Climate Change Response (Moderated Emissions Trading) Amendment Bill

I move, That the Climate Change Response (Moderated Emissions Trading) Amendment Bill be now read a third time. This bill is about implementing for New Zealand a workable and affordable scheme that will provide an incentive to reduce emissions and to encourage afforestation. It strikes that right balance that we need to find between protecting our environment and ensuring New Zealanders have jobs. It ensures that we do our fair share on climate change without the pretence the previous Government ran of New Zealand being carbon neutral.

New Zealand has actually been going round and round in circles for over a decade on trying to get a price on carbon pollution. This bill means that on 1 July next year there will be that important price on carbon as part of our package to respond to the challenge of climate change. This revised emissions trading scheme is consistent with National’s commitments to the electorate. We said we would align our scheme more closely with Australia; the bill does that. We said we would provide incentives for industry to reduce emissions without encouraging an exodus of jobs and investment overseas; the bill does that. We said we would rejig the scheme to be fiscally neutral, so households, farms, and businesses would not be funding multibillion-dollar windfall gains to the Government; the bill does that.

If this bill was not passed, the existing scheme would come into effect on 1 January, and it would increase power prices by 10 percent and put $400 million a year in costs on to industry. There are also no allocation plans, and there are a number of serious areas in the existing legislation that would cost jobs and do damage to the environment. This Government is not prepared to burden households and businesses with that scale of costs at this time, when we are just seeing the fragile signs of an economic recovery after the worst economic downturn since the Great Depression. The scheme would have to had to be delayed until 2011 if it were not for an agreement with the Māori Party, for which I must thank them. Frankly, mokopuna in the future will thank them also. They have been constructive players and want to move New Zealand forward.

The Māori Party brings a very balanced perspective to this debate, with both a strong commitment to Papatūānuku, the environment, but also a real concern about jobs and about the impacts on low-income households and an understanding of the importance of primary industry to New Zealand. In the Opposition’s criticism of the Māori Party, it has been said in one breath that this does too much for Māori, and in the next breath that it does too little. Well, both cannot be right, and I think that reflects the fact that we have come to a very fair agreement.

I also acknowledge the role of United Future, who have consistently—not just now, but also over the last decade—played a very constructive role. I particularly acknowledge the work of Peter Dunne in chairing the Emissions Trading Scheme Review Committee. I also thank the very capable Craig Foss for the work he did in chairing the Finance and Expenditure Committee. I acknowledge the hard work of officials, particularly those in the climate change and risk directorate of the Ministry for the Environment, led by Stuart Calman; the Ministry of Agriculture and Forestry team, led by Julie Collins; and select committee staff. I particularly acknowledge the Parliamentary Counsel Office officials, who have worked extraordinarily hard. It is interesting to me that for all the debate on the bill over the last 2 days, scrutiny of Supplementary Order Paper 98, which we have moved through the House has found not a single error.

This bill makes a number of important changes to make our emissions trading scheme workable and affordable. The industrial, energy, and transport sectors will be entering the scheme on 1 July, and agriculture in 2015. There will be a transition phase for the next 3 years with a half obligation and a fixed-price option of $25 a tonne. Those changes will halve the cost increase for electricity and fuel for consumers and businesses.

The bill also makes changes to support for trade-exposed emissions-intensive industry, which I think is the most challenging dimension of climate change and emissions trading scheme policy. First, a high-intensity and medium-intensity threshold is specified. Secondly, the allocations will be based on an industry average and not on 2005 levels. That will ensure that we do not reward those that have been laggards and have had higher emissions, and punish those that have invested early in efficiency. Thirdly, the allocations will be production-based. That is as per the economic analysis that was done by the New Zealand Institute of Economic Research and Infometrics showing that that was the most effective way to address the problem of leakage. This Government is not about exporting jobs offshore; it is about incentivising more efficient production here in New Zealand. The fourth change is about slowing the phase-out of support to industry so that it is in line with our major trading competitors.

There has been a nonsense claim of $110 billion worth of cost to families. Let me go through and challenge that. First, it is not a cost; it is a lower level of revenue.

Hon David Cunliffe: The New Zealand Treasury is not a nonsense.

Hon Dr NICK SMITH: The analogy I make for Mr Cunliffe, who interjected, is that if his research and development tax policy, which cost $260 million a year, was costed in the same way that he wants to cost this emissions trading scheme bill, it would cost $43 billion. That is, if we add all the years up and add all the interest, we get that sort of ridiculous figure. All the rhetoric about debt, etc. is simply a smokescreen for Labour, who fundamentally have not been able to find fault with this bill.

