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

Thank you, Madam Speaker. I present to the House a legislative statement on the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill.

ASSISTANT SPEAKER (Barbara Kuriger): The 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 third time.

Firstly, I want to begin by thanking those who have worked to progress this bill through to this stage within the condensed time frame that has been required. I appreciate the considerable effort from members of the Environment Committee and I thank the members of this House for their engagement with the bill during the recent committee of the whole House stage.

As I said before, this bill represents a simple and pragmatic approach to ensuring that small forestry participants in the New Zealand Emissions Trading Scheme—the NZ ETS—continue to be safeguarded from the impacts of the three for one penalty if they fail to pay units on time, while a revised and more proportionate penalty is finalised. The three to one penalty for failure to pay units by the due date is set at three times the price of carbon, with no discretion to be reduced. For forestry participants in the NZ ETS, this penalty usually arises when forests are harvested, deforested, or deregistered from the scheme, and the resulting unit liability is not paid back in time. While the three to one penalty came into force for most NZ ETS participants at the beginning of 2021, its application was deferred for small forestry participants until the end of this year due to concerns that it could cause serious financial hardship if a small forestry participant were to incur the penalty by being unable to pay their unit obligations on time. To put this into perspective, a small forestry participant with 10 hectares of forest land might be required to pay units valued at, say, $500,000 after they were harvested; if they failed to pay those units on time, they would then be subject to a penalty of around $1.5 million over and above the $500,000 that they were originally required to pay. The scale of this penalty puts them at risk of serious financial hardship, meaning that their home or farm may be at risk.

The transitional arrangement was initially set up as an interim solution to protect small forestry participants from risk of serious financial hardship. Instead, it was decided that the excess emissions penalty would continue to apply to small forestry participants who failed to pay units on time. This is set at $30 per unpaid unit, and, unlike the three to one penalty, may be reduced in size by the regulator in certain circumstances. The transitional arrangement has been instrumental in mitigating the risk of serious financial hardship to small forestry participants, whilst officials develop an alternative penalty that is more appropriate for these participants, which will be effective from 1 January 2025. However, as the year end approaches, so too does the expiry date of the current transitional arrangement. As acknowledged previously by members of the House, the NZ ETS is complex and it is important that we get the settings right for small forestry participants in the future. This bill ensures that it is possible by extending the expiry date of the transitional arrangement to cover unit liabilities arising from forestry activities carried out before 1 January 2025. The two-year extension recognises that the risk posed to these participants by the three to one penalty remains, and ensures that they continue to be safeguarded while a revised penalty that is more proportionate to them is finalised, and that there will be sufficient time for officials to educate small forestry participants on what a revised penalty will mean in practice.

The title of this bill is undoubtedly long for the very simple legislative change that it proposes. However, the benefits that it delivers, which I have discussed today, should not be underestimated. I commend this bill to the House.

The question is that the motion be agreed to.

I had to make you wait for that one, Madam Speaker.

ASSISTANT SPEAKER (Hon Jacqui Dean): Yeah, I’d nearly passed you over.

Ah, yes, well, luckily we didn’t. Actually, this would probably be the only bill that is not as long as its title: the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. And, I kid you not, the bill is not much longer than that, actually. But it is an important bill.

The complexity of our emissions trading scheme when it comes to things like forests and their age, which is an arbitrary line drawn only because of the Kyoto climate conference—it’s a nonsense, but, anyway, it is what it is. But, unwittingly, some farmers and landholders who own forests, who are caught up in this, are blissfully unaware and they fell it—cut the forest down or burnt it or whatever happens—and they end up with a liability three times what would have been the original cost, but they were unaware of it in the first place. So this happens all the time, actually; it’s quite frequent. And I know farmers who’ve been caught up in this and then are terribly upset because they end up realising what’s happened when someone tells them they’re liable. And, in some cases, they find out anyway without being told by someone else. Quite frankly, if they don’t tell anyone, they won’t actually get caught anyway.

It is pragmatic; I think it’s a really good decision to do it. As I said, the arbitrary nature of that—any time he’s come up with legislation of this type, then it has a good purpose, but there are always unintended consequences. And it’s until you get to the point where these things manifest themselves, when people are being caught as they have done—we have to do something about it. Look, I’m not quite sure why this ended up in the urgency motion. No one really knows why we’re in urgency for all of these bills. I know, really, all they want to do is get rid of the five waters legislation. But this is necessary, the National Party supports it, and I commend it to the House.

Thank you, Madam Speaker. I’m very happy to be speaking on the third reading of—and I’m going to say it, as well—the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill—deep breath!

What this bill does, as previous speakers have said, it’s that it’s for a good purpose—so I agree with Stuart Smith—and it’s really because these small forestry participants could be in quite a financial pickle with the penalty set at that three to one ratio that the Minister spoke about. So we’re extending their exemption from that penalty regime for two years.

