Climate Change Response (Emissions Trading Scheme Agricultural Obligations) Amendment Bill

We begin with the Climate Change Response (Emissions Trading Scheme Agricultural Obligations) Amendment Bill. We come first to Part 1. This is the debate on clauses 3 to 34, “Amendments to Climate Change Response Act 2002 to remove agricultural obligations” and Schedules 1 and 2. The question is that Part 1 stand part.

Thank you very much, Madam Chair, and it is a pleasure to be in the committee of the whole House for this piece of legislation. This is a relatively simplistic piece of legislation. It is a repeal of certain provisions in the Climate Change Response Act 2002, and it has two parts, and I will provide a context in terms of the importance of that.

Firstly, I want to acknowledge that New Zealand’s agricultural sector is one of the most carbon-efficient sectors in the world and is the backbone of the New Zealand economy. This legislation is in regards to ensuring that the emissions related to agriculture do not form part of the emissions trading scheme. It is an acknowledgment that that is not the mechanism which is appropriate to deal with those emissions. However, under this Government, we have signalled our intent that by 2030 we will be putting in place a pricing system in order to price agricultural emissions. I will note that those future aspects in terms of what we do are not part of the scope of the bill, but I am providing that context in the aspects in terms of what will happen once this process is complete and the repeal is complete.

In regards to the overall considerations in regards to emissions in the agricultural sector, it currently reflects around 53 percent of New Zealand’s total emissions. New Zealand has one of the highest proportions of methane from livestock emissions of any country in the world, but our farmers and the primary sector are very focused in terms of the actions required in order to reduce those emissions, and are taking significant steps and investment, particularly through AgriZero, in order to achieve those outcomes. I look forward to questions that will follow.

Thank you, Madam Chair, and thank you to the Minister for his explanation on this piece of legislation. The Minister has mentioned that it’s about removing the backstop whereby the agricultural sector will be moved into the emissions trading scheme (ETS). We understand that and we understand that there is ongoing work which I will raise questions about a little bit later on. When we get out and amongst our farmers and the agricultural sector, the majority of them will say, “We just want certainty. We want to know where we are heading. Certainty is really important for us, and not this to-ing and fro-ing necessarily when we have changes of Government.” My question to the Minister here—

Hon Mark Patterson: Support the bill. That’s what we’re doing—giving them certainty, Jo.

Hon JO LUXTON: Mr Patterson, you might like to listen and perhaps you could take a call. My question to the Minister here is: given that our farmers want certainty, given that there is no plan at all, aside from investing money into research and development—which is great, which is wonderful, and I will ask questions about that in a little while—how can just simply removing agriculture from the ETS with no other plan in place and just simply saying, “We will look to price emissions no later than 2030.”, give farmers certainty? How on earth does that give farmers certainty about what’s next? The Minister mentioned that farmers are very efficient. We know that; we acknowledge that—absolutely we do—and they are doing a lot of work to reduce their emissions, but they ask for certainty. I genuinely—and I’m not being political about this either—want to know how this provides farmers with any certainty or any plan that they can look toward going forward before 2030?

Thank you very much to the member for her contribution. As I noted in my opening comments, the scope of this bill is really answering one simple question: should agriculture enter the emissions trading scheme (ETS) on 1 January of next year or not? It is a view on this side of the House that it should not.

Interestingly, it was the intention of the previous Government to eventually remove agriculture from the ETS and establish pricing through He Waka Eke Noa. That programme was dead on arrival as we came in as Government, when we took office a year ago. There was no pathway forward in regards to that work. We all agree that pricing for agriculture is not suitable within the ETS. There is no point dangling around the fact, and the sector accepts that and the ETS is not the right tool to do that job. The point of this bill is to make an agreement to remove it from the ETS, and that is the scope of the bill, and that’s what I’m happy to answer questions on.

Thank you, Madam Chair. Thank you to the Minister for his response. However, in the Minister’s opening statement he did raise a number of other subjects and issues with regard to this piece of legislation as well as the specific points of this legislation. I do wonder, then, whether that might open up the opportunity to further speak to some of the issues that the Minister did raise.

Yes, the Minister was right—this was the backstop should He Waka Eke Noa not go forward. We realise it has not gone forward, but at least it was something—there was a plan in place. There is no plan in place. There is money being put into research and development—I get that—to reduce methane emissions. The Minister has said—[Interruption] Take a call, Mr Hoggard. The Minister has said that they will look to price emissions no later than 2030. They’re simply crossing their fingers and hoping that there will be enough research and development in place in regard to methane reduction without an actual concrete plan. If this doesn’t come to fruition, how on earth are farmers going to have the certainty? How on earth is this country going to potentially pay a $24 billion bill if we do not meet our requirements?

Thank you, Madam Chair. Following on from my colleague’s comments and this discussion about the backstop, I don’t think anybody here disagrees that the emissions trading scheme (ETS) was a backstop. We note what the Minister was saying—that there was a lot of work to go into He Waka Eke Noa that isn’t being continued—but the point is that everybody knows that this is a difficult subject and that a lot of work is required. There was this backstop date of 2025 to incentivise that discussion. Now we’ve had a change of Government and changes of priorities, but we’re hearing from the Minister that he still anticipates a pricing scheme by 2030. This, then, goes back to the backstop point. Why, then, remove the ETS backstop at 2025 and not move that to 2030 if the Minister is so intent on doing some sort of pricing of methane by 2030? That’s my first question.

My second question is: will the Minister confirm what I just heard him say in his opening address, which was that over 50 percent of New Zealand’s emissions are agricultural? I ask this because during the second reading debate earlier this week, Government support members, at least, seemed to be questioning that. I said in my second reading speech that I thought that this was an agreeable thing to say—that in New Zealand, at least half of our emissions are coming from agriculture. I didn’t think it was controversial, but at the time there was a lot of noise in the House. I’d like the Minister to confirm that as well.

My third question in this contribution again relates to what the Minister said in his opening remarks. It’s about what evidence he’s relying on for this statement that we hear often that New Zealand is, I think the Minister said, one of the most efficient countries in the world in terms of greenhouse gas emissions when producing primary produce. I’ve added in some words there, but I think that’s what the Minister was referring to. We also hear in this House a lot that New Zealand is the most efficient, so I’m interested in what the Minister is basing his statement on—whether his words were carefully selected for being “one of the most” as opposed to “the number one most efficient”. If he could comment on that, it would be useful.

Why it’s relevant to this discussion is that the backstop has been removed. We’re now waiting. We’re pushing everything out to 2030 and that’s just Government policy. There’s no backstop being provided any more, and the rationale for removing that backstop is that we’re already the best or among the best in the world. That is the justification for not having a backstop. The evidence that’s been relied on, that statement, is very important.

Thank you, Madam Chair. I appreciate the opportunity to talk to the Minister regarding this legislation. Further to my colleague’s comments about the removal of the backstop—and I appreciate the Minister acknowledging the substantial problem that emissions from livestock are in our country; a major challenge.