There has been criticism that this bill is too generous. This emissions trading scheme will be the first in place of any country outside of Europe, and it will be the most comprehensive, by including transport, industrial, and energy emissions. New Zealand is also the first country in the world to include forestry, and under these amendments, because of our unique emissions profile, it will also include agriculture. There has also been criticism of our production-based approach, which was recommended in the analysis in the Finance and Expenditure Committee review. I note that Australia is taking that intensity approach in its Carbon Pollution Reduction Scheme, which is expected to be passed in its Senate this week. It is also the approach that has been taken by Europe in the third phase of its emissions trading scheme. This is about incentivising efficiency, rather than just exporting emissions-intensive industries to other countries. It is true that we are making a provision in this bill to ensure that it does not snuff out the early recovery of the economy. The passing of this bill means we have an emissions trading scheme that balances environmental and economic outcomes while showing the international community that we are serious about tackling climate change.

After having achieved the milestone of passing this bill, attention will have to turn to the complex intellectual job of implementing the scheme. The Government looks forward to working with industry to ensure a smooth implementation. The passing of this bill will be an important first step for New Zealand towards addressing climate change. It allows us to get on and implement an affordable and pragmatic scheme, and to play our part in addressing this global problem. I emphasis that it is a first step, and that New Zealand must remain nimble-footed with regard to agreements that may be reached internationally, to decisions that our trading partners make, and to advancements and updates in the science. Getting the emissions trading scheme up and running will be a major programme for the Government over the next year. Challenges include providing the allocations of emission units to those intensive trade-exposed companies, and that will include consultation with industry and other New Zealanders about how we calculate and implement those entitlements.

This bill will deliver for New Zealand a workable and affordable emissions trading scheme. I am pleased to commend this bill to the House. It is a critical and important first step in our nation’s effort to do our fair share in combating climate change.

We are about to pass a bill into law, the Climate Change Response (Moderated Emissions Trading) Amendment Bill, that is fundamentally flawed on multiple levels. It is economically irrational, socially inequitable, environmentally counter-productive, and fiscally unsustainable. Its hallmark has been one of poor procedure and hasty consideration.

The Committee stage of the bill was taken in about 8 hours under urgency. That allowed for no proper chance to remedy the defects associated with the select committee process, including the withholding by the Minister for Climate Change Issues of key aspects of the official analysis of the legislation. What is worse is that the 8 hours were completely insufficient to allow Parliament to come to terms with the two sets of amendments tabled only yesterday. One, from the Minister, was a Supplementary Order Paper of 121 pages, with at least five mistakes that I have found already in the explanatory note, which we opposed. The other one was from the Māori Party enacting a Treaty clause. We ultimately decided to support that, notwithstanding that there was no proper scrutiny allowed for those particular amendments. What is worse, National, the Māori Party, and Peter Dunne voted down every amendment put up by the Opposition designed to improve this bill. Having deprived the people of an adequate select committee process, those parties then prevented any real improvement being made in the later stages of the legislative process.

We proposed an amendment to cap overall levels of free allocation, given that the bill as it stands puts in place an uncapped intensity-based allocation model. An uncapped method allows the overall level of allocation and, therefore, emissions themselves to increase because there is no cap in the “cap and trade” scheme. So it carries with it an extensive fiscal risk if recipients of free allocation choose to increase production. That is why the Parliamentary Commissioner for the Environment told Parliament that it is vital to create the right incentives to reduce fiscal risks and to create policy certainty for business. But National, the Māori Party, and Peter Dunne did not support this amendment, which sought to advance fiscal responsibility and environmental effectiveness.

Labour also tabled amendments to phase out free allocation to industrial and agricultural activities completely by 2030. We did this because, as the bill stands, the level and duration of allocation is excessive. Providing free allocation for more than 80 years with a phase-out rate of only 1.3 percent a year defies any common-sense idea of a transition. Even the Minister says that 1.3 percent will not survive future reviews, which begs the question of why he wishes to enact it in the first place. At this level of generosity, as with any protection or subsidy—as we saw with supplementary minimum prices in the 1980s—future Governments will find it very hard to roll back this level of assistance. Allocation recipients will have a very powerful incentive to maintain the status quo. National, the Māori Party, and Peter Dunne voted to keep these permanent pollution payments.

