Land Transport (Clean Vehicle Standard) Amendment Bill

Members, we come now to the debate on clause 6. Members, please note that Arena Williams’ tabled amendment inserting a new clause 5E amending section 167C should properly be an amendment to clause 6, so it will be considered as part of this debate. This is the debate on clause 6, “Section 167C amended (Regulations for purposes of Part 13 (clean vehicle standard))”. The question is that clause 6 stand part.

Thank you, Mr Chair. This is a significant clause within the wider scheme of the bill, and it, basically, relates to removing “2027” and replacing it with “2024”. Now, that might seem very simplistic in terms of what is on the page, but the implications of that are significant in terms of the points that need to be traversed this afternoon in the Parliament, because, basically, in essence, what this is doing is it’s saying regulations that were already going to be permissive under the Act are going to actually be brought forward. So, as it stands in law currently, regulations for the setting of emissions targets for these vehicles would have kicked in from 2027. This proposal is to scrap that and to bring the date back into 2024 so that for the coming year these targets could be set by regulation.

Now, I ask the Minister in the chair, the Hon Erica Stanford, please—and she may want to seek some advice around this. I note that the regulatory impact assessment indicates on page 6—we’re on a new clause—a reference around the source not being found. It’s the final paragraph there. It starts with “Error! Reference source not found.” So, Minister, the committee would be grateful if you were able to perhaps seek some advice and provide a response around that—specifically, why that is there.

It’s also really interesting that within that paper—and this reference there is earlier on—it talks about “Calculation will require in depth consultation with the sector”. The Minister of Transport has already identified that he believes the only form of consultation that needs to take place is with importers. It’s really interesting, though, that everyone, including importers and those outside of importers, will need to live with the consequences of this particular decision, and surely, Minister, there should be an opportunity to engage, as part of the process of consultation, with others outside of the sector.

I’m interested in hearing from the Minister what evidence they have seen regarding the health benefits of the standard and the implication that any changes will bring—in particular, this change. So this is, basically, saying that we’re going to rewire and wind back three years—as an envelope of time—when the regulatory powers could kick in. We’ll talk specifically about the targets in the next call, so I won’t go there, but I am interested in hearing from the Minister what evidence is the Minister and the Government relying on in bringing this back earlier by three years, given that the targets as they currently stand are set in legislation, and we on this side of the Chamber are still sort of puzzled as to why you would change that. You already have a process kicked in. It might be because the only people that were able to be consulted prior to this point and the only ones that will be consulted in the future are going to be the ones that are going to benefit, perhaps, by not having to have incentives to ensure what they are importing into the country are heavily favoured in the form of no- to low-emission vehicles.

So the question for the Minister is that I’d be grateful, Minister, if you could clarify that error source issue that’s currently in front of the committee, to clear that up. Secondly, just what evidence does the Government have regarding the health benefits of the standard and the implication of the changes—in particular, around the wind back by three years.

Thank you, Mr Chair. I am just a little interested in this section of the debate because clause 6 and clause 7 are, arguably, the most substantive parts of the committee stage of this bill, and I wonder whether or not we’ll be able to get adequate answers, not having the Minister who is directly responsible in the chair. But I will go on and ask my questions, anyway.

Clause 6 is the bit of the bill that is now enabling targets for carbon emissions from light vehicles imported annually to be prescribed by regulations for any calendar year. So that means within the next year—2025, which is only less than six months away—the targets can change from what they have been for the last few years. Previously, the Minister for Transport had stated that this bill was about increasing certainty for the vehicle industry. He then subsequently answered my question to say, “Well, once we can do this by regulation, we can make the targets more stringent or we can make them more permissive.” The whole point is that within a year or two, we could have different targets and nobody knows what they will be and whether they will be higher or lower. How on earth is this introducing more certainty? This is creating uncertainty for everyone.

Secondly, just following on from the point that my colleague Tangi Utikere made, which is: is it the case that only vehicle importers will be consulted on any new targets for levels of carbon dioxide that are brought in under regulations, and, if so, how on earth could this be appropriate, given that this will have massive implications on New Zealand’s overall carbon emissions and air quality?