Not only is the removal of the backstop a problem for there being no incentive whatsoever for the industry to actually reduce its emissions but there is also the removal of even the reporting requirements. If, as the Minister acknowledges, greenhouse gas emissions from livestock and agriculture are such a substantive part of our emissions profile, how are we even to understand what the scale of the problem is if reporting requirements are removed as well? When gains are made, how are we to understand where those gains are being made?

I have an amendment to deal with this, which I invite the Minister to support. It amends Part 1 and it retains the reporting requirement for farmers to report on their emissions. It extends the time frame to implement an emissions measurement scheme by six months, meaning that this would be required by 1 July 2025. This will enable a better understanding of the emissions profile of the agricultural sector and will prepare farmers for the claimed certainty that there will be emissions pricing, and for reducing their emissions. This amendment retains the bulk of the legislative regime to enable pricing agricultural emissions at a later date.

I have a second amendment that I invite the Minister to support also. This legislation also removes the requirement of agricultural processes to report. That is another extraordinary step, because those processes have been reporting their emissions since 2011. One of the most vital things we need in understanding any environmental problem is solid data on the pollution, on the emissions, on what is the nature of the problem, and if you take away the requirement for processes or farmers to report, you basically remove the ability of us to understand the scale of the problem and, likewise, the ability to understand the scale of success when we do manage to reduce emissions.

My second amendment to Part 1 retains the reporting requirement for agricultural processes to report on their emissions as they have done since 2011. This will enable a better understanding of the emissions profile of the agriculture sector and the processes. It also retains the bulk of the legislative framework, including references to definitions related to agricultural activity to enable emissions pricing for agriculture at a later date. Surely the Minister—and this is a question I put to you, Minister—wishes to retain the ability of us to understand the scale of the emissions problem. I’d love to hear your response to that. Thank you.

Thank you very much to members for those questions. I want to reinforce the aspects that I noted in my opening statement that it is the Government’s position that the pricing of agriculture is not suitable within the emissions trading scheme (ETS), and hence the purpose of this legislation is to remove agriculture from the emissions trading scheme. There is a consensus position in regards to industry feedback around that. It was the intent of the prior Government to remove agriculture from the ETS, and this bill is simply doing that. It is not doing anything else in regards to that primary purpose.

In regards to the points made by the member in regards to amendments on visibility and reporting, this bill does not affect the ability to account for agricultural emissions. The processor-level reporting obligations that the bill removes are entirely separate from the national accounting of agricultural emissions. The New Zealand accounting standards around national emissions uses data sets from a wide range of sources, including Statistics New Zealand and other aspects—Beef + Lamb New Zealand, DairyNZ, etc. It does not use ETS data, which was last updated in 2012. We will not be supporting those amendments, because they are not going to be serving any purpose.

The purpose here is to stop the pricing of agriculture in 55 days from today. That is the reality. It is a position that, as I said, is one of consensus support, and I am surprised by those that aren’t supporting it.

The Hon Damien O’Connor, and apologies—my peripheral vision didn’t go back to your previous seat.

That’s all right. I’m often invisible around here, Madam Chair!

I have a few key questions for the Minister. At the start of the explanatory note of the bill, it says, “amends the Climate Change Response Act … to remove agriculture activities from the New Zealand Emissions Trading Scheme”, so I’d ask the Minister: did he consider removing the energy component of agricultural activities?

That is, in processing there’s a huge amount of coal; in agriculture, there’s a lot of diesel. Did the Minister or did the Government consider moving that? If it is hell-bent on removing agriculture from the emissions trading scheme (ETS), it’s only part of it, so the bill is actually quite misleading. It doesn’t take agricultural activities at all out of the ETS. It takes or removes what was a backstop obligation for biogenic methane and nitrous oxide. The question of the Minister—and he can answer it—is: how is nitrous oxide going to be considered, given it plays a part in different stages of the agricultural system?

The second one was: did the Minister consider taking out the transport component of agriculture—tractors, a lot of trucks; those travelling around the country will see 53-tonne trucks carting milk backwards and forwards. Did the Government or did the Minister consider taking that out? If the bill says it’s to take agricultural activity from the emissions trading scheme, it’s quite misleading. Perhaps the Minister can say how he considered that.

The other things that I’d like the Minister to answer is that he says it leaves the ability to calculate your emissions, but, of course, it takes away the obligation. It’s kind of a market approach to it, so where does that leave Fonterra and its proposal to “know your numbers”? And should farmers choose not to do that, how will that be followed through? The Minister has probably considered this—maybe he has, maybe he hasn’t—so maybe he can answer that question. I’ll leave it to the Minister.

Thank you, Madam Chair. Thank you very much, Minister, for joining us this afternoon. I’ve got a quick question, and I know my colleague will as well. Minister, could you enlighten the committee, in your understanding of the primary industries, that the animal ruminant sector has been falling since about 2010, so the overall contribution of methane by virtue of that is diminishing, notwithstanding that we are talking about a short-lived gas that decays back to carbon dioxide.

In terms of the overall contribution of the primary sector, what do you think would have been the counterfactual, Minister? Should farmers have been forced into what were otherwise He Waka Eke Noa, and that’s obviously been now disbanded? And do you want to speak to, kind sir, the 20 percent of wool growers that were potentially going to go out of business should that have been adopted? Going forward, is it your perception that we put pragmatism back in the room to help rural New Zealand adopt the kind of practices, and also allow them to adopt technology, to nullify this problem?

I heard a threat to the wool industry there, so I thought I’d better get up and seek some clarity from the Minister. Look, just in follow up to some of the questions from my colleague Mark Cameron, there does seem to be some confusion here I’d like you to illuminate.

As I understand it, what we’re trying to do here is just take the backstop mechanism out that was a carbon dioxide equivalent, which is something that was wholly dismissed; it’s a world-leading approach to have a split gas approach. This mechanism here is carbon dioxide equivalents, which I think everyone—and I think you did allude to that earlier—across the industry and, actually, across the political spectrum has decided is a wholly inappropriate measure by which to deal with the challenge of biogenic methane.

You may not be in a position to fully confirm this yet, but for those that are watching or listening today that may be alarmed at the impact of agricultural emissions on the climate, is the Minister in a position to maybe allay some of those fears by outlining some of the figures that he’s seeing in terms of this? As I understand it, we are in a position, potentially, with New Zealand agriculture, that we are well on track to meet obligations that we have made in this House and internationally. We are actually catastrophising about a problem that actually isn’t existing in real time.

Thank you, Madam Chair, and I thank the Minister for his answers. Can I ask him a number of questions. Can I first get the Minister to agree that the large amount of risk for the rural industries in respect of methane disappeared the moment the last Government—with New Zealand First at the time, actually—introduced the split gas target, so that the amount of emission reduction expected from short-lived gases like biogenic methane was a lot lower than the reduction in emissions required from carbon dioxide? From my perspective, that was the first big limitation of risk for the rural sector, which was appropriate.

