent log prices, quite valuable from a log perspective as well. So what can happen is that those trees can be either inadvertently cut down and the land sold to another purchaser, and I’ve seen a number of these cases—that purchaser, not knowing there was a liability around those trees that have been cut down, or disappeared or harvested; and consequently is facing this liability. Now, that’s a challenge that’s always going to exist; this bill won’t change that. But this bill does give those landowners and those forest owners who find themselves in those circumstances longer to manage the liability—and it also, I guess, manages the liability as well to some extent, because the penalties were set at three times the current carbon price, effectively. So the penalties would be very significant under the current legislation, and the need for the extension to that changes the liability on that and certainly improves the situation.

So there are some other challenges in this area as well, and we’ve seen just recently where the Ministry for Primary Industries have got a massive backlog of applicants wanting to register for the ETS, there’s significant backlogs there and—oh! I just about knocked the glass over. I suppose you could argue that that backlog, and the fact that those applicants have been delayed, and enter another stage of the emissions trading scheme—effectively, that’s taking credits out of the marketplace for a certain time, and the fact that you’ve taken units out of the marketplace, you could argue that it’s forcing the price: a higher price for the unit seller in the marketplace, and more cost to the cost of living price indexes, and all of those sorts of things. Because the application of the ETS, effectively, will increase the price of a whole lot of things that we either consume—and the most obvious ones of those are fuel, and also electricity. So having delays in these processes affects that, and the reason I raise that is because this bill is just one of those many responses that we’re going to have to negotiate our way through the future of this very challenging situation.

So we set out, as I said earlier, on a pathway to include sequestration of trees in our ETS. We set out on that pathway, but we didn’t ever put a plan in place, initially, as to how we would manage that process. The Government, in recent times, has been struggling with this very issue and have proposed a number of initiatives, which so far haven’t found a home. The great danger of this, as we try to manage our way through this process, is that we certainly don’t want to undermine the ETS, we don’t want to undermine our response to climate change, we don’t want to undermine our international liabilities, and we don’t want to undermine our credibility in the international marketplace. So there’s some very big challenges for New Zealand in this sector, quite apart from this bill.

The other matter about this bill is that it does line us up with those few countries in this world that have a similar process in place, and it’s very important that we line up our climate change initiatives with international best practice, because if we ever do branch out in New Zealand and take our response to the international marketplace, that will allow us to fit into that international marketplace easily. So it’s important that we get these things right.

So I said, when I started speaking, that there was very little for me to talk about, because the bill didn’t change as it went from the first reading to the committee, and then back to the second reading, and it hasn’t changed at all. So, as the Minister said, there was one submission and it wasn’t relevant. But the reason there was no need for a long select committee stage or for change at the select committee stage was that the department had done a very good job of consulting on this in the first place. It is a relatively simple matter, but, none the less, they’ve done a good job on consulting with it, and, as a result of that, the bill came to the House in the shape it needed to be in—a simple bill—and went to the select committee stage and came back to the House still in that stage. And I very much doubt—despite the optimism of the Minister—that the committee stage will take very long.

I probably can’t add any more than that; I’ll probably talk for far too long on far too little—ha, ha! Thank you.

Thank you very much, Mr Speaker. I am pleased to take a call on this bill with the very long name—as the last speaker, Ian McKelvie, said—the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. I would like to agree with a lot of what Ian McKelvie just said, in terms of it being a fairly unusual select committee process—that is, we did not hear from any submitters. We did, of course, hear from officials, and I thank them for their time, but there was no hearing and it was a very short turn-round. The first reading was on 18 October, a great day, and we have, as a select committee, made no changes to the bill. As the previous speakers have said, it is in fact a very simple bill; so I’ll just quickly cover what it is about.

It is about the small forestry participants that we’ve heard about, and that is how they fit into the Climate Change Response Act 2002, which, of course, provides for the emissions trading scheme—the ETS—which covers forestry. We’ve just had some explanation of that from the previous speaker. The obligations of the ETS include surrender of a credit for every tonne emitted and, if you don’t surrender, penalties apply. So these forestry obligations are very complex; some of that was just touched on.

The change in the last Parliament amended the penalty provisions and provided a deferral for the small forestry participants until 1 January 2023. You may have noticed that 1 January 2023 is fast approaching and a new penalty of sufficient proportionality for these small forestry participants has not yet been worked out. The current provisions in the Act do not seem to be appropriate for those small forestry participants, so all that this bill does is extend that deferral for another two years—so that is until 1 January 2025—to give officials an opportunity to work out what the right penalty is for these small forestry participants.