Thirdly, my question to the Minister is about whether there will be a full climate impact policy analysis done—a CIPA—on proposed changes to the standards for 2025, 2026, or 2027 before they are brought in through the regulatory-making powers. Will there be a full climate impact analysis, and will that be public?

I’d just indicate to members that at the moment I’m aware that, obviously, the Minister in the chair will still be required to address those questions, and I’ll be liberal in the timing of the Minister to take advice, if necessary, and the pace of the committee will be reflective of that.

I’m good to go. Thank you, Mr Chair. Just in answer to the questions around the error source, that has been now fixed, and it says, “Table 2”. I just wanted to clarify for the member that that was just a formatting error. It has been fixed, and it says, “Table 2”.

I want to make it clear that we, as a Government, are committed to the Clean Car Standard, and the health benefits of that are obvious and you can find them anywhere. I mean, noxious fumes, clearly, are detrimental to human health, and the whole point of having a clean vehicle standard is to reduce those, which we are committed to.

I think the previous Government knew that there would always need to be some changes. We’re just bringing that forward so that we can take a look at that now to make sure that we’re getting the benefits of the clean vehicle standard: to make sure that importers are able to import the vehicles they need to meet the standards, as well as getting the reductions in emissions that we need for those obvious health benefits.

Thank you, Mr Chair. Minister, can I thank you for that. I think you should just stay in the chair, because we’ve spent nearly six or so hours asking just that one formatting question, and it seems the only response that we needed was that it’s simply meant to say “Table 2”. Already, you have provided a direct response in a much shorter time, and so I thank you and encourage you to remain there. Transport might be your new calling perhaps. But can I just pick up on the issue around—

Tim van de Molen: Point of order, Mr Chairperson. Thank you, Mr Chair. Look, I just wanted to pick up on the comment you made before the Minister spoke, in which, if I heard correctly, you were suggesting that you would require the Minister to address questions. Now, that is a significant deviation, if that’s what you said, sir, from the current process where Ministers indeed are not specifically required—the Chair cannot require the Minister to answer questions. So I’m interested in whether you are making a new ruling to that effect, or if I misheard.

CHAIRPERSON (Greg O’Connor): No, you may have heard me say that of course there’ll be an expectation that the Minister will address the questions. That remains the case, and I’m sure that the member, having been on both sides of the House, would certainly understand why there would be such an expectation. But I thank you for helping me clarify that.

Thank you, Mr Chair. I guess one of the questions that I do have for the Minister is how will the Government seek to maintain the ambition that is evident in the current targets—and we’ll come to clause 7 later. But how can that sense of ambition be maintained if, effectively, the Government is winding back the date upon which it would make it easier to water down what the threshold is for those targets and for those standards?

The Minister has informed the committee that the Government is serious about the work in this space, but that doesn’t really align with the ability to, carte blanche, with limited consultation—and we’ve heard previously from the Minister that in setting these regulations under his watch, the only people that will be consulted are vehicle importers, and that’s it. Now, vehicle importers clearly have an incentive when it comes to perhaps looking at what are the best cost options for themselves. That is very easily the case to be to the detriment of, potentially, the environment. There’s nothing in here as a stopgap measure in terms of the timing of this to suggest anything otherwise, so I am interested in hearing from the Minister a response around that.

The other one is that previously, we referred to the Parliamentary Commissioner for the Environment, an Officer of Parliament. The committee is extremely familiar with the contents of that letter now, but it was suggested, I think, from the Minister in the chair that the concerns that had been identified in the commissioner’s letter were more appropriately targeted towards clause 6—which we are at, at the moment—and it comes to timing. So my question there perhaps is for the Minister, around a response to the suggested amendment from the commissioner, and, in fairness to the Minister, it may require a wee while to come back on a response to that, because this was traversed in previous parts. But it was also, essentially, signalled to be parked for the latter clauses. It relates to the suggestion from the Parliamentary Commissioner for the Environment to make a minor amendment to the drafting of section 175A(1) of the principle Act so that it actually allows for the time frame to be set not later than 30 June 2025.