Secondly, in respect of that split gas target, there is still a desire to reduce emissions from methane, and that therefore the—I can’t understand the logic as to why the rest of the economy should face a price-based measure to reward emission reductions when the agricultural sector doesn’t. I don’t understand the economics of that because it seems to me the economic theory that applies to carbon dioxide also applies to nitrous oxide or methane in respect of those issues.

The next point I would ask the Minister to comment upon is the report back on the bill. The general policy statement says that processes may pass the same cost to all farmers regardless of their emissions efficiency. The concern that seemed to be expressed in this explanatory note was that there wouldn’t be a reward for the farmer that goes further. I agree that that is a valid concern. I asked the Minister whether he considered one of the options on the table, which was to effectively run a scheme where the farmers who were ahead of the curve got rewarded by emission reductions that were taken out of the general pool, which would have remedied that particular problem and left an effective price signal rather than a cross-subsidy from the rest of the economy. Volunteers effectively would have been rewarded, and that would have been taken out of the pool in a way that would have encouraged the requisite behaviour.

Can I also ask the Minister to confirm that the backstop included 95 percent free allocation of emissions based on 1990 emissions. There was no great financial risk to those sectors that I’ve heard some other members in this House say the rural industry was exposed to, because there was 95 percent free allocation. There was only exposure for risk for the last 5 percent of emissions.

Can I lastly ask the Minister whether consideration was given to the suggestion by the Parliamentary Commissioner for the Environment, the Rt Hon Simon Upton, who suggested that the way through here was to have a separate pricing scheme for methane with offsets from carbon dioxide sequestration and pine forests being reserved for the rural sector rather than being used by, for example, the energy sector or the industrial sector to offset their emissions. From his point of view, there is a fallacy in taking a 30-year offset in respect of a carbon dioxide emission that lasts 1,000 years, whereas there is good sense in enabling farmers to have the benefit of a forestry offset to offset methane emissions if they couldn’t reduce them otherwise.

Well, thank you, Madam Chair. I’ll work my way through questions from members. I’ll start by firstly again reinforcing, as I noted in my opening statement, that the Government, this Government, has repeatedly stated that it has commitments in regards to pricing of agriculture. The task now is to get that in place by 2030 and to put the emissions trading scheme (ETS) aspect to bed. It is acknowledged by all that the ETS is not the suitable structure which agricultural emissions pricing should fall part of. The simple purpose of this very narrow bill is to ensure that that is not undertaken. That is the scope in which we are covering.

The point in regards to the split gas approach in terms of a principle is one that is noted. We are committed in regards to a fair and sustainable pricing, but outside of the ETS. It would be simply inefficient of any Government to look to put agricultural into the ETS and then to take it out—that is ridiculous. I’m not sure why members of the Opposition would think that that would be a sensible thing to do. Well, I probably do know, but I’m not going to get into that. The reality is that is what we’re doing here in regards to that.

In regards to some of the comments in regards to emissions, well, let’s be clear: diesel going into a ute or petrol going into a farm bike is covered under the ETS and will continue to be so. That aspect in regards to on-farm considerations is not changing at all because we know when you get fuel from a service station, that is covered under the ETS.

As to the point around nitrous oxide, about 70 percent of that comes from livestock particularly, and that is a key driver in terms of that.

As to the question around Fonterra, they supported this legislation at select committee. They support farm-level systems.

In regards to the methane science point and the target review, we have work under way around that. We’ll look to update that view of the science in due course. Methane targets can only be met by gross reductions in methane. The second emissions reduction plan process that we have under way will take into account those considerations.

Thank you, Madam Chair, and thank you for answering our questions, Minister. I just wanted to interrogate a little bit into the answers that you gave earlier. You said one of the sorts of policy rationales for, I guess, removing agriculture at a processor level from the emissions trading scheme (ETS) is that there’s an intent to have on-farm emissions pricing by 2030. I think it’s worth looking at the context around this. I mean, we’ve been trying to price agricultural emissions since I think the early 2000s, and you’re absolutely correct that nobody in this House sees putting agriculture at a processor level in the emissions trading scheme as the most optimal solution; that’s why it’s called a backstop. It’s sort of a means of last resort. I guess my question is: if there’s no on-farm emissions pricing by 2030, then what is the backstop? If it’s not done by then, what will we actually do to price emissions in the agricultural sector?

The regulatory impact statement made some particularly good points around the issue of the inter-sectoral equity, in that there are 600,000 enterprises in New Zealand, roughly. They all face—well, other than the agricultural-based ones—some sort of price for their polluting activity in regards to our climate targets, at least their greenhouse gas emissions. That’s why, in the inter-sectoral analysis of the cost-benefit analysis section—the multi-criteria, rather—the Minister’s preferred option was ranked with two minus points, because they’ve correctly identified that this does actually create some inter-sectoral inequity in the sense that the logic here is that the New Zealand agriculture industry is the most efficient in the world. It’s often repeated, and in some measurements and in some studies, it’s shown to be true.

Why wouldn’t that logic apply for other enterprises in the non-farming world? For example, the video game industry is, I would assume, quite efficient in terms of producing economic activity relative to the amount of carbon it uses, because the New Zealand energy system is mostly renewable. If the kind of logic for exempting agriculture from paying for emissions is because it’s efficient, should we not apply that logic wider to the rest of the economy? That is correctly what the inter-sectoral analysis is revealing here, because it’s actually not very fair.

The other repeated claim is that it’s a short-lived gas. I mean, absolutely, it is a short-lived gas. There is a biochemical difference, but there’s also another sector that has a short-lived gas, methane, which is in the emissions trading scheme, and that’s the waste sector. Now, the waste sector still has to reduce their methane; it’s still in the emissions trading scheme. If the logic is “because it’s a methane”, “because it’s a short-lived gas”—well, most of the emissions from waste is also a short-lived gas—would we, on that basis, also seek to exclude waste from the emissions trading scheme?

I heard the members here—I can’t remember whether it’s on the left or the right; I’m directionally challenged today—say biogenic methane. Yes, absolutely, we do need to take the challenge of biogenic methane head-on, which is why, I guess, to be consistent with the philosophy of the parties on the right—well, on the left here, which is on the right philosophically and on the left, I guess, geographically to me—pricing is a powerful mechanism. Why move away from this market-driven approach, which is to actually price things? And why move to, I guess, a sort of vague system where there’s no kind of guarantee that emissions will actually reduce? We have been working at the challenge of reducing biogenic methane emissions in agriculture for at least 20 years now, and we’ve not got closer.

I’m going to take a call from the Hon Damien O’Connor. I just want to say that we’ve been waiting for some Amendment Papers to be sorted and a new sheet to come through. While the questions have been relevant to this point about having agriculture in the ETS or not—that is important—what I would like now is to narrow people down to the clauses in the bill and specific questions to the Minister around the clauses, or the Amendment Papers that people have put up.