As Ian McKelvie mentioned just before, one of the reasons why the select committee didn’t receive submissions, apart from one that was out of order, was because of the previous consultation that happened, and, importantly, in that previous consultation that the officials undertook, there was no objection to an extension of this deferral. So, with that, I commend this bill to the House.

I call—I’m just having a mental blank—

💬 Hon Members: Andrew Bayly.

—Andrew Bayly. It’s just that it was the quietest I’ve ever heard you stand up, Mr Bayly—perhaps was the problem.

I’m so pleased that you could finally remember my name, Mr Speaker.

💬 Simeon Brown: Stranger in the House!

Stranger—let’s not go there. Anyway, it is a pleasure, and I wasn’t scheduled to talk, and that’s why the honourable Speaker is having trouble, but it is a pleasure to be talking on this climate change response—no, I’m not going to read it all—second reading. And I’m a ring-in, because this didn’t come before the committee that I sit on, but, none the less, it’s a very important matter, this.

I think this is about making sure that people get a fair go. As all the speakers have noted, there are situations where people simply do not apply and don’t know what’s happened with the land. Maybe you’ve just acquired it, and you suddenly find out that a few years ago—it may even be prior to 1990—the land previously had exotic forests on it that were removed. And, hey presto, you paid what you thought was good value for the land, and then you find you get suckered with, or socked with, a huge bill. So what this bill does is it defers it from 1 January 2023 to 1 January 2025 to give that time, as everyone has spoken about.

But no one’s actually talked about the numbers. Just to put this in context, what if this has a maximum threshold or minimum threshold? However you look at it, in terms of if you have less than 25,000 units, you will be able to operate under this delayed time setting. And to put those 25,000 units into perspective, that probably represents an area of about 35 hectares, so there are a lot of small exotic forests around New Zealand. So this is dealing with those smaller blocks.

So, again, if it’s 25,000 units at the current carbon price of about $88, that means that the owner of that land will need to pay approximately $2.2 million in terms of the emissions trading scheme (ETS). So with a three times charge, which is what the rules are if you don’t meet this requirement, you will be charged three times the current rate. That would mean, potentially, a liability of $6.6 million. And so this is just giving time for people to recognise and to check what the situation is. But also for some people, that is a substantial amount of money, particularly if you hadn’t anticipated it.

So the deferral was developed in response to submissions, although I heard one, to the Environment Committee. But the principles behind it were: the size of the penalty was viewed as excessive—and I just explained that—and the current rules mean that if someone had a legitimate reason why they mightn’t have known about a previous plantation, it didn’t matter because what would happen is they would get charged the penalty anyway. So it was a way of trying to mitigate that and to enable the regulator to take a more appropriate view on it.

And, interestingly, Māori had some concerns about this. They were concerned, particularly when you think about a lot of iwi land is held in trusts and it’s very unclear what the ownership is and who actually has the responsibility to make the penalty payment. So they were particularly concerned about this. And so this is a pragmatic way of dealing with it. As everyone said from our side—well, Ian McKelvie said and no doubt my colleagues will—we will be supporting this bill.

But the other thing to note with this is that the design of the penalty aligns with international jurisdictions. So it’s, to some extent, futureproofing whether in fact the ETS—New Zealand’s ETS, which is quite a distinct climate change mechanism—can be aligned with other international practices, which is an option we should keep up our back pocket.

Now, the last thing I just want to talk about is backlog, because I have been approached by a number of constituents who have been seeking to get clearance, whether in fact they are surrendering credits, to get confirmation from the regulator. And what we’ve been hearing is delays of up to a year. So in the case of one particular landowner I know who wishes to sell his land but can’t because he can’t get the clearance from the regulator, he is now sitting in a situation of hiatus. He cannot get that done. He cannot proceed and get on with his life, because we’ve got a Government department—

💬 Simeon Brown: How many bureaucrats do we have there?

14,000 extra bureaucrats over the last five years. Approximate cost: $2 billion a year.

We need a Minister to focus on making sure these consent applications and the issuance of these ETS credits are done quickly and promptly. And it’s not good enough to blame it on COVID. We should be getting the resources in there now and dealing with it, because it’s putting people’s lives at risk and creating a whole lot of tension that should not otherwise be. So I hope the Minister will action that side of it. He’s certainly been made aware of it. But it is something that needs desperate attention, because this Government should be trying to make sure that people can get their ETS credits and the confirmations that they require. But on that note, I’ll let the others take over.

Talofa lava. Thank you for the privilege to take a short call and to speak to the bill tonight in the second reading. The Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill before the House advises the applying of a necessary approach to extend the time line of the original legislation. Can I begin by acknowledging and thanking Minister James Shaw and officials from the Ministry for Primary Industries and the Ministry for the Environment for their hard work, valuable contributions, and also to acknowledge the one submitter through the public consultation process.