The previous speaker just talked about why we’re in urgency. This bill had its first reading on 18 October, which was this year—quite recently. It went to the select committee, there were no submissions on point in the select committee, and the select committee made no changes, and why we need that fast process is because otherwise the three to one ratio would start from 1 January 2023, which is quite soon. So it’s important that this bill goes through quickly so that those small forestry participants aren’t hit with the penalty scheme on 1 January 2023 and can, in fact, wait until 1 January 2025. But, in fact, during that two-year period, the intention is for a separate regime to be progressed that works for those small forestry participants.

So, as the Minister said, this is very straightforward. It’s a pragmatic bill, and I commend it to the House.

Well, it’s remarkable that there’s such little deliberation on such an important piece of legislation—

💬 Rachel Brooking: Oh, where were you in the committee stage?

—the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. And Rachel Brooking asks where I was. Well, the ACT Party believes in participating in democracy, but there are just a few of us, and we’re stretched thin at the moment, opposing some terrible bills that have come through this House in the past 48 hours and actually having to also try to channel the concerns of our constituents and stakeholders. And the member Rachel Brooking made a good point: there were no substantive submissions on this piece of legislation.

Now, what this bill does is it proposes to extend the time frame for the Ministry for the Environment and the climate change commissars to work out a regime that won’t so severely penalise mum and dad farm foresters that they march on Parliament with pitchforks and burning pine branches. Right? Because when this piece of legislation was initially passed—which imposed this penalty regime on farm foresters—people who grow some pine trees as an investment for their future and who might think that once those pines are cut down, the revenue from that will support them in their retirement or maybe pay the tuition fees for a child to go to school. And it turns out that by cutting them down and potentially not replanting them, maybe they want to use their private property for something else. I mean, who knew? Under this regime, using your private property—you have to ask for permission for everything.

But imagine they wanted to cut the trees down and use the revenue from that to pay for the kids’ school fees or pay for their retirement, and then they discovered they’re subject to a penalty regime because, apparently, by cutting down trees, you’re doing so much damage to the climate by releasing that carbon in the form of a tree, that you will be subject to penalties three times—three times; extraordinary penalty: three times—what the cost of the emissions are under the emissions trading scheme. And when the emissions trading scheme was $5 a tonne for carbon or, well, $15 a tonne, you probably ended up still making a profit on your trees. When it was $25 a tonne, maybe that was break even. And $45—crikey, that would be frightening. It’s now $88 a tonne of carbon, today. So that means that if you had to pay a penalty because you decided to cut down the pine trees that you planted 18 or 20 or 23 years ago—about the typical cycle for structural-timber forests or for high-quality timbers grown in a managed pine plantation—then you could be subject to penalties of $270 to $280 a tonne of carbon apparently emitted.

Now, that ignores the fact that these pine trees, potentially, could be made into a wood product that ended up in a house with a design life under the Building Act of 50 years. That’s right, Rachel Brooking, I can see you having a bit of a chuckle over there. Imagine that. Timber for a tree that contains carbon that’s cut down and milled and goes into a house, which has a design life of 50 years, and you say, “The carbon’s still locked up for 50 years.”, but to the mum and dad farm forester, “Oh no.”

This Labour Government that declared a climate emergency, supported by a green velvet hand with the Green Party’s climate Minister, James Shaw, passed this piece of legislation, back in 2020, that imposes these outrageous costs on farm foresters, on smallholders, and on people with really small plots that they want to cut down, mill, and maybe even turn into woodchips and send off to the local school to use in their boiler, because they’re not allowed to use coal any more—apparently because if schools use coal or people use coal and boilers for their business, like milk powder production and so on, then, you know, the climate’s going to be damaged and the polar bears will have nowhere to live, and the Green Party MPs’ children will have no future. We hear this a lot.

But let’s just come back to the bill. Let’s just come back to the provisions of this bill. Let’s come back to it, the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. This is barely a pimple on the backside of a pine tree, this problem. And yet here we are in the House. In fact, the Minister himself, when he introduced it, I could tell he was exasperated—exasperated—having to come to the House and introduce this piece of legislation to fix this problem. And he thought, with a stroke of a climate fairy’s wand, he could solve climate change for New Zealand with this climate change response amendment bill or the zero carbon Act or an emissions reduction plan or some other 300-bullet-point multiple-PowerPoint-slide plan that actually doesn’t reduce emissions one bit. But it turns out, in the real world, in practice, in the world that people live in, farm in, grow pine trees to make stuff like timber for houses or even timber bridges, if you’re one of the climate pixies who works at the New Zealand Transport Agency under the current regime, that, actually, it’s quite complicated.