Thank you, Madam Chair, and clause 33 is the operative provision that removes agricultural activities. I’m asking the question again of the Minister around consideration that he or officials may have made as to the impact of this legislation. The question of whether nitrous oxide or diesel, all that, should be taken out of agricultural activities, given that’s what is said in the bill, he clarified before. There are two other areas. Trees grown on farms are part of normal agricultural management systems, for shelter, for shade. Maybe the Minister can clarify whether he is proposing to take trees planted on agricultural land out of the emissions trading scheme (ETS), because farmers asked for—and, in fact, under our proposals, the provisions included them. The farmers wanted trees grown on farms in the ETS but not other agricultural activities. It’s a bit of “Have your cake and eat it too”. That’s a question for the Minister: is he going to take trees that are grown on agricultural land out of the ETS?

The second one is about processors. Now, what this does is take away the potential obligation for processors to report their emissions or surrender their emissions. One of the options was, of course, a levy from agriculture from biogenic methane based on a calculations for efficiencies of farming systems—one that would have, and currently does for some processing companies, acknowledged good practice. That is, farmers that supply animals to the processors from good farm systems that have emitted less methane get a reward acknowledged—usually in a bonus payment—from those processors; maybe Fonterra, maybe for the meat companies.

There’s already processor obligations to report their emissions through the ETS, so if you were to roll that forward, as was a proposal, and thereby achieve the inclusion of biogenic methane in an emissions trading scheme, which was acknowledged internationally in my travels, acknowledged consistently as being leading edge, being at the forefront of the pack—and farmers said, “Why should we be at the forefront?” The question to the Minister: was there an assessment done of the potential lost opportunity for New Zealand’s food and fibre produce being at the forefront of global emissions reduction and thereby receiving bonus payments? The reality is that some of our customers—that is, some of the big players; Nestlé in particular—are prepared to pay bonuses for lower carbon ingredients. The lost opportunity from this piece of legislation, in my view and in my experience, is huge. Was this calculated when the Minister and his Government proposed to just take it out?

While we acknowledge that including biogenic methane and on-farm emissions was not ideal in the ETS, and we proposed He Waka Eke Noa, that was rejected, so the backstop is what we are adjusting here. If you go back to processor-level obligations and you have a calculation that acknowledges emissions from farm—and it’s 95 percent discount, remember—it’s not full payment. This is bringing all agricultural emissions, including biogenic methane, into a payment system that was acknowledged internationally, time and time again when I was in the marketplace and talking to trade partners, as being at the forefront of our efforts to reduce international agricultural emissions. There is still a determination to do that. If New Zealand had been at the forefront of that, the opportunity for bonus payments, for premiums, was huge; was and still is huge.

The Minister and his Government is bringing in this legislation and removing what could have been a simple proposal through processor-level obligations to put us at the forefront of that. My question is: how much is it costing us?

Thank you for those questions. In regards to the points raised by the Hon Damien O’Connor, in regards to any policy positions around removing forestry from within the emissions trading scheme (ETS), the categoric answer to that is no. We have no intention of doing that. What we did inherit from prior administrations was significant volatility and lack of certainty in the ETS because of positions around what was in or out of the ETS in regards to forestry. We have worked very hard to restore credibility in the ETS, and one of the key aspects is in regards to the role of removals, which we see as a fundamental part of a net-based strategy.

In regards to the point from the member Hernandez, in regards to the options being considered, if I refer, and if you refer, to the regulatory impact statement—I’m sure you’ve read it, but maybe if you do—then there are three options that were considered as part of this work: a full repeal, which we are talking about and discussing as part of this bill; delayed backstop; and retained reporting. The full-repeal scenario, which this bill is executing, delivers upon the Government’s commitments in regards to keeping agriculture out of the ETS. The assessment of options was undertaken, a decision was made, and that is what we are referring to today.

I also want to give regard to where we stand today, and it’s outlined in the draft emissions reduction plan that we published in May. That plan signalled and indicated that we are broadly on track to meet the 2030 methane reduction targets, today, where we stand—no pricing, no other aspects. We are on track, where we are today, in terms of meeting that target.

The conversation in regards to the need to bring this in place right now, when farmers do not have all the tools which they can utilise in order to deploy, to take action to do that, is unreasonable and not practical and will bring potentially 100,000 farmers into the ETS on 1 January, which will have significant costs on that sector, significant appliance complications, significant bureaucracy. I will reiterate that, on this side of the House, that is not the way in which we do business. I can tell you, from conversations with the farming community, that is not the way in which they do business either. We are working with the sector, not against them.

We all understand the obligations we need to do around emissions reduction. The agricultural sector is doing a lot in this regard already, and there is more to be done, but what we are discussing here is removing pricing of agriculture from the ETS, starting in 55 days’ time. We are very clear, across the board, actually, that agriculture pricing should not be part of the ETS. I think we get back to basics and do what the bill says and get on with the process of repealing it out of the ETS.

Thank you, Madam Chair. I appreciate the opportunity to speak again. Minister, further to the points you’ve just made, acknowledging that emissions have reduced somewhat, how have you accounted for the cause of that?

Surely having in place an inevitable pricing that’s going to come into effect and having in place a backstop—explicitly, incentives for the agricultural sector to deal with its emissions. Is it not correct to assert that it’s because of the very certainty that an emissions pricing scheme is going to come into effect that the sector is investing in finding ways to reduce emissions, looking at means of reducing its emissions—that farmers are taking actions to do it? Furthermore, when the He Waka Eke Noa process was undertaken, there were strong arguments made by the agricultural sector that the water regulations that were being put in place would have a similar effect to any specific climate emissions regulations.

What assessments have you made, Minister, on the impact of your Government in relation to climate emissions—because these things were linked by the sector? I remember very distinctly being told by Federated Farmers, “Oh, the water reg is going to have an effect on climate emissions, so you don’t need to specifically take action on climate emissions.” What analysis have you done on the impact of removal, also by this Government, of water regulations on opening the door to increased emissions in the future? Where are the disincentives for the sector to now increase its emissions, to now expand its activities in a way that takes no account of greenhouse gas emissions?

Speaking to the specifics of the potency of the gases we’re talking about, Minister, I want to pick up on the comment of the short-lived nature of methane that my colleague acknowledged. What about the long-lived nature of nitrous oxide, which is a 300 times more potent greenhouse gas than carbon dioxide and is a long-lived gas? You rightly acknowledge that it is largely attributable to the urine and the dung, the manure, from animals, but that is driven by the agricultural intensity that is facilitated by a lack of processor pricing on things like fertiliser, which, of course, is the other contributor to nitrous oxide. What consideration was given to the impact on what you have claimed are the successes that are coming in the sector, on those successes continuing? It seems obvious, it seems axiomatic, that if you remove any of the incentives, any promise of a forthcoming pricing regime, any sort of backstop, those emissions are going to start increasing again.

There’s a clause, an amendment specifically, that I proposed regarding ensuring that at the farm level and at the processor level, there’s a requirement that retains farmers to surrender emissions credits up until 1 January 2030, extends the time frame to implement a fair on-farm emissions pricing scheme to 1 January 2030, and retains agricultural processor obligations. Retaining emissions pricing for agricultural processors will enable the 2030 methane emissions target to be met. This is the assumption of this amendment, which is an amendment to clause 4, with section 2A amended. This is the sort of amendment that takes into account what you are apparently trying to achieve but doesn’t throw the baby out with the bathwater. I’d appreciate a response to those questions, Minister.