What this is currently suggesting is the date would kick in from 2024; what the Parliamentary Commissioner for the Environment is seeking is an amendment—which I think is quite significant, given that the commissioner has sought to make this particular view known. If this was at select committee, the commissioner would have no doubt submitted and would have made this point known to members of the committee. There would have been advice received on that. So my question to the Minister is: what is the Government’s view of the specific request from the Parliamentary Commissioner for the Environment to, effectively, have the date as not later than 30 June 2025, rather than sticking with, as currently proposed, a blanket-year rule of 2024?

Thank you for the opportunity, Mr Chair. My amendments for the Minister are about the dates that section 167C(1)(j)(iv) of the principle Act would apply from, and the reason I want to ask the Minister some questions about whether it should apply earlier is in relation to how, then, new section 167BB would come into effect—so those are those Part 13 regulation-making powers that are being moved forward here, essentially, by clause 6. I would argue that the Minister has got the timing for those wrong because of the operation of section 167B. The timing in moving it forward is a problem because we don’t have an explicit enough recommendation to the Minister when he considers what his decision-making power should be under the regulations to, essentially, ratchet up the requirements for the industry to continue to import cleaner and cleaner vehicles as technology changes around the world, and as our international agreements become more stringent and we get closer to those 2040 goals that we have signed up to.

I had recommended for the Minister to consider an arrangement where, under section 167B, he was also directed to consider the imposition of regulations under that section, which are appropriate for considering our international and domestic climate change ambitions. But because we won’t have that built into the legislation, to now move the regulation-making powers forward would then mean that he’s got to consider, not only in subsequent years, what our international obligations are, but in this, currently, there is no direction for the industry on how the Government intends to meet those international obligations, and, indeed, there’s no obligation for the Minister to even consider that when he makes his first round of decisions under the regulation-making powers.

I think it would be more appropriate for the settings to be clear for the industry now, as they are, and then for us to be able to step out those further regulation-making powers later, because, again, we get to this point where, if everyone around this House wants certainty for the industry—and the Government has been clear in other pieces of legislation and on an international stage, where the Prime Minister has recently made some remarks in this regard. New Zealand is still committed to our international obligations to reduce our emissions profile, and the transport fleet is an important part of that. So that is a really clear signal to the industry, and yet we don’t have, then, primary provisions which are giving the industry some really clear targets for how their contribution to that will be judged. We end up in this position where we’re sort of saying one thing on one side of our mouth and giving the industry another indication on the other, and so that’s why I’ve proposed two amendments. There’s an option there for 2025 and there’s an option there for 2026. The reason for that is for the Minister to consider whether it would be appropriate to give the industry certainty in that way by using the new provisions.

Also speaking to this point about the timing, the Hon Dr Megan Woods made some comments about the appropriateness of the timing for these regulation-making powers to come in, in her contribution on clause 2, I believe, of this bill. The Chair at that time, Barbara Kuriger, gave an indication to my colleague that there would be an opportunity for further debate on the timing provisions, particularly with regard to the regulation-making powers in this section, and so it would be useful if we could canvass with the Minister what the intention is here for the regulation-making powers. If they come into effect now, is there an intention to give the industry certainty over the next two years and three years, where, on the one hand, that certainty is being taken away by taking it out of the primary legislation? Those questions were raised by Megan Woods, then they were not answered by the Minister because he felt that it was more appropriately addressed later in the debate, and so here we are, at that point, but I haven’t heard the Minister address that timing point yet.

Thank you, Mr Chair. Look, just in response to Mr Utikere’s questions earlier, we of course respect the comments of the Parliamentary Commissioner for the Environment—a very knowledgeable man—but it is our view that this review is important because these targets are very key to realising the standard’s potential emissions and fuel savings. So we have to be able to strike a really good balance between being stringent enough so that we can accelerate the supply of low- and zero-emission vehicles, but not being too stringent so that those importers are then unable to source those vehicles at sufficient numbers and they then can’t meet those affordable prices. So it’s a balance.