This Government bill will change the New Zealand emissions trading scheme by amending the Climate Change Response Act 2002. The penalty was strengthened in 2020, but there were concerns that it may significantly impact small forestry participants, causing serious financial hardship in some cases, and those concerns persisted. The bill seeks to extend the transitional engagement period from the end of 2022 to the end of 2024, allowing more time for a new, more proportionate penalty to be developed, and, in particular, participants to be educated on the new penalty before it’s implemented in 2025.

This afternoon, we heard in the debating chamber about the economy that was debated in the general debate session across the House, with our Government Ministers Dr Megan Woods and Minister Nanaia Mahuta highlighting the Labour Government’s commitment in achieving a low-carbon future for Aotearoa. Aotearoa cannot be left behind with our future exporting industries, our economy, and the environment. The Government has strong climate change priorities in the carbon reduction scheme and continues the credible plan to reduce our emissions in order to meet climate change targets. The Government released the first emissions reduction plan in May 2022 when I was sworn into the House as a representative and it is the road map to reduce emissions in Aotearoa for the next 15 years.

This bill would amend the Climate Change Response Act 2002, otherwise known as the Act, to extend a transitional arrangement by the Climate Change Response (Emissions Trading Reform) Amendment Act 2020. The transitional arrangement that is being extended allows small forestry participants from being subject to a repayment, otherwise known as the three to one penalty, as part of the New Zealand emissions trading scheme. The extension of time will ensure that enough time is given to educate affected parties before the new penalty regime takes place on 1 January 2025.

Finally, I want to acknowledge the chair, Eugenie Sage, and members of the Environment Committee that I have had the privilege of joining this year. I thank them for their professionalism, the collegiality of their work, and their valuable contribution on that particular select committee. I commend this bill to the House.

Tēnā koe e te Māngai o te Whare. I’m pleased to take a call on the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. There were various comments in the Environment Committee—and I thank the previous speaker, Lemauga Lydia Sosene, for her comments about the collegiality of the committee—about the title of this bill. It is a mouthful, but it is what it says on the tin.

It is a very short bill, as other speakers have canvassed—and I will be brief—about ensuring that our emissions trading scheme (ETS), which is one of the few in the world which includes forestry, actually works for smaller participants who have got forestry on about 30 hectares and have liabilities of around 25,000 units annually. It ensures that they are not liable for these, what could be for them, quite burdensome penalties at the moment. There was consultation in August by the Ministry for Primary Industries, Te Uru Rākau, and that highlighted the support for what the bill does, which is extending the transition period until the Government has been able to work out what is a suitable penalty for the smaller forestry units.

So the bill was unusual in the fact that we had a very short submission period. There was only one submission. It was out of scope. But there were some 25 submissions on that consultation exercise that Te Uru Rākau had done from across the forestry sector. So the committee was reassured by that earlier consultation and we didn’t recommend any amendments because none had come through the submission process.

So it’s a small bill. It does benefit those small forestry owners. It does help the ETS to work better. The Green Party is happy to support the bill.

It gives me great pleasure tonight on behalf of the ACT Party to confirm we will support this bill. Now, I did have significant reservations at first reading, which I set out quite clearly. Unfortunately, due to the very short time available, the committee was not able to attract any significant submissions. And knowing how difficult it is for organisations and individuals, particularly smallholders, particularly small farm foresters, the type of people and businesses that this bill—people carrying out forestry activities with low volumes, people in those situations often find it very difficult firstly to know when Parliament or select committees are calling for submissions, they often need to get advice, they need to talk to memberships or co-ops about what’s our position going to be, how should we respond, what are the various concerns. And so it’s not surprising that we didn’t get any submissions that could help the committee potentially deliver a better bill back to the House. But let’s just look back at what this problem is.

Essentially, the current legislation imposes an extraordinarily extreme penalty to farm foresters, to organisations, individuals who remove trees from their land and don’t replant. They might do that for a variety of reasons. They might decide to do something remarkable, like change their land use from forestry to productive farming, to beef and lamb, even dairy. They might decide that, actually, they’re going to remove the trees, the pine trees, if they are, for example—and they’re not going to replant anything, they’re just going to let the bush come back by itself because maybe those paddocks are just too steep, maybe it’s too difficult to get equipment in there. Maybe during the cost of living crisis, they can’t afford to pay for the equipment to get in there. And maybe with the immigration settings still pretty much turned down to zero under this Government, they can’t get the labour they need to go and replant what are often quite remote and challenging bits of terrain in the back country of New Zealand, because those are the kind of people who—after 1996 and particularly when the Kyoto Protocol was signed by New Zealand—realised there might actually be some benefits to continuing to allow forests to grow on their land and not cut it down for a reasonable time and to participate in schemes that allow them to claim carbon credits.