Thank you, Madam Chair. I have just two quick questions for the Minister. As has been mentioned, there has been talk of how we’re getting 95 percent free allocation. Can the Minister confirm whether or not reports by the previous Government showed that the He Waka Eke Noa scheme would have cost 20 percent of sheep and beef production in this country and that, actually, the emissions trading scheme backstop was even worse—

Hon Damien O’Connor: Profitability—it said profitability.

Hon ANDREW HOGGARD: Well, profitability and quantity. Profitability is quite important. You know, I do like to make a profit—obviously, you’re not too interested in farmers making money.

The other question is: what, if anything, in this bill will stop companies listening to the market? They’re taking on board market signals and transferring them to farmers, and in terms of what’s happening right now on-farm, I record all the emissions that are happening on-farm. I have an insights report by Fonterra that gives me ideas on how to improve my efficiency on-farm and improve the greenhouse gas emissions from my farm. I do not see anything in this bill that will stop that from carrying on. Can the Minister please confirm that that is the case?

Thank you very much, Madam Chair. As I said in my opening statement, He Waka Eke Noa was dead on arrival when we came into Government. It had no ability in order to do anything. The consensus was lost, and hence we did not proceed with that.

In regards to the other aspect that has been noted by the member in terms of the broader work that’s under way, it is clear from our perspective that this bill, again, is a very simple bill. The mechanisms by which this will achieve, in terms of reporting for agricultural emissions, are already in place and available out there across the market. It is important to work a market-led approach, and as I’ve stated, as outlined in our draft emissions reduction plan, the market is already, in conjunction with the industry, on track to meet targets in regards to emissions reduction by 2030.

Thank you, Madam Chair. Given that the Minister has just raised the point around being on target to reach our reductions, there’s a couple of things that I wanted to ask the Minister about, but I also want to come back to the point that my colleague the Hon Rachel Brooking brought up with regard to extending the backstop—rather than getting rid of it, extending it—which the Minister didn’t seem to answer at the time. I think that’s a really genuine question that should be responded to because as the Minister himself—or others, perhaps—has mentioned, it has driven really good behaviour and the type of behaviours that we want to see from our agricultural sector.

If he was to consider extending it out further while the current technologies that the Government is investing in and talking about come to fruition and then they can price by 2030, what harm is there in extending this backstop plan out to just beyond 2030—or 2030, for that matter? Simply because of the fact the Minister has raised—that currently we’re on track to meet our reductions. Again, what happens if this all falls apart, if we don’t bring to fruition the technologies that they’re heavily investing in and it puts us at risk of not meeting our methane reduction targets? Therefore, why is it not then OK or worth thinking about moving the backstop of bringing agriculture into the emissions trading scheme to further beyond or to 2030?

Thank you, Mr Chair. I do note that my colleague who also resides in the fine city of Dunedin has more questions to ask as well. Now, I just want to comment, really, now that my colleague’s just re-asked a question that I asked. I won’t go over that, but I would like to ask the Minister to respond to a couple of comments that have been made by his coalition partners and both members of the executive. Then I have a third question about the emissions trading scheme (ETS) in general.

The first comment was from the Hon Mark Patterson, who seemed to be suggesting that, because some emissions reductions have happened, everything is on track and there is nothing more to do. I would like him to comment on that, in the context of what I see on the Climate Change Commission’s website that “there are significant risks to meeting the second and third emissions budgets and the 2030 biogenic methane target. The agriculture and transport sectors show the largest risks, and insufficient action to reduce emissions in these sectors will put the second and third emissions budgets at risk.” And they go on. I know the Minister knows this well. There’s very clear advice from the Climate Change Commission about risks to those second and third budgets—not looking at the first. Can he respond to the Hon Mark Patterson’s comments and how they relate to the second and third emissions budgets? That’s my first question.

My second one is in relation to Minister Hoggard’s comments just now about whether the market-led approach can still happen if there’s not this backstop of the ETS. Of course, the market is always there, but what I’m interested in, if you take the logic of that argument, is that nothing would ever be in the ETS. I wonder what the Minister’s feelings are about the total abandonment of the “polluter pays” principle, because that is where all these conversations are about climate emissions. They are pollution and we have a “polluter pays” principle. Where does he stand on that, particularly in regard to his colleague from his coalition partner raising that issue?

My third new question is: can the Minister give any explanation about why most of his Government’s climate change documents and policy documents say that everything is coming back to the ETS? We saw in the Budget the $3 billion of reductions in policies and complementary policies for cutting climate emissions and this heavy reliance on the ETS. Why, then, is the backstop removed for agriculture, and why does it go further than methane emissions? We’ve heard contributions from the Green Party, so I won’t go further into that, and the Hon David Parker and the Hon Damien O’Connor have all touched on that aspect—that there are, actually, a whole lot of different elements that are being removed from the ETS backstop here. It is not simply the methane that cows burp. I think that is what most people think about when they’re thinking about agricultural emissions. Of course, other ruminants do as well, but this is also into fertiliser and nitric oxide as well. If the Minister could explain those three questions, that would be useful.

Again, if he can go back to my original questions, which were: is he confirming that he agrees, and it’s Government policy, that at least 50 percent of New Zealand’s emissions are from agriculture? Some of his colleagues in his own party seemed to dispute that the other night. What is he doing for that, to get this 2030 pricing scheme in place? And what is his evidence that New Zealand is the most or one of the most efficient primary producers in the world?

Thank you, Mr Chair. I’ll go on now to the actual legislation because I have a couple of questions around clause 5 in Part 1, about the repeal of some of the Treaty of Waitangi clauses in the legislation. I am asking genuine questions here, because if my colleague Lawrence Xu-Nan was here, he would look at this legislation and understand what it meant straightaway. I’m asking genuine, good-faith questions about how to interpret this legislation, and I’m asking because the Greens are a political party with Te Tiriti at the heart of our constitution. I’m also asking because, in my electorate of Dunedin, which I am a list MP based in—

Hon Rachel Brooking: Whose electorate?

FRANCISCO HERNANDEZ: I am a list MP based in Dunedin—I actually received a higher share of the party vote from Te Pāti Māori voters than I did Green voters, so I feel some obligation to our colleagues here in Te Pāti Māori to try and ask questions about Te Tiriti.

My question is about section 3A(b)(i) of the Climate Change Response Act. Why is that section being repealed? That section is around—[Interruption]

CHAIRPERSON (Teanau Tuiono): Can I invite the members, if they want to have a conversation—those two doors—to have it in the hallway?

FRANCISCO HERNANDEZ: Thank you, Mr Chair. The parent legislation is section 3A(b), and it refers to “with respect to the following provisions (with relate to powers to make secondary legislation), before recommending the making of secondary legislation, under those provisions, the Minister must consult, or be satisfied that the chief executive has consulted, representatives of iwi and Māori that appear to the Minister or chief executive likely to have an interest in the secondary legislation:”. Now, I understand and appreciate that huge chunks of the secondary legislation from this is kind of being wiped out anyway, so that could be the reason for it, but some of these clauses are pretty benign. For example, in section 3A(b)(xi), it refers to section 161G, which says, “The Governor-General may, by Order”—it’s just talking about how to calculate the methodology for methane and nitrous oxide reductions from agricultural activity.