Given the immense costs of the levels of allocation, not just fiscally but also economically and environmentally, it is crucial that there should be transparency over how allocation takes place. But this bill reduces that transparency, so Labour sought to enhance it and put in place safeguards against corruption by requiring the details of all allocation to be published. Allocation involves the transfer of enormous amounts of wealth in the form of carbon credits from the taxpayer to individuals and firms. The taxpayer deserves to know the level of these subsidies and have a clear, analytical rationale as to why they are provided. If we do not have that transparency there will be no public trust in this scheme and there will continue to be rightly held suspicions that allocation levels are based more on politics rather than economics. Labour tried also to require any donation to a political party by a recipient of allocation to be disclosed. But National, the Māori Party, and Peter Dunne do not support the right of the public to know these things.

We also tabled amendments to remove the half obligation and raise the price cap from $25 to $100 during the 2010-12 period. The half obligation is unnecessary. It shifts costs by more than half from the polluter to the taxpayer, and, despite the Minister’s claims, in the electricity sector it will not reduce the impact on electricity prices. The European experience shows that it will not. What is worse is that the fixed price is set at such a low rate that it does not fulfil the purpose of any transitional price cap to provide certainty against price spikes. Any price cap should be set high enough to act as a safety valve, not just another subsidy.

We also sought to prohibit the banking of non-forest New Zealand units during the transition period. This would have prevented the collection of credits while the price of carbon is low and then the selling of them at a higher price once the cap is removed. Banking and trading free allocated credits, taken with price caps, will result in increased emissions and windfall gains to polluters. But National, the Māori Party and Peter Dunne did not support fixing the bill in these ways.

We also tried to put back the entry date for agriculture from 2015 to 2013. As the Parliamentary Commissioner for the Environment told Parliament, there is no evidence to justify delaying the date of entry of agriculture to 2015. We can measure emissions at processor level from 2013, and emissions-reducing technologies are available, particularly in the form of nitrogen inhibitors. Delay merely keeps the full cost of emissions with the taxpayer until 2015 and postpones appropriate levels of emissions-reducing investment and proper behaviour in this sector. National, the Māori Party, and Peter Dunne did not support these changes, either.

We also sought to establish a fund to reduce greenhouse gas emissions through the promotion of complementary measures. All the evidence internationally is that an emissions trading scheme can do only part of the job. There need to be robust complementary measures in place, as well. The amendment that we proposed would have provided for an annual appropriation for revenue accrued from the emissions trading scheme to promote energy efficiency, renewable energy, and research and development. We put this amendment forward because assistance provided to households beyond 2012 has been axed. This bill gets rid of the household fund in the original legislation. That fund would have provided a billion dollars of energy-efficiency assistance to low-income households over 14 years. The Māori Party traded off its abolition for a one-off $24 million scheme targeted at low-income households. Let us do the maths on that. Low-income households, many of which are Māori, will receive $976 million less in energy-efficiency assistance than they would if this amendment was not passed. National and Peter Dunne were part of that deal.

The bill as it stands makes highly undesirable changes to the Act in order to achieve alignment with the Australian Carbon Pollution Reduction Scheme, an objective that Treasury, the Parliamentary Commissioner for the Environment, a leading independent expert, and others all tell us is without any clear analytical basis, given the unique emissions profiles and industrial profiles of the two countries. The fact that the Carbon Pollution Reduction Scheme is still proposed only, but went through a $7 billion revision only this week in order to try to get Liberal Party support, only adds to demonstrating the incoherence of the harmonisation proposal. We proposed amendments to remove the harmonisation objective and to take out the criterion as a relevant one that the Minister should take into account when determining allocation plans. Despite this clearly being in the national interest, National, the Māori Party, and Peter Dunne opposed it.

We also tried to enshrine national emissions targets in law and to require the Minister to ensure that they are actually met. Targets should not simply be a matter of pious intention. The current levels, duration, and model of allocation are completely incompatible with the Government’s target to reduce 1990 emissions by 50 percent by 2050. If the Government’s “50 by 50” reduction target is anything more than a catchy slogan, the Minister should have been prepared to agree to enshrine the target into law.

Finally, we proposed amendments to establish an independent advisory committee on climate change to provide advice to Ministers and promote informed public debate on the public policy response to climate change. The development of climate change policy in New Zealand has been controversial; we all know that. There is no consensus on key issues as there is, for example, in Europe. There has been insufficient independent analysis of the costs and the benefit of climate change policy initiatives. The select committee process that we have just witnessed aptly demonstrates why such an independent body is so sorely needed in this country. National, the Māori Party, and Peter Dunne opposed even these measures.