But, of course, the problem is that when this legislation was passed, the climate change response—well, essentially, the zero carbon Act back in 2020—the penalty that would have applied to farm foresters and smallholders to remove trees from their land and didn’t replant, or who had removed them since 1990, would have been in the order of $20 a tonne times three. A three times multiplier, a penalty of about $60 a tonne for every tonne of carbon they were assessed as being obligated to compensate the Government for in order for the Government to meet carbon targets that they had announced. So crikey, I mean, if I was a small holder or farm forester and I knew that I had a liability to either replant the land I’d cut trees from or pay, you know, $20 a tonne if I didn’t pay it, crikey, if it was going to be $60 a tonne I could be assessed on—so it’s kind of like an IRD of emissions trading penalties—then I might choose to do something. But, of course, what’s happened is a lot of these farm foresters and smallholders really had no idea what their liabilities, what their exposure was.

So this bill, this extension of time for the Government to work out what’s a fair regime, recognises, actually, the penalties and the regime that were going to be imposed on small holders—on farm foresters, for example—was completely out of proportion to the risk that they didn’t replant their land with pine trees or some other vegetation; the risk that they didn’t fulfil their obligations under the emissions trading scheme or under the Climate Change Response Act to pay off their carbon debt. That risk is actually tiny; it’s infinitesimal. When you think about the scale of global emissions, the fact that New Zealand emits over 80 million tonnes a year of carbon dioxide from manufacturing, from transport, from energy production and consumption, from making things—

💬 DEPUTY SPEAKER: Sorry, could the members on the left please just keep it down; they’re affecting the concentration of the speaker. So could you just move closer if you want to have a conversation, rather than across the House? Mr Brown, you might just leave something. Just behave.

Mr Speaker—

💬 DEPUTY SPEAKER: Carry on, my apology. In fact, I’ll ensure you get an extra minute.

Thank you. And, look, ACT Party MPs enjoy the support and the occasional encouragement from members from the National Party here to my right. And so I just assume, faithfully, that it was just the usual encouragement and “Just give them hell” that we expect from my National colleagues. But thank you, Mr Speaker, for offering to run defence, to protect me from people like Simeon Brown and his sharp tongue, his great wit; and, of course, Nicola Grigg, who is—like me—a regular attendee at agricultural shows, A&P shows like the Christchurch show New Zealand Agfest last week. Of course that’s the kind of places that New Zealand farm foresters, that small holders, the kind of people who grow a batch of pine trees on the back of their property potentially as an investment, something that mum and dad thought about years ago: “We’ll get into one of these pine-growing schemes and will get these pines, and, in 20 or 30 years from now, someone will come and cut them down, and that’ll form part of our retirement investment, our savings for the future.” And, of course, it’s people like that—it’s people who never expected to have to face these incredible penalties under the emissions trading scheme and under this piece of legislation, who we are trying to give a break to at this time.

Because the penalty regime was never really intended to punish such a group of people who have such a small stake in our overall emissions or emissions reduction—emissions mitigation—as this group. But, of course, what’s happened since the legislation was passed, the carbon price is not $20 or $25 a tonne; it’s about $85 a tonne. So a three times penalty is going to be somewhere in the region of $240 to $260 a tonne for the obligation that these people are under who might have cut down some old growth forest pre-1990. They are required, if they haven’t replanted it, and it was there on their land before 1990, to fulfil their obligations under the emissions trading scheme, to pay a penalty or to, basically, buy carbon credits and hand them back to the Government at $85 a tonne. That makes no sense. Because if you’ve got some forest that your mum or dad or grandparents planted or let regenerate on your family farm, say up the back of the King Country, where I visited a farming family in January, at Aria, and who showed me a bush block that their father and grandfather had allowed to regenerate, and they said, “Well, look, we don’t get any carbon credits for it because it’s pre-1990, but if we were to cut it down, we could pay that bill and we could replant it with pines and we could earn around $85 a tonne for the carbon sequestration.” None of this makes any sense because the way this Government’s meddled with the emissions trading scheme, introduced a zero carbon Act—in the words of the Hon James Shaw and Dr Rod Carr, the Climate Change Commissioner, what they say is they want to pull all the levers on every aspect of the economy to reduce climate change. None of that makes any sense.