I mean, surely, even if you’re not intending to price agricultural emissions through the emissions trading scheme at the processor level—and I can see that that’s a policy choice that the Government is making. Surely, it would be good to still have the input of tangata whenua in that when you’re making legislation and when you’re making regulations. Not only do Māori have huge interests in the agribusiness sector—and I think one of the speeches from the colleagues in Te Pāti Māori actually pointed this out—Māori were the original farmers of this country, and they’ve still got a huge stake in what’s happening here. I guess my question is: why are these kinds of provisions being scrapped, and what do they do?

I want to refer back to the answers that the Minister responded with—and I thank you graciously for your answers, Minister. You mentioned the cost-benefit analysis (CBA) in the regulatory impact statement, and I noticed that the status quo has had that cost-benefit analysis done and it was shown to be positive. I also noticed that none of the alternatives have had cost-benefit analyses done to them. My question to the Minister around that is: has there actually been a cost-benefit analysis done on the alternative proposals—or have I just misread the paper and they are somewhere else—and, if so, do they show a similarly positive CBA compared to the status quo? I think that’s important to the legislation—to what we’re proposing.

The second part is that the Minister alluded to the fact that we were already on track, according to the projections of the second emissions reduction plan. Now, I checked back to that document, and it said that that was with the assumption that a methane inhibitor was developed. I’m sure that the Minister is already aware that, although the development of technology is necessary, it’s only one component of the adoption of public policy, and I guess the previous emissions reduction plan made a reference to methane inhibitors as well, but they viewed that as being complementary to a pricing scheme, because if there’s a pricing scheme, you actually incentivise the uptake of these technological measures. Can you please confirm my understanding? Thank you.

Thank you to the member for those questions. To be clear, this bill does not repeal the requirement for Government to engage on secondary legislation, including with iwi Māori. It only repeals the sections requiring consultation about secondary legislation related to agricultural New Zealand emissions trading scheme obligations, as these provisions will no longer be required as agricultural activities and will be removed from the bill. That aspect that you’ve noted is clarified, in that regard.

There’s been a number of questions throughout in regards to nitrous oxide. It is a common misconception that nitrous oxide is a significant contributor to ag emissions. Fertiliser accounts for around 18 percent of ag emissions—nitrous oxide—and the total contribution from fertiliser is around 3.8 percent. Nitrous oxide is around 9 percent of total emissions, and it is sensible to think that if the majority of nitrous oxide—as was noted by a prior member and many farmers here will be aware—comes from urine and dung from animals, then it would be sensible for it to be considered alongside methane, versus being treated within the components that we’ve discussed already. I think that is a little bit of background in regards to a number of questions in that space.

Before I take the next contributions, it would it be helpful for the committee if people could refer to the specific clauses that they’re debating or that they’re providing contributions on. I’ll take the next call—the Hon Priyanca Radhakrishnan.

Thank you, Mr Chair; I will, as you’ve mentioned, relate my specific questions to clauses in the bill. I think, from memory, clause 33 removes agriculture from the emissions trading scheme (ETS), and I just wanted to traverse, I guess, some of the questions that I don’t think the Minister of Climate Change has really clarified. He did clarify why this Government had made the decision, ultimately, to remove agriculture from the ETS, and that is laid out, of course, in the regulatory impact statement (RIS), as well, quite clearly. It talks about the increasing number of participants; the Minister mentioned a number—that was 100,000—and I did hear colleagues on this side of the Chamber query that number. I don’t see an explanation within the RIS, as far as I can tell, that tells us how that number was arrived at. I would appreciate some clarification from the Minister around that.

To the point that my colleague Rachel Brooking made earlier, there’s been some conversation, some discussion in the Chamber from both sides, around whether market incentives alone will take us to a point that the Minister mentioned, which is meeting our emissions reductions targets, or whether it was in fact this backstop. Everyone agrees that it’s not the ideal response, but, as has been traversed before, it is a backstop. If there’s nothing better that the sector can look forward to currently, wouldn’t delaying—one of the options that’s laid out in the RIS—the backstop at least give the sector some certainty that something was going to be put in place, as opposed to what’s currently laid out in the RIS, which I’ll get to in a minute? I don’t believe the Minister’s clarified that point around the incentive, and that was the point of this backstop.

It says in the RIS that pricing ag emissions through the ETS was set up—there’s a whole point, paragraph 10, around that. Part of it was that “It provided a clear signal of intention and helped act as an incentive to drive uptake of emissions”. We’ve seen examples, whether it’s DairyNZ or Fonterra, who have been pushing that agenda in terms of more sustainable agriculture as well, but whether that is actually because they know that if they don’t do something about it, they will be priced in 2030, or whether it was the market incentives is unclear. What was the Minister’s thinking around that in picking the particular option that the Government has landed with?

The other question that I have is around the technologies and tools that the Minister mentioned as well. I totally get and accept the point that the Government wants to ensure that the sector has access to those technology and tools. I note that the Minister has announced previously—I think it was—a $400 million investment in tech and tools there, and that the Government has signalled intention to equip farmers, but what I’ve been hearing is that that’s still quite a way off and does not necessarily mean that the tools and technologies will be available in order for pricing to be put in place by 2030. What guarantees or what assurances can the Minister give? Can he provide some clarity around the thinking there: what are those; what is the time frame for that?

My final question that I wanted to ask was just around paragraph 17 of the RIS, which kind of makes mention, and the Minister alluded to this in his opening remarks as well, that there is a plan. I know that my colleagues on this side of the Chamber have pointed to the fact that removing a backstop, which was, you know—well, a backstop, if there was nothing else in place. Yeah, it was an incentive, it played a role, but also it meant that, if the sector couldn’t come up with a pricing regime, this would at least ensure that we reduce our emissions. Taking away that backstop with no plan leaves, actually, the sector with less certainty. There is a work plan that is alluded to here—it’s very “high level”—and I wondered if the Minister would be able to give us a little bit more around the thinking of that plan and what certainty the sector can have that this plan will actually get us to where we want to be in 2030.

I move, That debate on this question now close.

Thank you, Mr Chair. It would be great to get answers to the questions just asked, and I’ll remind the Minister again: I am still interested in whether he agrees with his coalition partners about the rejection of “polluter pays” and that we’re well on track for the second and third emissions budgets.

