Biofuel Bill

I want to make two important points in this part of the debate on the Biofuel Bill. The first is in relation to costs. We have no idea of the cost we will be imposing on New Zealand households with this bill. We know that households are under enormous cost pressures—food prices going up, electricity prices going up—and what we know from this Government is that it is completely out of touch with the struggle that is going on in ordinary New Zealand homes as they put their family budgets together. I was just astonished to hear the contribution from Dr Michael Cullen, the Deputy Prime Minister in this Clark-Peters Government. What Dr Cullen said was this: “The price of gas sometimes goes up and down by 10c overnight. So why would we give a bother if this is 1c or 2c?”. Why would we bother if this bill poses an increase of anything from—depending on the advice—somewhere between 3c or 7c a litre? Well, let me tell members what 3c a litre means. Every cent a litre costs New Zealanders $60 million—$60 million. So tonight this Parliament is looking at whacking another $180 million of costs on to families and businesses for very questionable environmental gain.

We believe that if we have an emissions trading scheme, there will be an incentive for biofuels. Biofuels should be able to stand or fall on their merit, rather than our having this nanny State bill where the Minister is going to define the exact percentage of biofuels for the next 6 years. That is my first point. The second point is—and it comes down to the amendment in my name in respect of the commencement date—that every member of this Committee knows there is enormous international debate about the sustainability of biofuels. There is not a publication in the world that has not talked about the awful problems that other countries have got themselves into with their biofuel regulations. And what does this bill do? It says we are going to make biofuels compulsory on 1 October this year, but we are not going to sort out the sustainability standard for some time in the future. So if I bowl a tropical rainforest over, grow palm oil, and export it to New Zealand, it will meet the compulsory requirement of this bill on 1 October. If I go and bowl over some Amazonian forests, if I steal food from the poorest people in the world and produce biofuels, on 1 October that is all OK. And the Green Party, New Zealand First, and Labour are saying they do not care.

They do not care! Have they not listened to the submissions from Oxfam—a reputable organisation? Have they not listened to the Parliamentary Commissioner for the Environment, whom the Government appointed, and who opposes this bill and says that it is damaging to New Zealand’s environmental reputation? My amendment is very simple, and says simply this: do not introduce the compulsory requirement until we have the sustainability standard in place—put the cart after the horse, not before. Have members ever heard of anything so common-sense?

Now, the Green Party members were interesting. They did not want to argue for introducing this compulsion before some sustainability standard comes into place into the never-never. They just simply said: “We can’t vote for Nick’s amendment, because we haven’t yet seen it.” Well, that is not a very good argument. We moved it at the Local Government and Environment Committee. We gave notice that it was one of the most important issues in this bill, and for members in this Committee to proclaim that this bill is about sustainable biofuels, when the sustainability standards do not come into place for some long time down the track—officials say it may be as late as 2011—is reckless and irresponsible.

I could refer to the Secretary-General of the United Nations pleading with countries not to put biofuel requirements in place without sustainability standards. I could refer to the reports of the OECD, and to the United Kingdom House of Commons. I could refer to the reports from the World Food and Agriculture Organisation, and to all of that international advice, and still the Government blindly proceeds with this bill and this compulsory requirement that is so foolhardy.

I would like to respond to some of the misinterpretation of information that was provided to members of the Local Government and Environment Committee, including Dr Nick Smith, by officials from the Ministry of Economic Development. The cost estimates that Dr Smith continues to recount to this Parliament are, as he knows, not the figures that were given to him by the Ministry of Economic Development.

Hon Dr Nick Smith: Give us its figure.

Hon DAVID PARKER: The figure is the figure that I gave earlier, and the member has heard it on numerous occasions before. It is shown on this piece of paper here, which is a briefing on the Biofuel Bill given by the Ministry of Economic Development on 18 June 2008, when that member was on the committee.

Hon Dr Nick Smith: What does it say about costs?

Hon DAVID PARKER: The advice was that the cost of the additional blending infrastructure and the like that the oil companies will have to have would be the equivalent of 0.2c to 0.4c per litre of fuel sold, assuming that the—

Hon Dr Nick Smith: For the infrastructure. What about the fuel?

Hon DAVID PARKER: For the infrastructure, assuming that the cost is recovered over a 4-year period. They will probably recover it over a longer period.

Hon Dr Nick Smith: $20 million.

Hon DAVID PARKER: It is 0.2c to 0.4c per litre. The overall cost to consumers is estimated at being in the range of a net benefit of 4c per litre to a net cost of 1.3c per litre. With higher oil prices, biofuels could in fact save New Zealanders money.