This bill is fundamentally flawed. As I have said previously, it will make New Zealanders poorer, our economy weaker, and our emissions increase. The amendments Labour tabled over the past day would have addressed some, but not all, of these significant deficiencies, but, like our attempts to reach a consensus with National earlier in the year, they were spurned.

Tēnā koe, Mr Assistant Speaker Barker. Tēnā tātou e te Whare. The Climate Change Response (Moderated Emissions Trading) Amendment Bill was always about fulfilling New Zealand’s international, environmental, and domestic obligations in a fair and balanced manner, and I am glad to speak in the third reading of this bill because that is what it will achieve. From an international perspective, this legislation will enable the Government to head to Copenhagen in a few weeks’ time with a substantive framework to curb emissions and to show that New Zealand is prepared and committed to do our fair share in the fight against climate change. Indeed, this National-led Government will ensure that New Zealand stands with our international friends and neighbours as progress is made on this most significant of issues.

I agree that we should be standing with our neighbours, but we need not march out ahead on our own. To do so would not make any practical improvements towards the goal of combating climate change. It may allow our Government representatives to attend future conferences with a slight feeling of moral superiority, which is a landscape the Opposition was most addicted to when in Government, but that feeling would have been built on the back of failing businesses, a struggling economy, and job losses. That is why we stand side by side with our partners and why we are aligning ourselves more closely with Australia.

As I have said, this bill ensures that we do our fair share for climate change while balancing our international and environmental obligations with our domestic responsibilities. This is what New Zealanders said on 8 November last year that they wanted and this is what the National-led Government will deliver.

This is very important legislation, and the changes that National supports are designed to assist the transition into the scheme for those most affected by the changes. By extending entry dates and increasing allocations, this bill is helping to cushion the transition for existing industries and their related consumers so that they can continue to hire workers and contribute to our recovering and strengthening economy. Again, from an environmental perspective these industry and worker-friendly amendments will not negatively impact the global issue of climate change, at all, in practical terms, but they will make a big difference to thousands of New Zealanders who represent the backbone of this country’s economy, the agriculture, fisheries, and energy sectors among them. Those in the agriculture sector at least will sleep a little better knowing that when this bill passes its third reading, they will now have until 2015 to prepare for their involvement in the scheme. The agricultural sector is to New Zealand what the mining industry is to Australia, and we need to ensure, more than ever in the current economic conditions, that we allow this sector to continue to thrive.

There has been a tight timetable for the progress of this bill, but, as the Hon Nick Smith pointed out, it was not only the upcoming Copenhagen talks that called for timeliness but also the fact that under the previous administration’s scheme, which currently stands, consumers and businesses were about to unwrap a $400 million bill for Christmas, including a 10 percent rise in power prices, due to changes that come into effect on 1 January. That is not what New Zealand’s businesses and families need; in fact, it is not what many families can handle right now. There are signs that the worst of the economic crisis is over, but the effects are still being felt and will continue to be felt for a long time. The existing legislation is not what New Zealanders want, and they said so at our general election after John Key openly proposed a moderated emissions trading scheme that acknowledged the hardships that Kiwi workers, families, and businesses are facing.

This issue is all about sustainability. It is a buzzword that has been bandied about liberally, and with good reason, but it has been overlooked in its wider application to climate change response. Policies need to achieve the goal of creating a sustainable world to live in now and for future generations, but these policies themselves need to be implemented in a way that is also politically and economically sustainable. Although the previous Government’s emissions trading scheme put many measures in place towards this goal, it was a fundamentally unsustainable response because the balance was wrong. The legislation was out of touch with the people in my communities of Ruatōria and Porirua, who are already struggling to pay their escalating power bills. It also placed too many impositions on sectors of the economy that felt they were not being given enough time to come to terms with the new environment and the costs that were being demanded. To make sure that the scheme is achieving its goals in the future, there will be 5-yearly reviews to ensure that we really are dealing with a sustainable climate change response. Although we will never please everybody, I am confident that this bill will remedy and address many of the inadequacies of the current scheme and take us forward in a sustainable manner to a sustainable future.

The Treaty was signed by hapū and iwi and it protected their right to manage their lands, forests, fisheries, and other taonga. This bill provides that opportunity. The Treaty created this population of people called Māori and said that they should have the gift of citizenship. The quality of that citizenship has not been all that it should have or could have been, but the opportunity to get and keep jobs because we have a strong and growing economy and to have access to warmer, drier homes are all elements that contribute to a better-quality citizenship. This bill provides for that. The Treaty provided that there would be a Government that would govern for all and balance interests for the benefit of all. This bill reflects that.