What we’re trying to do with bringing this date forward much earlier than everyone would like is to make sure that we strike that balance so that, actually, we’re able to meet the targets that we need to meet. While I appreciate the views of both the Parliamentary Commissioner for the Environment and other members in the committee, it’s our position that we need to bring that date forward so that we can give those importers as much certainty as they can possibly have so that they can bring in the vehicles in the numbers that we require so that we can meet the standards. Thank you.

I’m sorry if I missed it, but I don’t believe the Minister in the chair has addressed my question about whether a climate impact analysis will be undertaken of any new proposed standards for 2025, 2026, and 2027, and whether or not that will be public before those regulations and the new standards come into force. That’s relevant to clause 6 because clause 6 is the part of the bill that is giving the Minister the power to set those standards for those three years under regulation.

I appreciate the comments that the Minister has made about the importance of bringing in more low- and zero-emission vehicles into our fleet. I think at this point in the debate, it would be worth raising the concerns of a range of organisations like Drive Electric, Better New Zealand Trust, and some car importers, who have all expressed concern that their members support retaining the Clean Car Standard settings. They have not had the opportunity to provide those views. Because there was no select committee process on this bill, they have not been able to come and talk to this Parliament about why those standards were appropriate. They’re concerned that giving the power to the Minister to change standards undermines the certainty of direction for the industry. So, rather than providing more certainty, there are a range of people in the industry saying that this creates more uncertainty because we don’t know what the direction of travel will be.

We don’t know what the standards will be 2025, 2026, or 2027, and any changes to the standards have broad economic implications. They will have an impact on electric vehicle uptake, on emissions from transport, and on ongoing imports of petrol and diesel—which costs the economy and affect the current account deficit—and future liability to buy offshore carbon credits. It will also, potentially, impact our EU free-trade agreement because that trade agreement has in it an expectation that New Zealand will be making progress towards its emissions reduction targets, and this is one of the key levers that we can use to achieve those targets.

Since the removal of the Clean Car Discount, the average emissions of newly registered light vehicles in the first five months of 2024 have increased back up to 161 grams per kilometre, on average. Now, that’s up from 136 grams per kilometre last year. Before we brought in the Clean Car Standard and the Clean Car Discount, we were trailing the world. We had some of the most inefficient vehicles coming in, and it wasn’t second-hand vehicles, because we import our second-hand vehicles from Japan, a country that has standards that are far more ambitious than what—New Zealand had zero fuel-economy standards.

Clause 6 of the bill is what gives the Government and the Minister the possibility of setting new standards in regulation, rather than coming to the House—as is what happened previously, and it had a proper select committee process. So the reality is that the axing of the Clean Car Discount has led to a rebound. We’re importing more high-emissions vehicles. Our average emissions in the fleet—this isn’t just about electric vehicles; it’s about the average emissions from new cars coming into New Zealand, and it’s predominantly the brand new, large SUVs and double-cab utes and gas guzzlers that are driving the high emissions.

However, the standard and the discount were able to address that so that we would get lower-emission versions of a given vehicle in a given class. So the research before we brought this in showed that there were double-cab utes available in the UK that were lower-emission than what was available—

CHAIRPERSON (Greg O’Connor): Ms Genter, the opportunity to talk about targets comes in the next clause. I can understand you’re giving some context to this, but it’s relatively narrow and on the—

Well, I would really appreciate it if the Minister could address the question on what is going to happen with the climate impact analysis of any new regulations. Given that there’s been no select committee process, I think that it was important to state the concerns of people in the industry like Drive Electric, Better New Zealand Trust, and some of the other car importers who have expressed these concerns about this change being brought through, about it undermining certainty of direction for the industry, and about it having broader implications.

We want to understand—well, basically, this point just needs to be made in the Hansard because we’re not having a proper select committee process, and we’re only hearing from the Government that somehow they’re giving certainty to the industry. It’s unclear how that could be the case, other than they’re giving certainty to those who want to continue bringing in high-emitting vehicles, and that will have broad economic implications for New Zealand and cost to us in the long run.