Hon Dr Nick Smith: So you don’t need regulation.

Hon DAVID PARKER: We have Dr Smith chipping away there saying we do not need regulation. His other stated concern is the sustainability of biofuels. At the moment, one can sell biofuels in New Zealand, they are sold in New Zealand, and there are no sustainability criteria. Whichever way one looks at it, this bill improves the status quo, because it immediately introduces reporting obligations in respect of biofuels, and it promises to have fully articulated sustainability criteria by about the middle of next year. In the meantime, it sets out the principles that have to be applied in respect of those sustainability criteria.

Can I just demolish a couple of other things that have been spuriously put up by the National Party. An example was given of corn-to-ethanol. We agree that that is a bad thing. Corn-to-ethanol could be produced and sold in New Zealand at the moment; this legislation, because of the sustainability criteria, will prevent it from occurring in the future. It would not meet the sustainability criteria, because the criterion of a 35 percent reduction in greenhouse gas emissions would not be met. It would fail on that one. In addition, it would fail to meet the criterion that biofuels not be grown on land of high productive value.

Finally, on the issue of cost, as I said, the cost might go down, or it might go up by 1c a litre. We hear National members shed crocodile tears about that, whilst their transport spokesperson, who has not taken a call in this debate, is proposing tolls in Auckland of $5 a day each way—50 bucks a week!

I just know, Mr Chairperson, that you are dying to hear the rest of the bit at which I got cut off on when I was debating a previous part, and it does fit neatly into the title of the debate—trust me. The title is, I guess, the principal part of the debate we are having, and, as I said in an earlier debate, this is largely a placebo bill. Certainly, one of the reasons I oppose it is that it does not encompass those things that are really going to make a difference. I would have much preferred this bill to have in its title, and to include, “alternatives to fossil fuels”, because in my humble view if there is to be some resolution to the consumption of fossil fuels, then we have to look at the big picture, at the hydrogen options, and at some of those other things—dare I say electric; I am not sure whether that is a fuel or not—including solar power. That is why this bill is so narrow and will make such a minuscule difference to what actually happens. That is my first point. The bill is too narrow to actually resolve the issues confronting humanity. I put that out there to be considered.

The other thing I was about to raise in the previous debate in terms of sustainability, is that we have a dearth of knowledge—a lack of knowledge—about the impact on existing plant and machinery in New Zealand. When we start mandatorily making regulations about what fuel mixes are to be, I am not sure what the implications of that are going to be. In my modest operations at Te Tipua I have a tractor. It is an old tractor, but it is about 140 horsepower. The replacement value of a tractor today is about $1,000 per horsepower, so members can do the sums. If this tractor, which probably has an engine life of somewhere in the 12,000 to 18,000 hours—it has done about 4,500—does not like what it is mandatorily being asked to consume under this bill, which is a 5 percent mixture of a biofuel into the additive, and it dies, the implications are going to be quite serious on the kind of revenue flows that are in my modest operation, I can tell you.

So when we talk about sustainability, there is a certain sustainability of the plant and machinery that we do actually have currently in New Zealand, and nobody has actually raised that issue. If we are seriously talking about the title, then it might include the words “and killing off obsolete machinery”. So that is an issue I want to put before the Committee as well.

There is another issue about sustainability. Whilst I acknowledge what the Minister said about the corn-to-ethanol argument, there is a sustainability issue, too, surrounding the use of our farmland. We talked earlier in the debate about the pressures on feeding the world, and food chain compaction in terms of the food now being consumed. One or two members in this series of debates have talked about rape or granola, or some of those other oil-bearing fruit alternatives that we can actually grow. The economics are that the current price of wheat is about $500 a tonne, and most good operators are getting yields in excess of 8 tonnes. Some of them are getting over 10 tonnes per hectare. Members can do the sums on that—$5,000-odd a hectare gross. With the current price of canola at about $800 a tonne, and somewhere about 2.5 to 3.5 tonnes per hectare, one is sort of saying that the pressures then come on to sustainably farming one’s arable land.

Whilst the bill talks up the benefits of rape in a crop rotation, most people involved in arable farming in New Zealand have been around long enough to have worked out what grain crops suit them and where they have pulse crops, brassicas, and all that. To actually impose a crop that is not as viable as current arable use puts certain other implications on arable farmers.

The absolute contrast in this is that the current price of wheat at $500 a tonne makes the growing of the oil-seed crops less viable and less preferable. But the more of a move there is to the oil-based crops, the less there will be of the grain crops, and that price goes up further, and that margin just gets wider and wider.

I apologise to my colleague; I have a meeting I need to go to, and I want to make a further contribution. I have noticed that not a single member in the Committee has been able to refute the core argument around the amendment that National has put.

