Land Transport (Clean Vehicles) Amendment Bill (No 2)

Members, we come now to Part 2. This is the debate on clauses 9 to 12, “Amendments to Land Transport (Clean Vehicle Standard) Regulations 2022”. The question is that Part 2 stand part.

Thank you, Mr Chair. So, as the Minister rightly pointed out, matters relating to carbon dioxide accounts and how they must be operated are in Part 2. In Part 2, we have clause 10, which amends regulation 14, so that if a category 2 light vehicle importer imports vehicles between 1 January 2023 and 31 May 2023, before any transfer of credits—in other words, you imported a low-emissions vehicle, you get a credit—in respect of vehicles imported in the period. is given effect to, the account holder must make the credits available for offsetting, and the director may offset the credits against any charges payable by the importer in respect of other vehicles imported in that period.

Now, that’s a very, very interesting amendment. One of the things that I want to bring to the attention of the committee, and to New Zealanders who may be listening to this debate or watching it, is that often it’s the organisations and the individuals directly impacted by legislation who have the deepest and most accurate insights into the way that legislation and regulations are going to affect their businesses and their consumers—their customers. That is why ACT exists. ACT stands for—it’s an acronym—the Association of Consumers and Taxpayers. When it comes to this piece of legislation, ACT firmly believes that taxpayers are getting a raw deal because of the enormous amount of cost and time and waste of human resources that’s gone into establishing the scheme in the first place, particularly taking the priorities of Waka Kotahi NZ Transport Agency, who are tasked with delivering a safe and efficient road system, taking their eyes off the ball at a time when our roading network has severely degraded and is going to take enormous investment, planning, and resourcing to recover—taking their eyes off the ball and forcing them to start looking at how to reduce New Zealand’s emissions when we already have the emissions trading scheme.

So, Minister, and for the people at home listening to this debate or watching it, the reason ACT exists—the Association of Consumers and Taxpayers—is because we fundamentally believe that when it comes to things like importing vehicles and measuring their carbon dioxide emissions, actually, unless there’s a benefit to doing that, why on earth would you set up a regulatory scheme to do that, and why—

CHAIRPERSON (Greg O’Connor): Mr Court, you’ve previously advertised Subaru; you’re now advertising a political party. Please come to Part 2 of the bill. I’ve been very generous; you’ve been going for three minutes. Part 2 of the bill, please.

Thank you, Mr Chair. I must say that when Greg O’Connor, who is in the Chair right now, was the chair of the Transport and Infrastructure Committee, he gave lots of time to the submitters who raised these very issues that the ACT Party is raising about this bill. So we do appreciate your quality chairing of the Transport and Infrastructure Committee at the time this passed through.

Now, I want to come to the transfer of credits. Now, what we’ve heard from the industry—and this is potentially an answer to the problem—is that there’s a risk that organisations that import low-emissions vehicles will get the carbon credits and then hold on to them, because they know that under this Government, which has signalled that the emissions cap has to go down every year, the price of carbon credits under the emissions trading scheme is only going to go up. I mean, it was $20 a tonne when I came to Parliament in 2020, then $25, then $40; now it’s $85 a tonne, and we hear from the Climate Change Commission or climate Minister James Shaw that they fully expect it to be in the hundreds of dollars a tonne in the near future.

So it would make sense, if I was a motor vehicle importer importing low-emissions vehicles, that I might want to save my carbon credits for another year, because like any Ponzi scheme, if you think the value is only going to go up, then you hold on to them until the day before the scheme crashes. The problem is, Minister, like all Ponzi schemes, no one knows who is going to crash—[Bell rung] Mr Chair, I want to come to my question. So before any transfer of credits in respect of vehicles is allowed—

CHAIRPERSON (Greg O’Connor): Sorry, Mr Court; I haven’t given you the call yet. Simon Court.

Thank you, Mr Chair. I’ll come to the question.

CHAIRPERSON (Greg O’Connor): That would be good.

So does this clause—clause 10(6)—in fact, relate to the concern that some importers raised with me that organisations that import low-emissions vehicles could potentially hoard their carbon credits in the anticipation that some time in the future they’d be able to redeem them or exchange them or sell them and trade them at a much higher price? Because it looks like they’re going to have to reveal and hand over the ability to exchange them or trade them to the Director of Land Transport.

That actually raises another issue, Minister. So, firstly, does this clause address the concern that’s been raised with me about hoarding carbon credits under the scheme? Then it actually raises another question. Some vehicle importers actually might want to hold on to the credits because they get vehicles in batches. They might get a low-emissions batch, and then at another time of the year, they’re going to get high-emissions vehicles, and so they may want to hold on to their credits to balance them out. But it looks like, in this clause here, these credits that they might accrue are going to have to be offered to the director to offset against any charges payable when it might make more sense for that importer simply to hold on to the credits and if they have sufficient working capital to pay the charges. So, Minister, I would like to know, does this clause, 10(6), which amends regulation 14, address the risk of hoarding carbon credits under the scheme? And will importers actually be required to offset charges in any given month?

Then I want to come to clause 11, which amends regulation 28, about information being publicly available, and that any person who wishes to apply for information must apply to the director on the agency’s internet site. So, Minister, could you please explain also the intent behind clause 11? Thank you.