Thank you, Mr Chair. I’m happy to address the question that was raised by the member the Hon Julie Anne Genter, and I apologise that I didn’t already do it because I was chatting with officials during her last speech. But I’m happy to answer the questions.

Regarding the climate impact analysis, there will be one. There will be a regulatory impact statement, and that will be done to inform the Government’s decisions on the targets set by regulations. So that will be done. But more broadly around the question of certainty for the sector, the feedback that we have had is that the sector is calling for this certainty. They’re calling for us to set these regulations, and there is broad agreement that that will bring certainty to the sector.

Look, I think the other point to note is that this was always going to happen eventually. The previous Government realised that this would have to happen at some stage; we’re just bringing it forward to ensure that the sector is getting the certainty they need so that they also have that forward-planning ability to bring in the vehicles that they need so that they can help us to meet the common goal that I think we all have of reducing emissions.

Thank you, Mr Chair. Thank you to the Minister in the chair, the Hon Erica Stanford, for providing responses to my questions. I think it’s interesting that the Minister says that this is providing certainty to the industry. Actually, it’s the opposite, I would suggest, because what currently exists in terms of certainty are that the targets are set down in the legislation through to—well, for the purposes of this, and regulations don’t kick in until post-2027.

I’m interested in the Minister’s response there, because I would have thought that, actually, what was more certain was that at the moment, anyone, including importers, could go and have a look and they could see exactly what it is that the targets are for this year—currently, that’s done—for next year, the year that follows, then the year that follows, and then regulations would be kicked in. So it seems counterintuitive to suggest that this act of bringing back regulation-making powers much sooner, which is what this clause does, where the Minister, in exercising those regulation making-powers, would only consult with the industry and no one else—how is that providing certainty when it’s still unknown what those targets might be?

💬 Arena Williams: No, she’s keen on my amendment.

Well, that’s good to hear. So I’m a bit perplexed around that, because the certainty to me would be much clearer as it’s specified, as it is, in legislation. You can look up the date for the next three years and you can see exactly what the target limits are. This clause seeks to, basically, rule a line through those and basically say that, well, it’s over to the Minister, and provided that he consults with the industry, his approach seems to be unfettered in that regard.

I do have a couple of Amendment Papers in my name here—they’re Amendment Papers 42 and 44—and so I’d be obliged if the Minister was able to provide a response. I think it might be that it’s not one of supporting those amendments in relation to clause 6—

💬 Hon Erica Stanford: Oh, give it a go.

—but you never know. You never know, Minister. Amendment Paper 42 seeks to replace “2024” with “2028” in clause 6. I don’t think we need to be a rocket scientist to, basically, work out that what that would mean is that the regulations would kick in as they would be post-2027. So I’d be interested in the Minister’s thoughts, even if it was a fleeting opportunity around that. The other is on Amendment Paper 44, which seeks to, basically, delete clause 6 in its entirety—lines 10 through to 12.

I am encouraged to hear that the Minister has referenced that the Government takes the views of this Officer of Parliament, who has made his views known, seriously. It is disappointing, though, that it seems that dismissing the Rt Hon Simon Upton’s suggestions to try and make this a little bit more workable is going to perhaps be the outcome or the position that the Government have subscribed themselves to.

Minister, I do have a question that relates to the implications around the date change. New Zealand has obligations, as they stand currently, to meet targets and the expectations of the emissions reduction plans two and three. Has there been specific advice around the rolling back of the date and, therefore, the specified targets in legislation, and what implication, if any, that would have in terms of our approach to the emissions reduction plan?

I think that is important because that’s an overarching consideration, and this clause specifically enables regulations to meddle with that. So I’d be interested to hear whether there has been any advice that’s been either sought or provided around that, and, if so, it might be that, yes, the advice has been received and sought, but we still believe that the roll-back date is still in order—but I’ll leave my questions.

I move, That debate on this question now close.