The emissions trading scheme, if it was allowed to function as a market-based scheme—and I know that the Minister Megan Woods this afternoon asserted that, you know, in order to reduce emissions from the transport sector, for example, the cost of a unit of carbon in the emissions trading scheme would have to be over $500 a tonne. Now, again, none of this stuff makes any sense, because when you look at the way the Labour Government back engineers its terrible social engineering policies to get us out of cars, and comes up with prices that are completely unrealistic—like $500 a tonne of carbon to incentivise a change of direction—this back engineering stuff is one of the ways that they justify some of their terrible policies, when, really, if you just let the emissions trading scheme do its work, with one change only, and that would be—I mean, it’s important that we give an extension of time to these people while the Government works out how not to ruin a whole bunch of smallholders and mums and dads and older people at retirement age who have saved for their retirement by putting some pines on the land and cutting them down.

While it works out how not to ruin them, there’s one more thing they could do. What they could do is adopt my member’s bill, which is the Climate Change Response (Offshore Mitigation) Amendment Bill. What that would allow New Zealand businesses to do—and thank you, Mr Uffindell, for paying attention, it’s very, very important. The National Party needs to have a close look at this policy; we expect you to support it as well. What my bill would allow is for New Zealand businesses to mitigate their emissions offshore. Currently that’s not allowed. This Government imagines that New Zealand’s climate is a little bubble. It’s like the town of Springfield in The Simpsons; it’s got a glass bubble over it, right? And under that glass bubble is all of our emissions that we’re supposed to emit and then mitigate, right? Now, in fact, if we were allowed to mitigate our emissions offshore, we could do it at a much lower cost; we could engage in proper climate diplomacy where we’re helping developing countries replant forests that they’ve lost to unsustainable land-use practices. Places like Fiji where they cleared mangroves to get tourist boats in, we can help them regenerate their environment, reduce carbon, or suck it up in all of the regenerating bush, and actually allow threatened species like orangutan and eels and other things to have homes in places that currently they don’t.

So, look, ACT will support this bill, the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill, but we think there’s a couple of important things that we could do under the emissions trading scheme. Mr Speaker, thank you very much for your concern, running defence. Thank you very much, Mr Speaker.

Point of order, Mr Speaker. I’d just like to point out that the reason National Party members had difficulty hearing each other is that Simon Court is wearing a tie that is very loud! I just want you to reflect on that.

💬 Simon Court: Responding to the point of order—

No. I don’t know what’s been happening in the House tonight, but members should just sit down and let it wash over themselves, and I’ll call Camilla Belich.

Thank you, Mr Speaker. I’m very pleased to stand to take a call on this bill—a much-anticipated call. I am going to actually read out the name—the full 17 words—of this bill, the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. It’s a very short and discrete bill. It actually doesn’t cover Simon Court’s views on climate change leading up to his member’s bill on a totally different subject matter, you may be surprised to know. In fact, it only has, as I can see, three active parts, one of which is there for consistency, with the main change which is simply a change of date from 1 January 2023 to 1 January 2025. So, essentially, changing the implementation date from one date that is coming up soon to a date in two years. So quite a simple change that does make sense within the scheme that the Government’s put in place with the Climate Change Response (Emissions Trading Reform) Amendment Act and the Climate Change Response (Zero Carbon) Amendment Act.

This Government is committed to a just transition in climate change, and I think this is what this bill represents. There’s an acknowledgment that, for small forestry participants, it’s going to be difficult for them—due to the size of penalty that they would have otherwise had to pay, and the size of the assets that they hold—to actually have this Act come into force at the original intended date. I think it is both pragmatic and fair, and I think that was probably reflected in the fact that we seem to have support from around the House for this very sensible bill.

I don’t sit on the Environment Committee, but I do commend them for their work and their collegiality and the fact that they have agreed, I think by majority, that this bill should go ahead in order to, as I said, just ensure that there is fairness when we do implement these emission trading reforms and that there is pragmatism. I think all those people who are looking to the Government’s climate change initiatives should see this as a very positive move because it shows that there will be times when we need to take a step back and just allow that time for education and information to be provided to people that the emissions trading scheme affects, and that this is the perfect example of that. So I commend it to the House.

Thank you, Mr Speaker. Firstly, I’d like to congratulate my colleague over the way—Camilla Belich—for going through all 17 words in the title. I thought about doing the same, but—

💬 Hon Members: Do it.

Well, they’re saying go—no, I don’t know. It’s probably a bit of a mouthful, and I have a tendency to get tongue-tied and twisted this late at night. But I will dive into the more substantive points around a revised penalty regime, which came into place on 1 January 2021, which strengthened the penalty applied for people who failed to surrender or repay units to the Crown. It increased to three times what the carbon price was.