In the end, this comes down to whether one philosophically believes in perpetual dependence on the State or the creation of wealth so that all are better off through the development of their own resources. I choose the latter. I commend the Māori Party for making the same choice, for believing in iwi and their rights and aspirations to grow their own resources, for understanding and supporting the downstream opportunities for whānau, and for seeing the balance that has to be struck between the environmental and economic interests of our country—our nation of Aotearoa New Zealand. I acknowledge and thank the Minister for Climate Change Issues, the Hon Nick Smith, and our colleagues in the Māori Party. Ngā mihi nui ki a koutou. I commend this bill to the House.

I can but disagree with the last speaker, Hekia Parata. How can extending subsidies for carbon pollution until 2080, if not longer, be the road to independence and self-reliance? It is exactly the opposite. The ambition of the emissions trading scheme is to reduce New Zealand’s greenhouse gas emissions. That is stated in the existing legislation. It is meant to do that at the lowest possible cost to the economy by reflecting into the economy the cost that arises from the Kyoto Protocol to the New Zealand economy of increases in emissions. So, if one produces emissions, one is meant to pay for them; if one reduces emissions, one gets rewarded. That is what happens to New Zealand already under the Kyoto Protocol. The Climate Change Response (Moderated Emissions Trading) Amendment Bill undermines the effectiveness of the emissions trading scheme to do that. For those who are major emitters, the amendment pays for virtually the whole of the costs of their emissions.

The existing scheme was already generous in the free allocation to trade-exposed industries, and that was for good reason. I think on all sides of the House we are agreed that during a transitional period when some other countries are not properly pricing emissions, it would be wrong to force major emitting industries to pay for all of the cost of their emissions, because that could make them broke. In the case of industries that could move, like the steel, aluminium, or cement industries, they could relocate to a country like China, with no environmental benefit but with an economic loss to the country. For that reason, the existing Act is already very generous in its allocation. It gives free allocation to those industries of 90 percent of their 2005 emissions—90 percent, not 10 percent, not 20 percent, not 50 percent, but 90 percent of their 2005 emissions. So the idea that that was not generous was always nonsense. The free allocation of that 90 percent rate was to go unabated until 2018—a decade from last year, when the legislation was passed. Industries had a decade of that 90 percent allocation of 2005 emissions provided to them free—a decade to adjust before it started to abate. Then it would abate at 8 percent per annum, but it would all be over by 2030.

The independent expert advising the select committee, Dr Suzi Kerr, is a pre-eminent world expert. We are very lucky to have her in New Zealand. She is not just an expert in a New Zealand context; she is so expert that she is currently a visiting professor lecturing in emissions pricing at none other than Stanford University in the United States of America. She told the select committee that the existing scheme, which had free emission rights phased out by 2030, was already, if anything, too generous to major emitters, that it was economically wrong for New Zealand to be so generous, and that we should be less generous. But this bill does the opposite.

I will turn to a couple of other things. We heard Hekia Parata say that this bill saves people money on their power bills. Well, that is not necessarily true. New Zealand’s power price is heavily influenced by the cost of new generation capacity. That new generation capacity cost is not changed by this short-term gift of free extra emission rights to the heavy emitters in power generation. So I proposed an amendment. I said “Let’s guard against double-dipping here.” All that amendment said was that before major emitters in the power industry got free emissions they had to show to the Commerce Commission that the prices would have gone up but for that extra free allocation. The reason I put that amendment forward was that the experience in Europe, which we ought to have learnt from, shows that if we do not do it, power generators put up their power prices anyway and pocket the extra free allocation that they get at the cost of taxpayers. That is not fair. National and the Māori Party voted against that amendment, and it did not proceed. People now face the risk that they will get an increase in the power price when the Government is giving even more free allocation to the electricity sector.