Moana Mackey: Because it is not doing anything.

Hon Dr NICK SMITH: Well, let us go through it. Does the member accept, as the Minister of Energy does, that there are a large number of unsustainable biofuels around the world and that that is cause for serious concern?

Colin King: He’s nodding.

Hon Dr NICK SMITH: He is nodding, as is the member. In every other area of public policy, before we make something compulsory we want to have the standard in place. Have members ever heard of anything as ridiculous as what the member for Rotorua wants? She is the temporary member for Rotorua; she is a goner, the National candidate is on his way here, and we are looking forward to welcoming him. One of the reasons Steve Chadwick will go is she does not seem to give a hoot about the costs imposed on people in Rotorua on low and middle incomes. She is prepared to pass any sort of politically correct legislation that imposes costs on her constituents, and that is one of the reasons she will go down the gurgler in a few weeks time, when we have a general election.

I come back to the core point: why will this Parliament not support having the sustainability standard in place before making biofuels compulsory? The Government says that that would just delay them.

Moana Mackey: Of course it is.

Hon Dr NICK SMITH: Well, is it a bad thing to delay making unsustainable biofuels compulsory? I ask those ladies opposite why we would want to compel people to use biofuels made from palm oil from Indonesia. Labour is making biofuels compulsory before it introduces a sustainability standard, and not a single member of the Government, including Steve Chadwick, can give me a reason why.

Hon Steve Chadwick: It will stimulate biomass.

Hon Dr NICK SMITH: Oh, she says it will stimulate the biofuels industry. Well, let us try to stimulate a sustainable biofuels industry. There is absolutely no logic in the Government bringing this provision into effect on 1 October.

There is a reason for it. Labour has been in Government for 9 years, and New Zealand has the worst increase in emissions of any of the 42 Kyoto-obligated countries—an awful record. We have lost record numbers of trees. We have had a constant decline in the amount of renewable electricity. Basically, the Government is going into the election on the issue of sustainability with one of the worst records on climate change that any Government could have. It wants a little photo opportunity on 1 October, so that its members are able to say: “Hey, guys, we know that climate change is in trouble, we know that emissions have gone through the roof, but, hey, we’ve got the Biofuel Act.”

What the Government is not telling the public is that the sustainability standard is miles down the track. I do not think a single member of this House believes that it will be provided by the due date of 1 July next year. The Government says it wants to get in early with this legislation in order to get the benefit of it. Sorry? In order to get the benefit of biofuels making up half a percent of fuel in the first year, it will go ahead with it without the sustainability standard!

National members on the select committee struggled for 6 months to get a sustainability standard and could not do it. We have given a hospital pass to the officials to try to work it out. The Government knows that they are not going to meet the timetable for the sustainability standard, but it is passing this bill without that most basic component. I have a simple challenge for members of the Government: if they want compulsory biofuels, they should put in place the sustainability standard that will deal with the risk of food being taken from the poorest in the world, that will deal with the risk of biodiversity being bowled over, and that will ensure that there actually is some climate change benefit, before rushing ahead and introducing compulsion.

The last point I will make to the Minister of Energy is this. He says we need this bill to stop unsustainable biofuels. Well, whenever we get the standard, it still will not prohibit unsustainable biofuels.

It is indeed a pleasure to follow my colleague Nick Smith, who would have to be the most knowledgable member in this House on this subject. I would like to refer to the title of the bill, and to cover about six issues very, very briefly: what the Minister of Energy said previously; the behaviour of the various parties in this Chamber; what true leaders would do when confronted with the challenges that this Government has scored own goals on; the comments that Nick Smith drew to the Committee’s attention; and the record of this Clark-Peters Government on the Kyoto Protocol.

If we were to listen to and believe what the Minister said before, we could only draw the conclusion that this bill in actual fact is not required, because everything is rosy. But we know that that is not the case. This Biofuel Bill is a lot deeper and more complex than that.

When I heard the contributions from New Zealand First, United Future, and the Greens, I drew the conclusion that a lot of members are voting in support of this bill for the wrong reasons, and I have seen that happen in this House far too many times. Biofuels have a little bit of a notion around them that they will be the panacea for all our problems. However, the science has caught up with them, and that attitude seems to be very, very perverse. Yet the politicians in this House will support this bill because there has been an amendment around sustainability.

Nick Smith very eloquently highlighted how senseless the speedy process of this bill through the House is. In actual fact it makes the whole thing quite unprincipled.