I was very happy to see through this—and I see it has unanimous support across the House—that this penalty has been deferred until the beginning of next year, and rightly so, as well, because, as has been reasonably well-trampled-over, over the course of this bill’s discussion, there are a number of small holders who will get punished, and the price of failing to surrender or repay units is fairly significant. I would probably wonder aloud, if you may indulge me, whether this was the intended penalty to be applied when first established. The carbon price was notably lower.

Simon Court walks off. I was going to talk about your member’s bill—no, no, go on! But it has risen significantly, and we note, for someone with 25,000 units, around 30 to 35 hectares, as my colleague Andrew Bayly intelligently advised us earlier tonight, the cost of that is significant. What are we sitting at, at the moment? Around $88 per tonne. So, for someone with 25,000 units that they have failed to replant, that is around $2.2 million. If you apply the three to one penalty, that balloons quite significantly to $6.6 million. That’s a lot, and that can be quite punishing.

It was also noted how we had quite a few Māori land owners and organisations raise concerns around this, given the nature of Māori organisations and how they’re set up and how it could produce a situation which was not equitable. I think that is a good thing to raise, and I think it’s a good thing that this has been pushed out a little bit longer so that people can develop awareness. I do acknowledge that there are probably quite a few participants in the industry who don’t have awareness of this, and I hope they don’t get to see their neighbours run into this sort of trouble, but I’m sure there will be one or two bad stories that do filter back down through the grapevine.

I did note that Simon Court talked about the ability to offset offshore, and before he had even said it, I had written down a note here. I actually wrote it earlier in the afternoon because I wanted to raise it as a point, because to me it strikes me as something that is quite a sensible option. The reality is that climate change is a global problem and it requires a global solution, and if we are going to achieve it, it is going to be expensive, but the best way to do it is in the most cost-effective manner. If we can spend, let’s say, $50 a tonne mitigating climate change overseas, then why not do that? Why would we spend $500 a tonne in New Zealand? That makes no sense. We get the same result.

💬 Hon Julie Anne Genter: We actually have to get to zero everywhere.

We get the same result. It’s a global problem. So let’s be smart and spend money as best we can.

💬 Simeon Brown: It’s just the greenwashers—that’s all.

There is a bit of that, Mr Brown. There are other ways that we can decrease the impact of climate change. We note that this Government probably doesn’t have a great track record on that. We did have quite a lot of Indonesian coal coming in over the last year—about 2 million tonnes.

My best friend is from Huntly—Tim, if you’re watching this, I know you’ll be very happy to know that the Huntly burners are burning loud and proud and putting their smog over the Waikato. Unfortunately, it’s not from the local mine in Huntly, but it’s keeping the lights on. But there are better ways, and we need to be more efficient. Thank you, Mr Speaker. I commend this to the House.

I’m delighted to rise to take a call on this small but mighty bill. I am reminded of that well-known children’s story about the young lady called Millicent Margaret Amanda, whose name was too long for her short stature so everyone changed it to Milly-Molly-Mandy. I suggest, therefore, that I will continue to refer to this bill as the “Forestry (Low Volume) Amendment Bill” as a shortening.

This is a very simple bill, as has been said. For those watching at home and wondering what is going on here, we have the Climate Change Response (Emissions Trading Reform) Amendment Act of 2020. This puts a small change to that regime to mitigate the risk of hardship for small forestry participants as they get to grips with our climate change emissions programme.

And as they come to the party, it was interesting to see, across the way, our colleagues in National—the “grey men of politics”—struggle with Mr Court’s bright tie and become distracted and, frankly, a little giggly. I can only urge our friends across the way to perhaps try to embrace the brighter side of Barkers. This admittedly is somewhat difficult for them but I’m sure, if they try, they can find a little diversity out there somewhere when it comes to colour. Otherwise, I do commend Mr Court for at least embracing—alongside his diverse and colourful tie—the concept of climate change. It was nice to see a member of ACT affirm the possibility that we might need to protect orang-utans, who apparently live in the Fijian mangroves, but never mind.

So a small but important bill which will help us to reduce the tide of water coming in on our beaches, and assist to make it easier for small forestry owners to slip themselves into the emissions scene easily and continue to help us with our climate change response. And on that colourful note, I commend this bill to the House.

Thank you, Mr Speaker. A little bit of confusion there. I hope I’m in the right place at the right time. This debating chamber’s been on fire this evening. It’s been good. We’ve had robust debate. This brings us to talking tonight on climate change. As I look around the room, a number of our Transport and Infrastructure Committee members are in the House. Of course, a lot of work that we do is to reduce the emissions into our atmosphere. It’s a very important part of what we are trying to achieve. I note, today, National’s commitment—or U-turn, should I say—to our piece of work in Government, and I’m very, very grateful for their support and I encourage them to keep on going further. To my colleague over there—Simeon Brown—I’m excited to continue the dialogue to look at how we might work together to achieve better outcomes in transport for our climate, my friend.