Going back to the Minister’s last answer, he was talking about nitrous oxide from fertiliser being 3.8 percent of emissions and that, in fact, most of the nitrous oxide emissions come from animals themselves; therefore, the logic is because the animals are also making the biogenic methane, we’ll stick the two together and not separate them out. How does that logic flow from the points made by my colleague, who also lives in Dunedin—not the member for Dunedin, I’d like to say. How does that link with the very good point that he was making about methane applying for waste and how it is now treated differently from the methane related to the animals?\

The logic doesn’t seem to flow that, just because something is related to an animal—that one gas is sometimes related to an animal, but sometimes it is not; sometimes it is related to fertiliser. That seems like a very good reason to treat that nitrous oxide that’s coming from the fertiliser differently from the nitrous oxide that is coming from the animals. And the logic that he has applied, he’s not applying to other examples of where gases come from different uses. If you could comment on that, please.

Thank you, Mr Chair. I’m really pleased to be able to speak to this very significant bill with such significant implications for our climate future, especially at a time in the world where we’ve just had this significant election result in the US. The implications for climate and, therefore, our own actions alongside the rest of the world in actually raising the bar and how we actually apply our policies and apply our actions in urgently reducing emissions has arguably come into much, much more focus. I would really like the Minister to consider the Green Party’s proposed amendment. This is to clause 14 of the bill, and it proposes to delete clause 14.

Now, the mechanics of it is that the bill proposes to delete “and agriculture” from the cross-heading in section 80 of the Act, “Allocation of New Zealand units in relation to industry and agriculture”, but this amendment seeks to actually retain the reference to “and agriculture” in that cross-heading. Really, this is just about retaining the opportunity to actually put in a legislative framework and enable the pricing of agricultural emissions at a later date. I think this is really important, because the Government has been so clear in their comments that they are committed to meeting emissions reductions, and we’ve heard that over and over. They’ve got this pastoral sector working group, who’s going to be looking at this. I’m really interested to hear as well if this is actually a funded group at this stage, because I think, at scrutiny week, it was unfunded at that stage.

I think what we’re seeing with climate, not only with the significance of the election that we’ve just seen, is we are seeing significantly concerning impacts on climate around the world. It feels like no matter where we are in the political spectrum, we’re going to have this “Oh, dear” moment where we realise that, actually, voluntary mechanisms and taking our time to take action is actually not going to cut it. We will not only need to put in legislative mechanisms and pricing mechanisms; we’re also really going to have to have that whole carrot and stick approach. I would really like to hear from the Minister whether he would consider that and consider retaining the option of actually putting in this legislative change in the future.

We had a request from a number of questioners of the Minister for why he had rejected the idea of delaying the date of the backstop, rather than removing it. I haven’t heard that addressed. It’s an important point. In respect of the issue as to why the Minister perhaps should have adopted that option, I’m not someone who has ever favoured at this stage farm-level reporting of emissions for everybody. It’s ironic to me that the industry called for that and then, having got it, said it was too complex, complained about the administrative burden, and therefore advocated against their farm leaders who were proposing that as a solution.

I’ve always thought the better solution is to have a processor-level obligation which is very simple, because instead of having thousands of participants in the emissions trading scheme (ETS), you have a dozen or so major ones—maybe a few others—and then allow volunteers who are doing better than the average to actually receive the benefit as a volunteer, because there are farm leaders who should be rewarded for doing better than the average and taking that difference out of the pool. That way you would have a very administratively efficient way of rewarding those who are progressing faster than the average in their emissions reduction without the burden of farm-level emission reductions for everyone.

I hope that the Minister, when he is considering alternatives to this, will keep that in mind. I see no benefit to putting the regulatory burden on all farmers to no great ends. If farmers are just going to meet the average, let them meet the average through the processor. Let those that are leading and doing better be rewarded for that, and they will lead and create opportunities for others to follow for the benefit of the farming sector, of our economy, and for the environment, but without the administrative burden of everyone being in at the farm level. I would invite the Minister to respond to that, because it is related to the issue as to why, perhaps, it would be better just to extend the backstop date so that that could worked through.

I have never been convinced of the farm-level obligation. The ETS, as originally designed—and I did it way back when, in about 2007—was designed to be at the processor level. It always had the pretention of 90 percent free allocation, taken further to 95 percent free allocation. I still think that that is the practical way through that could have been enabled now by an extension to the date.

I raise a point of order, Mr Chair. I’m taking this point of order to seek guidance from you on which part we were to discuss Schedule 1 and Schedule 2 of the bill in; I would just like some clarification.

Some clarification? I’ll just take some advice on that. That’s in this debate.

FRANCISCO HERNANDEZ: So Part 1?

Yes.

FRANCISCO HERNANDEZ: Thank you.

Thank you very much, Mr Chair. I’ll work my way through some of those questions. The Hon Rachel Brooking’s point in regards to agricultural emissions, the 53 percent: the source for that is part of the 2022 New Zealand greenhouse gas inventory, which can be found on the Ministry for the Environment’s website.

In regards to the question around where did the 100,000 farmers come from, I had a chat with the Minister of Revenue and there are 50,000 GST-registered farmers, and, in addition to that, there are 56,000 “others”, including small-block holders—so 106,000; we’re in that ballpark.

In regards to the questions raised by the Hon David Parker, the points in regards to the future models that the Government may be considering in regards to policy of the pricing mechanisms of which we have committed to by 2030 are not part of the scope of this bill, but we will be taking into account all considerations as part of that process.

Sorry, what name did you just—

CHAIRPERSON (Teanau Tuiono): Francisco Hernandez.

FRANCISCO HERNANDEZ: Thank you, Mr Chair. I thought you called me Steve Abel, but that’s not a confusion that’s happened quite yet.

Tom Rutherford: It’s not an insult.

FRANCISCO HERNANDEZ: Ha, ha! No, he’s a better-looking man than me, so compliments. Thank you for allowing me to take this call, Mr Chair, and thank you for your guidance earlier. As you’ll see, there’s still quite a lot of ground to cover in both Schedule 1 and Schedule 2, so I hope you’ll resist efforts by the Government benches to prematurely close this debate.

I’ll turn now to the question to the Minister, which is around Part 1, clause 8, around the repeal of some functions of the Climate Change Commission. That’s clause 8 and it repeals section 5J around the Climate Change Commission’s function, specifically section 5J(ha). I appreciate that I’ve already anticipated the Minister’s answers—that, because it repeals the secondary legislation, it’s fair enough to repeal one aspect of the legislation that established the Climate Change Commission—but I think we need to be very careful about unilaterally imposing the changes on the powers of the Climate Change Commission without a cross-party consensus, because it’s one of the watchdog agencies that the Crown does have. It’s one of the independent monitoring functions that the Crown has set up to make sure that it’s independently accountable. Particularly in regard to climate change, that’s really important because the Government of the day essentially controls the greenhouse gas inventory process. I’ve been a participant in that process. I was one of the expert reviewers in the waste sector for, I think, the 2022 or 2021 inventory. It feels like a long time ago, but it’s very important to understand it.