In respect of regulation 14—and this is in subsection 6, in clause 10—which eventually got to a question, no it is not primarily about hoarding. It is simply about giving the Director of Land Transport the ability to let out at that period. As I’ve explained earlier in the debate, generally speaking for category 2 importers, charges will be paid at the time. They won’t be held on to for a period of time. So, given that that won’t occur between January and June, we want the process to be as efficient as possible when there’s, effectively, a wash-up in June. So this simply enables the director to net out any charges versus any rebates that have been incurred through that period. So instead of going through an inefficient process, perhaps, of a fee of $10,000 having to be paid when there is actually rebate of $12,000 in the system, we can actually net that out and have a much smoother process both for the agency that is overseeing it and also for importers as well.

When the member gets to the question around hoarding, he draws an illusion to the emissions trading scheme (ETS) as just a market mechanism and market behaviours around carbon credits. It’s quite different in this case, because, of course, the ETS, effectively, has a market price for carbon. In the case of this legislation, this scheme, the price is set in the legislation. There’s a price that is set now, and there was a price that was set that comes into effect from 2025. There’s much less opportunity, effectively, for gaming behaviour, if you want to term it in that way. This really just is about getting out and having a smooth process once the January to June period concludes, and from that point onwards category 2 importers will then carry on in the way that was envisaged under the original legislation.

The member’s second question—the member might want to remind me what that was, and I’ll quickly answer it.

Thank you, Minister. So just in terms of clause 11, which amends regulation 28 and which says, “Before the information described in subclause (1) is made publicly available, any person who wishes to receive that information must apply to the Director via the Agency’s Internet site”, could the Minister just please explain the relevance of that clause for the committee and for people who might be listening or watching at home?

Oh, it simply means that the importer can approach the director to get access to that information.

I move, That the question be now put.

So, Minister, you make the point that the scheme—the way it values carbon credits under the scheme—is different from the emissions trading scheme, which you described as a market. One of the challenges with the emissions trading scheme, and, I think, this legislation as well, is that the price is, essentially, set by a Minister’s expectation. So if the price of a carbon credit is set in legislation here, and we know the Minister and other Ministers who are either part of the Government or support parties have extremely ambitious climate targets which they tell us often we haven’t met yet—we haven’t fulfilled, we should be more ambitious, that there’s more that could be done, there are more levers to pull—is it likely that a Government that this Minister was a part of would increase the carbon charge under the scheme? Because if that was the case, then not only would it put up the price of vehicles being imported, it would also indicate that organisations which held on to the carbon credits were quite rational in doing so, because they could expect—like, would there be an annual increase, for example, Minister? Would there be an increase in parallel with the cost of a carbon credit under the emissions trading scheme?

Minister, I think it’s really important we understand that. Is this a one price forever, fixed in the legislation and the regulations around it? Or is this carbon price—which will apply to the emissions from these vehicles or to the vehicle based on its emissions intensity factor—likely to change? Who will have the power to change it? And should vehicle importers, customers, and people who need these vehicles actually be concerned that they need to get in really quick and buy a petrol or diesel vehicle because the price might go up?

And that brings me to a further question, thank you, Mr Chair, which is: look, isn’t the risk with this legislation and with this regulation, amended or not, delayed or not by six months, that actually imposing costs of thousands of dollars on petrol and diesel vehicles for which there is currently no substitute, Minister—we’re not talking about people, individuals and businesses, that necessarily have a choice. Currently, no substitute for a large people mover at a reasonable price, or a second-hand ute for somebody, a tradie, somebody just starting off, or a young farmer, a sharemilker who’s not going to go and buy a brand new $60,000, $70,000 ute—

CHAIRPERSON (Greg O’Connor): We’re well off Part 2 with this question.

But, Minister, this—

CHAIRPERSON (Greg O’Connor): Mr Court, indulging the Chair.

I’ll come to the question. So isn’t it likely that the sum of all of these policies, whether the implementation date is delayed or not, will be—it will actually delay, because of cost, new vehicles coming into the fleet because people won’t be able to afford them. That’ll be the few thousand dollars extra they won’t be able to afford, and it will actually make our fleet older and more emissions-intensive than it otherwise would be without this intervention.

I think, Minister, it would be helpful if you give us your perspective on that because we’ve heard about the cost-benefit analysis—frankly, I don’t think that stacks up. So if you just tell us a little bit about: will the Government make changes to the price of carbon under this scheme, and, if so, will that put up the cost of people—importers and organisations—importing vehicles? And will the sum effects of this policy, which adds cost to petrol and diesel vehicles, even lower-emissions ones, second-hand ones that are currently in the fleet, will it make our fleet actually older and dirtier?

I’ve already answered the first question and the answer is no. We’ve already set the initial price with a further price to apply from 2025. No Parliament can bind a future Parliament, but it’s not the Government’s intention to do that.

In respect of the second question that the member asked—which is more an in-principle question about the Clean Car Standard per se than this particular part—the evidence is very clear that countries that apply a carbon dioxide emission standard have cleaner fleets. New Zealand is one of only three countries, along with Russia and Australia, that doesn’t, and we have one of the dirtiest fleets in the OECD. You become a dumping ground for the dirtiest vehicles in the world if you don’t have a regulatory standard. That’s what’s happened in New Zealand, and importers already report to me that having a standard in place, even one that hasn’t kicked in via legislation, makes it easier for them to access cleaner vehicles in the future.