This bill, the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill, is a very good bill. Can I acknowledge the Minister responsible for this bill, the Hon James Shaw, who does some incredible work addressing our climate change challenges and coming up with great solutions for us, moving forward as a country.

This bill will extend the transition period provided for New Zealand emissions trading scheme participants with low-volume emissions liabilities related to forestry activity, within which they must comply with the penalties and compliance regime introduced by the Climate Change Response (Emissions Trading Reform) Amendment Act that was passed in 2020, I understand, by this Government. At that time, we were in Government with the Greens, and I appreciate their support to achieve this. This extension will last until 1 January 2025. It will mitigate the risk of serious hardship to small forestry participants who would fail to surrender or repay units by the previous due date of 1 January in 2023. It’s unbelievable that 2023 is just around the corner.

So I just want to acknowledge that this is a good piece of legislation. To my colleagues Rachel Brooking and the Hon Eugenie Sage, who leads out the Environment Committee: kia kaha tonu, the work that you do on such legislation like this is about supporting key stakeholders in the area to achieve the same goal that we all aim to achieve. But also the common goal there is to reduce emissions and address our climate change agenda. So, without further ado, I would like to commend this bill to the House.

Thank you, Mr Speaker, and happy to take a call on this bill; my excitement to leap up before just about pre-empting the previous speaker’s contribution. But, look, ultimately, what we’ve got here is a pretty straightforward response. We’ve heard from most of the speakers now on some of the ins and outs of why it’s important. I do just want to touch on a couple of aspects.

As we’ve heard, it’s unchanged from the select committee, but, effectively, what we’ve got here is a pragmatic solution, which is refreshing, to a challenge that was coming at a rate of knots—quite quickly, as it were—1 January 2023 being only some six weeks away. And, of course, the need to have to comply for those owners of small forestry holdings—not necessarily themselves small, but the holdings of which they have some forestry being relatively small in scale—being able to then have a bit more flexibility around working out how they may comply if they do find themselves in the position where they have this liability being imposed on them through the legislation, now have a further two years in which to work through what a solution might look like for them.

I’m sure that will be a massive weight off their shoulders, because, indeed, it could be a quite significant obligation. As we’ve heard, the threshold here is that small forestry participants are considered to be below 25,000 units per year—of course anywhere within that—but, potentially, if they were at the upper end, based on that current unit price in the $80-odd range, you’re talking a $2.2 million liability. At a three to one penalty regime, of course, that blows out to $6.5-odd million pretty quickly. That’s quite a large sum of money for someone to come up with, particularly if they are a smaller business, and looking at that sort of contribution would be daunting, to say the least, I’m sure. Even if they were able to borrow to fund that, you’re still looking, then, at a debt-servicing cost of several hundred thousand dollars. And, when you look at that in the scheme of what may be a small to medium farming business, or growing business, that could potentially be significantly damaging for their business, such that they are no longer viable.

I think, particularly when we look at the current environment—and we’ve seen interest rates moving significantly through the last year in particular—that potential liability from a debt-servicing perspective of someone looking at the upper end under this threshold would have shifted from somewhere around the low $300,000 mark as the annual interest bill, to now north of half a million dollars off the back of interest rate changes that we’ve seen. So that is a significant shift—an additional $200,000-odd of interest costs for business if they were borrowing and, in this instance, to try and repay that potential liability.

So anything we can do to relieve some of the pressure from this cost of living crisis we’re finding ourselves in across the board here in New Zealand is certainly welcome, whether that’s in a private capacity or for businesses. And, of course, we’re seeing them again across the country, facing unprecedentedly high costs at a time when revenue streams can be somewhat variable, and that is leading to a lot of pressure in a whole range of industries, but certainly in the food and fibre space as well. [Cellphone rings] And I suspect that may be my time up or some sort of acknowledgment of my wonderful contribution today! But I will give it another minute or so, just to check that that wasn’t actually an aberration—

💬 DEPUTY SPEAKER: We’ll take something between the two. Carry on, Mr van de Molen.

Thank you, Mr Speaker. So, as I say, you know, this is potentially a very big obligation for anyone who finds themselves in the position where they have a liability occurring under this legislation, and having that flexibility of a further two years to try and come up with a solution is certainly going to help. Of course, I gave that example of the debt-servicing scenario; I’m not entirely sure that there would be too many banks who would be willing just to provide an additional $6-odd million of debt to fund a liability under this legislation. And, as I mentioned, the ongoing viability impact that would come from the half a million dollar - odd interest bill would, of course, be challenging for the business as well.