And if you want to solve climate change using Government policies and Government laws, you’re going to cause all kinds of problems, because Government can’t imagine every single scenario that might happen to an individual, to a family, to a business, or, say, to an organisation like Māori landowners, who own land collectively and might decide that the palm plantation that they planted, say, back in the 1990s, as an investment and that they want to cut down now and use that timber, maybe, to build homes in a papakāinga environment or maybe just for cash because, goodness knows, Kiwis need cash these days with the cost of living crisis. And yet the Minister, who, bless his cotton socks, is actually sticking around in the House to make the case for this piece of legislation, certainly believes that with a just a little bit more central planning, he can save us from climate change, from greenhouse gas emissions, save the polar bears and all of those other creatures who’ve managed to survive on planet Earth since the end of the last Ice Age—Anna Lorck, polar bears; this is all about polar bears, that’s right.

💬 Anna Lorck: You don’t have to take 10 minutes.

And the member here says, I don’t have to take 10 minutes.

ASSISTANT SPEAKER (Barbara Kuriger): Mr Court, it’s actually about forestry, so can we stick to the bill, please.

Madam Speaker, you’re right. And I’d like to come back to the climate change response aspect of this bill, which is if you cut down pine trees or if you cut down forests on your land, should you be subject to a three times penalty regime—three times the cost of an emissions unit under the emissions trading scheme, which is about $88 a tonne. The ACT Party says, no, you shouldn’t, but we’ll support this bill for one reason—for one reason only. That’s because we don’t think that farm foresters and families and Māori trusts that own land collectively and planted pine trees in anticipation of earning some money in a certain time in the future should be subject to this penalty regime. We don’t. We also reject the premise of the zero carbon Act. We don’t think it’s necessary to have centralised control of climate policy. We actually think that New Zealand businesses, farmers, individuals, and people like me, who buy petrol and who pay for our emissions through the emissions trading scheme, have sufficient incentives to reduce our emissions, become more efficient, and carry out our own just transition into a low-carbon future without the green velvet hand of the climate Minister on the back of our neck.

So the ACT party will support this bill not because we think it’s good policy but because we think it would be terribly unfair to impose a penalty regime that applies from 1 January 2023 to farm foresters and to people who simply thought that if they grew some pine trees and then cut them down sometime between 15, 18, or 23 years down the track, they wouldn’t be subject to these horrendous penalties. So the ACT Party would actually beg the Minister, “Would you please save us from bad climate change policy?” But ACT will support the bill.

Tēnā koe e te Pīka. I was actually really struggling with the last speaker, Simon Court, because the same person who doesn’t believe in taniwha spent so much of his speech talking about fairies and pixies. I rise on behalf of Te Paati Māori—

💬 Simon Court: They’re not mine. They’re not mine.

—it is a long night—to speak to the third reading of the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill. The name is longer than the hours that we’ve done in the House this week.

This bill will extend the transition period provided for emissions trading scheme (ETS) 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 2020—there is nothing that is short in any of this language.

The extension until 1 January 2025 will mitigate the risks of serious hardship to small forestry participants who would fail to surrender or repay units by the previous due date of 1 January, 2023. Most have addressed this as well; we support that whakaaro.

This bill responds to the concerns of Māori landowners in being unfairly disadvantaged in the short to medium term under the ETS. So this is in response to the outcry of small forestry owners—including collective Māori land holders, forestry trusts—regarding the recent changes made to the forestry policy settings in the ETS. So we thank those land owners for, despite the constraints, taking the time to engage with us and challenge Government to ensure that these changes didn’t get rammed through.

We also acknowledge the Government for listening to the concerns, which we put before them, on behalf of Māori landowners, in the House. However, by not dealing with the core of the issue, we’re concerned that the Crown is kicking the can down the road and creating long-term uncertainty in the sector.

One of the options provided by the Ministry for Primary Industries to the Government—“Improved excess emissions penalty: Liability X market price with discretion to reduce by 100 percent”—said that it would have been the best option for Māori landowners as it gives the regulator the discretion to waiver any penalties due to the nature of the situation.

Our whānau is sick of having options presented to them that have been developed for them but without them. The Government’s relentless focus on engaging with wealthy dairy lobbyists has meant they’ve ignored the groups and sectors who need the most support to transition and remain economically viable.

We have been concerned and continue to say that our concern is that we do not want to see a free pass given to others while punishing Māori landowners. That is not a just transition by any stretch of the imagination and it represents a breach of Te Tiriti o Waitangi. If we’re going to truly achieve a just transition—one that is a true just transition, not the one just prescribed—as we undertake the necessary transformation in our society and economy to respond to climate change, then climate solutions must be by Māori, for Māori, according to Māori.

We are pleased that the Government has pressed pause on these changes, and is allowing people time for transition and implementation. However, they must not let this issue lie, but rather work with our people and our communities, including in this sector, to create a long-term solution that both reflects the urgency of the climate crisis and the economic reality for small landowners. Nō reira, tēnā tātou katoa.

Motion agreed to.

Bill read a third time.