Thank you, Mr Chair. A brand new line of questions for the Minister about the carbon dioxide accounts and, if the Minister retains the date as proposed by the Hon Simeon Brown, whether the carbon dioxide accounts are, essentially, ready to go. These were questions that I raised with the Minister earlier in this debate, and I was also told by the Chair at the time, Barbara Kuriger, that the appropriate time to ask those questions would be later in the day. So I’m dutifully doing that now.

The carbon dioxide accounts—just to explain this—are provided for under Part 13 of the Land Transport Act. It’s section 167C, and the provisions that empower those are set out at subsection (1)(s) of that section. Those carbon dioxide accounts have currently been set up under the Minister’s primary legislative powers, which provide for the carbon dioxide accounts to, essentially, back a system which allows importers to trade credits between the low-emitting vehicles, like a small electric vehicle (EV) that Toyota might import, and use it to import other higher-emitting vehicles, like a Toyota Hilux. Toyota have one of these accounts and it’s massively in credit because they’re so good at importing small, light EVs that actually offset things like their Hilux offerings. That’s great—it’s a system that’s working.

You’ve heard from my colleague the Hon David Parker that there are some policy choices that have been made in that situation. For example, he raised a question with the Minister, which wasn’t answered, about whether it was the correct policy of the Government to allow trading in those accounts—say, for example, what’s been reported on in the media where Toyota opined that it might be able to use the credits which it has built up, because its profile of the vehicles which it imports are better than the current settings, and that might be able to support those importers of small vehicles which are emitters, because those aren’t treated like a Hilux.

If you’ve got something like a Suzuki Swift, which is small and its weight class doesn’t push it into the category where it would be able to emit more, then it’s sort of a product which is not doing so well out of the system as it’s currently designed. There’s a policy choice there, which the Minister is open to make, and if she’s not open to my amendment which would push the date out further, then she needs to give us some assurance that those carbon dioxide accounts, which exist now and which have been set up under the current policy settings of the Government, where a number of policy choices have been set out clearly in primary legislation—whether the systems enabling those are ready for a Minister making regulations which are not available and which are not known now.

This is important for two participants in the system. One is the industry participants, because they hold these carbon dioxide accounts, but one is the ministry behind it, and we want to know whether the ministry system which it has built to allow for the administration of those carbon dioxide accounts is set up in such a way that it would be ready to deal with a new set of regulations from day one that made different sets of policy choices. The question there is: is it appropriate that it would apply from 2024—that’s this year—to, essentially, create a system that is not based on any of the policy choices which have been made earlier?

I mean, these regulation powers in section 167C, which have otherwise been set by primary legislation but will now be set out in regulation-making powers, provide the choices like how minimum standards should be applied to the lightest cars and how the maximum standards should be applied to the heaviest cars. If we tweak those, then the carbon dioxide accounts’ value changes, the way that they are tradable might change, and who holds them might change, and so we need to hear from the Minister about whether those systems are ready to go and whether she is confident that 2024 is the appropriate date, given the significant investment of the Government in that system, which backs the carbon dioxide accounts.

I move, That debate on this question now close.

Thank you, Mr Chair. I’ve just got a very short contribution to make here. It is a question for the Minister, obviously, but it’s one of clarification, and that is because what we’re looking at here is a change in dates, and why that is is that at the moment, the primary legislation—and what we will be talking about in the next part of the debate—sets out some numbers and some targets. Then, the Act also says that regulations can be made—they “may” be made—from 2027.

There’s a whole lot of this word “may” in the regulation in various sections of the primary legislation, including in section 167C. So when the Minister says that the Government is going to give more certainty to the importers, that makes it sounds like the Government must be making regulations, but my reading of the legislation is that the Government may be making regulations, and, of course, that is a very important difference because it means it’s discretionary as to whether or not these regulations will be made.

Earlier on, we had in the chair the Minister in whose name the bill is in, and he was saying that one of the two things that this bill does is to enable regulations—so “enabling” is the “may”. The certainty would come with a “must”. So is my interpretation correct that regulations “may” be promulgated and they “may” be enabled, but that’s at the discretion of the Minister?

Members, the time has come for me to leave the Chair. Committee is suspended and will resume after oral questions.

Sitting suspended from 12.57 p.m. to 2 p.m.