Look, the Minister will say that it’s because they’re repealing the parent legislation, which is to make sure that it’s kind of progressing the primary sector commitments, but my view is that instead of repealing that section altogether—and I accept the Minister’s word in good faith that they’re intending to progress the move to progress on-farm agricultural emissions by 2030—why not change it so that the Climate Change Commission has a role in monitoring and reporting on the progress of the Government’s initiatives to price on-farm emissions by 2030? If the Government is truly serious about their commitments to actually price on-farm emissions by 2030, then surely having an independent monitor will actually be better for that. If you look at the other aspects of the commission’s function, they’re consistent with that. Section 5J(a) is about reviewing the 2050 targets and, if necessary, recommending changes. Section 5J(b) is about providing advice that will enable the Minister to prepare emissions budgets.

The subsequent powers also provide the Minister with powers to either change the emissions budgets or to report progress on the emissions reduction plan or to monitor progress or also to take action on national adaptation risk assessments or climate change frameworks. To my mind, yes, we may be repealing the parent legislation which section 5J(ha) is currently looking after. My question to the Minister is: would he consider a Green Party amendment that changes that so that it instead looks after the progress of monitoring the Government’s progress to price on-farm emissions by 2030? If that is the policy mix that the Government feels is right, I’m sure I’ll be able to get my colleagues to support that, and we can have a blue-green deal across this House. None of the other parties need to vote for it. I hope they’d vote for it, of course, but I’m very interested in the Minister’s views on that particular section. Thank you.

Thank you very much, Mr Chair. I appreciate the member’s sales pitch in regards to section 5J(ha). I don’t know how to say this, but I’ll get straight to the point. The answer will be no. I will not be supporting that amendment. I appreciate that it’s late on a Thursday, but that’s not going to happen. The reason is that the Climate Change Commission has actually delivered that advice and, therefore, the function is no longer required as part of that law. Therefore, the clause is coming out. It’s a reasonably simple answer in regards to that point.

I move, That debate on this question now close.

Thank you, Mr Chair—that was nerve-wracking. I want to pick up on something that the Minister said earlier. Minister, you alluded to the truth that nitrous oxide emissions are largely associated with manure, and, likewise, we know ruminant methane is a by-product of the natural process of rumination in ruminating animals—cows and sheep and the like. Nevertheless, the agricultural gases designated as agricultural gases are methane and nitrous oxide, and those gases are the big challenge we face in the agricultural sector in our country.

My question is: even though there are processes that are causing those emissions, which are as a consequence of our big clearance of forest and draining of wetland over the course of the last 200 years and populating the lowlands with pasture and dairy cows and sheep and beef and the like, the fact remains that those land uses are contributing to climate change. My question is: is the Minister agnostic about land use?

Hon Rachel Brooking: Ag.

STEVE ABEL: There’s no pun intended; “ag-nostic” about land use. Was it that the Canterbury Plains in the last 30 years hadn’t converted so much of its land to dairying, reduced its arable production—and, likewise, Southland produced a lot more things like barley and oats, in the day.

If these were farm gate - profitable industries that could be utilising that land, that would solve the problem of the emissions of nitrous oxide—to some extent; because, obviously, if they’re still using fertilisers, there will still be nitrous oxide. That would solve the problem of the emissions of methane and still be a profitable means of producing nutrition for human bodies, in the agricultural sector. Surely the point of emissions pricing on those potent greenhouse gases—methane and nitrous oxides; super heating gases, essentially—is to incentivise things like land use change, more arable production or more cropping or more vegetable growing, more plant-based production or agroforestry? There’s a message being sent that the problem of methane and nitrous oxide predominantly from livestock is an issue.

The concern for me, in this question, is that the implication is that this Government is not agnostic about land use—that it is fiercely defending specific forms of farming, specific forms of pastoral farming, that are high-emitting. Where is the pushback from those other sectors of our agricultural industry who do not emit methane, who do not emit high amounts of nitrous oxide, who in fact are being encouraged by a pricing system that makes it clear that those are a problem for us in terms of climate change? To give an example of the challenge: simply because most of nitrate leachate, which is a problem for freshwater contamination and drinking-water contamination—simply because most of it comes from dairy cow urine doesn’t mean we don’t worry about it, because it’s a risk to human health. Of course we still have to deal with the problem of nitrate leachate, even though it is part of a biological process in dairy cows.

That’s my primary question, and it’s an important question of clarification, Minister. Are you agnostic about land use change, or is this simply about fiercely defending a specific kind of land use, i.e., pastoral livestock farming?

I’ll tell the member that I’ve spent a long time agonising in regards to the question and the points that the member’s raised, but it’s not in the scope of this bill.

I move, That debate on this question now close.

Francisco Hernandez. I really want to hear some new material.

Thank you, Mr Chair. This will be fresh material that I’m conjuring up right now. I’m asking questions around clause 32, which covers Schedule 2 of the proposed transitional arrangements. My question is that that clause seems to be about the people who have already registered for the scheme and essentially making sure that they can cease to participate under the Act, so the information that I would like from the Minister is how many people does this current schedule actually affect? Has there been a lot of early interest in registering to be part of the scheme, for instance? Does it affect a lot of people?

I would like to, I guess, return to the questions that I’ve already asked and the Minister still hasn’t addressed yet around the cost-benefit analysis. Was there a cost-benefit analysis done on the other proposals? There was a cost-benefit analysis done on the status quo. Was there a cost-benefit analysis done on the other proposals? There were three of them in the legislation. We would be very interested, on this side of the House, to actually find out whether the kind of policy options that the Minister is pursuing are suboptimal to the outcome we’re seeking. The sort of multi-criteria analysis essentially shows that the status quo option is equal to option one, which is the Minister’s preferred option, and option three, which is the deferred processor-level pricing. But option two, which is the ongoing reporting requirements, is the one with two minuses after it.

I’m curious to see if there was cost-benefit analysis done on the other measures, which is option one, the complete removal in option two, the ongoing reporting requirements in option three, or whether there was just analysis done on the status quo, because that seems to be not evidence-based policy if we’re just evaluating the status quo and not comparing the relativity of the options. The cost-benefit analysis shows that it does have a positive cost-benefit ratio—1.24 or 1.13 without the premium for carbon action—so I think this is a really important question.

I would also like to find out about the question around Schedule 2, because I think it’s important if we’re measuring how many people are actually affected by that provision, if it was actually necessary in the first place. Thank you, Mr Chair.

I move, That debate on this question now close.

The question is that Steve Abel’s tabled amendment to delete clause 5 be agreed to.

The question is that Steve Abel’s tabled amendment to delete clause 7 be agreed to.

The question is that Steve Abel’s tabled amendment to delete clause 14 be agreed to.

The question is that Steve Abel’s tabled amendment to delete clauses 32, 33, and 34 be agreed to.

Steve Abel’s tabled amendment to retain “agricultural component” in the definition of eligible activity is out of order as being inconsistent with the objects and principles of the bill.

Steve Abel’s tabled amendment to retain reporting requirements for farmers to report on their emissions is out of order as being inconsistent with the objects and principles of the bill.

Steve Abel’s tabled amendment to retain reporting requirements for agricultural processors to report on their emissions is out of order as being inconsistent with the objects and principles of the bill.

Steve Abel’s tabled amendment to retain requirements for farmers to surrender emissions units is out of order as being inconsistent with the objects and principles of the bill.