But, ultimately, it does give them that capacity, and I’m interested—and not having been on the select committee or involved in this previously—around whether there are implications, not just in some of the scenarios we’ve heard earlier throughout this debate of people who came into or perhaps bought a block of land and found that they then inadvertently had a liability that went alongside that, which may or may not have been a result of, you know, due diligence not being as thorough as it could have, or it was perhaps just a genuine situation where it may have changed hands several times and none of those parties knew, and now suddenly somehow it’s come up. I’m stretching it a little bit here, but the reality is you could find yourself with this liability and those situations.

But, quite aside from that, too, if you were to perhaps inherit a property—and therefore there was no risk of someone saying, “Well, hey, you perhaps should have just done better due diligence and worked this out.”—actually, in that situation, I suspect you’d still be facing a significant liability under this legislation. You wouldn’t be exempt, and so you would have to work through a solution as well.

So, on the face of it, a further two years to manage through that challenge is appropriate, given that we are talking, in the overall scheme of the emissions trading scheme and what we’re trying to achieve: a relatively low impact, a negligible impact from these small holders or holders of small forestry blocks, as it were—not small in the people themselves or necessarily bonsai-sized trees—but I think we’re all aware of the context of, generally, a small block of land, compared to a large forestry parcel. And so, on that basis, I think I’ve outdone my time, and I will commend this bill to the House.

That was an excellent contribution. I’d like to commend that member, Tim van de Molen. It’s a pleasure to speak on the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill.

When we think about the last year—and lots of things have happened—but when we think about the Wellington region in New Zealand, we’ve seen the wettest, warmest winter in our history. We only have to look around our roads, our coastal areas, our hills to see the kind of impacts that climate change is having on our communities and on our natural environment. And, at the same time when we have COP27 meeting, with accounts of a third of Pakistan being flooded, US Hurricane Ian—yes, there is a hurricane called Ian—devastating, having an impact over the United States. There’s been significant weather events going on.

So this bill will operate to extend the transition period provided for New Zealand’s emissions trading scheme (ETS) participants with those low-volume emissions liabilities related to forestry activity, within which they must comply with the penalties and compliance regime that’s been introduced by the Climate Change Response (Emissions Trading Reform) Amendment Act. This extension until 1 January 2025 will mitigate the risk of serious hardship to small forestry participants who would fail to surrender or repay units by the previous due date of 2023. So, again, this is providing an ability for a just transition. So while it’s important that we move and make those changes that we need to do, it’s important that we do that in a way that’s sustained, also, by those that are in the smaller forestry areas.

In a nutshell, it operates a simple premise: businesses that are responsible for greenhouse gases that cause climate change face a price for those emissions, and those that reduce emissions or plant trees to take carbon out of the atmosphere do get the benefit of that financial reward. For the decade that it’s been in place, prior to our reforms, it’s not been allowed to do the job it was designed to do—to cut climate pollution—and so this is another step in that direction to make sure we make that change and make sure it’s able to be complied with.

The emissions trading reforms were not just about reducing pollution that businesses emit to the atmosphere but it was also about removing greenhouse gases from the atmosphere, both by discouraging deforestation and incentivising the planting of trees in the right places. The legislation added a permanent forest option for post-1989 forest to the ETS. This has provided more incentives for landowners to integrate permanent trees into their landscape, better use of their less-productive agricultural land, and also the ability to diversify their income should they wish to.

As a Government, we are listening to the concerns of those communities and those sectors involved. We are also considering the independent expert advice provided to us by the Climate Change Commission. It’s important that we make these changes as part of our wider work in this space. As part of our work to implement a just transition, we must support those in the forestry and the agricultural sectors that we are working with on a wide range of other initiatives. Earlier this year, we consulted on a code of ethics for registered forestry advisers. The code was made in September and came into force on 17 October. And we are also, in addition to this, working on managing exotic forestation incentives and consulting on a national direction for forests in the Resource Management Act (RMA).

These proposals give the opportunity for local councils to have more control over where forests are planted and how they operate within the area. They also aim to manage the effects of exotic carbon forestry on nature, improve wildfire management for all forests—which is critical in some of our rural areas—and address the key findings of the one-year review of the National Environmental Standards for Plantation Forestry.

I’d like to conclude by saying we need to continue making changes in this space if we are serious about towing our weight internationally and driving the climate change that our planet so desperately needs, and I commend it to the House.

Motion agreed to.

Bill read a second time.

I declare the House in committee for the consideration of the Oranga Tamariki Amendment Bill.