In terms of talk about principles and sustainability, we heard from the chairperson of the Local Government and Environment Committee, who got up before and gave a contribution. She spoke about the principles. She could not talk about the standards. I put it to members that if they are talking about the principles around a sustainability standard, then why are they pushing this bill through the House before they have that sustainability standard? Why would they continue to go down the pathway of the perverse effects of the production of biofuels: the total demolishing of forests for the purpose of reaping Government-subsidised taxation benefits; rising food prices; and the taking of food from the mouths of the poor? It defies logic.

Another point I would like to make—time is running away on me—is that I have the sense that a very dumb thing is being done by this House. Accepting those perverse effects, a true leader would go further afield, instead of trying to fence off New Zealand and make it a solution inside itself. A true leader would actually go further afield and seek collaborative partners to identify long-term global solutions. Is the Clark-Peters Government doing that? Not at all. One has to seriously challenge the motive for it introducing this measure. The Biofuel Bill is damaged because it is being rushed through the House. National members recognise the potential of it, but it is hugely risky if one does not get the principles right.

In terms of the cost, when we look at the overall context of things we see that, regardless of what the Minister says, a lot more money is being spent on this novel bill than is being spent on the substantive game of addressing climate change. Regardless of how one wishes to quote it, the cost-benefit ratio of this bill does not stack up.

Coming from Marlborough, I recognise that a lot of the growth in that area in recent years has come from the change of land use. It has come from the use of automotive engines such as tractors, which burn fuels. Again, this bill will impact upon the competitiveness of our region.

Probably the point I am most disappointed about is that in asking the Minister to give me an explanation—

I have to say this bill is a shocking bill. No one here knows how to drill for oil, distribute it, refine it, and put it together, but a bunch of politicians who have never done any of those things sit around a select committee table and decide to mandate how it will be made here in New Zealand. No one here has ever made fuel, or refined it, but, no, a bunch of politicians, a bunch of elected representatives on a select committee, are so, so clever that they can decide and debate in Parliament whether, in the year 2012, the level of biofuels in our fuel should be 3.4 percent, or 3.35 percent, or 2.4 percent. Those are things that our politicians have spent their time debating and considering. Where on earth does the expertise or the knowledge come from?

Those politicians are so clever; they can sit around in this Parliament and decide not only the financial cost but the environmental cost. I promise that no member of the Committee knows whether adding that percentage of biofuel is a plus or a minus in terms of environmental outcomes. Members have no mechanism to account for it. That is what is so extraordinary. We cannot trace all the work, all the resources, all the effort; we cannot trace the sources of all the compounds and chemicals that go into a litre of fuel. We cannot even trace the mechanisms by which biofuel is manufactured and made, but a bunch of bureaucrats and politicians sitting around in a committee meeting in Parliament say they think the figure for 2012 should be 3.35 percent. They have no idea. They know nothing. It is the conceit that bothers me. The socialists have given up trying to run an economy.

Darien Fenton: Ha, ha!

RODNEY HIDE: They think it is funny.

Darien Fenton: No, we think you’re funny.

RODNEY HIDE: At least I would get higher up the Labour list than poor old Darien Fenton has, if I put my name up. What is tragic about this bill is what it means to New Zealanders. It will put up the price of fuel, for no environmental purpose; it is just so, I guess, some madcap members of Parliament and politicians who think they know something about the environment, who think they know something about an economy, who think they know something about the refining and manufacture of petrol, can go around and say “Look what we did!”.

All they are doing, by the way, is helping a couple of businesses in New Zealand get rich. They cannot sell their product commercially, so they come to Parliament, they get their product legislated for, and they get it into the market place. How mad is that? The next time I hear Steve Chadwick worry about the effect of rising costs on middle-income workers and low-income workers, I will tell her she is shedding crocodile tears. I would have included Darien Fenton, but I do not think she actually cares; I think Steve Chadwick does. It is this legislation, aided and abetted by the crooked New Zealand First Party, that will add costs on to New Zealanders. It is a disgrace, and David Parker should hang his head in shame. What sort of command and control kind of commissioner of petrol and fuel does he think he is that he can sit in Parliament and dictate the composition of the nation’s fuel?

Clause 1 agreed to.

The question was put that the following amendment in the name of the Hon Dr Nick Smith to clause 2 be agreed to:

to add the words “except section 34K which shall not come into effect until the regulations under 34GA have been gazetted by Order in Council”.

I move, That the Committee divide the bill into the Energy (Fuels, Levies, and References) Amendment Bill, the Customs and Excise Amendment Bill (No 5), the Tariff Amendment Bill (No 2), and the Local Government Act 1974 Amendment Bill (No 2), pursuant to Supplementary Order Paper 245.