I will talk a little about Treaty issues. We have agreed to the Treaty clause in this legislation, which says that the Treaty principles ought to be honoured in terms of consultation around forms of regulation. I felt somewhat uncomfortable doing that, because it did not go through the normal select committee process and it was just dumped in the bill yesterday. We did not have the time to properly examine it, but we read it as thoroughly as we could within that time frame, and we thought it was fair enough so we voted for it. But we do not support this unprincipled additional free allocation to only some owners of pre-1990 forests or the land on which those forests lie. The principle that National has breached is the principle of full and final settlement in Treaty settlements. Once there is a Treaty settlement and the assets pass from the Crown to iwi, those assets—and they are mainly land assets—should be subject to the laws of the land. I am bound by the Income Tax Act; so are Māori iwi. I am bound by the Resource Management Act; so are Māori iwi. I am bound by the emissions trading scheme, and so should Māori iwi be. There is one exception to that: if the Government, through some duplicitous wrongdoing, hides from Māoridom at the time of the settlement some undisclosed liability for future cost that undermines value, that is wrong. That would either amount to a misrepresentation by the Crown or the withholding of important information that ought to be transparently made available to the iwi in the settlement. So, again, I put up an amendment. I said, well, if there is that, yes, there should be additional compensation payable. But if they cannot show that there was withholding of information or misrepresentation then the same laws of the land should apply to all. I think it does not bode well for National nor the Māori Party that they have breached that principle. They breached it for the benefit of, let us be honest, the corporate end of town. Just as they gave money to the corporate end of town for the major emitters, they have done the same to Māoridom. They have ensured a profit for a few Māori at the cost of the rest of the community, including most Māori. It is wrong, and it undermines the effectiveness of the scheme.

The cost of free allocation in the agricultural sector is plainly unsustainable. We have a scheme that purports to transition to emission pricing, but allows emissions to increase in the interim. That would be like going back 20 years in New Zealand’s history; phasing out tariffs but actually increasing tariff protection while we phase them out is as stupid as that. It is as stupid as that. The best comparison I can think of is one I have already made with supplementary minimum prices. Again, it was a National Party folly—that time under Mr Muldoon. The rate at which this Government is falling into debt is bad, with Government debt already spiralling out of control in New Zealand. This will add to it. Supplementary minimum prices held up land prices by artificially subsidising farm output and profitability of farms. That is what this bill does to farmers. They get more than 80 percent of the additional free allocation. In fact, I think they get more of the total free allocation; 90-something percent of the overall free allocation goes to farmers. Eventually, that will have to be withdrawn, because it is unaffordable for the country. Otherwise, Government debt will go up by $110 billion by 2050. Even if we exclude interest, the additional cost of free allocation in all sectors—the vast majority of which goes to agriculture—is $50 billion dollars. These are astronomical numbers—$50 billion. It cannot be sustained. When that free allocation is withdrawn, farm prices will crash. People who have been farmers throughout will not be any worse off, because they have been farmers throughout. The people who buy farms in the next 20 years will do their dough. They will do their dough, and they will be poorer. They will suffer as people suffered in the 1980s following the removal of supplementary minimum prices.

This bill is fundamentally flawed legislation. It undermines the environmental outcome. Our emissions will go up relative to where they would have been under the existing scheme. As Brian Fallow said, the point at which New Zealand’s emissions peak will be later, and the amount that they peak at will be higher before they decline. That will be at an environmental cost to the planet and at an economic cost to the country. It is not just me saying that: it is Treasury, it is the Ministry of Economic Development, it is the Parliamentary Commissioner for the Environment, and it is the expert advisor to the committee, Dr Suzi Kerr—it is virtually everyone. And still the Government proceeds.

I stand to speak on behalf of the Green Party on the third reading of the Government’s amendments to the existing emissions trading scheme in the Climate Change Response (Moderated Emissions Trading) Amendment Bill. One of the interesting points that I think is often forgotten in this debate is that people think if we muck it up now, we can somehow fix things up later. The problem with greenhouse gas emissions and particularly carbon dioxide is that they pretty much last forever. A great proportion of the carbon dioxide that is emitted today will be around in several thousand years’ time. Carbon dioxide does not break down quickly but builds up in the atmosphere. It means that every year we increase our emissions we increase the stock of greenhouse emissions in the atmosphere. It is not that simple to get it out of the atmosphere again.

If we want to reduce the level of greenhouse gases in the atmosphere below a level that we think is safe, say 350 parts per million carbon dioxide equivalent, it means the curve to reduce the level in the atmosphere—the emissions curve that we have to go down—gets steeper and steeper every year we increase our emissions into the atmosphere. There is no free lunch here. We cannot say that today we are not going to address our greenhouse emissions because we can deal with them later. Actually, we cannot. The emissions that go out today will add to the stock in the atmosphere and increase the problem for everybody on planet Earth for the next couple of thousand years.

I think it is important that we remember what this is all about. This is supposed to be a bill to reduce greenhouse emissions in order to reduce the risk of out-of-control climate change. That is what the purpose of this bill was supposed to be. My colleague Sue Kedgley described it as Orwellian, and in a way she is absolutely right. It is Orwellian in the sense that this is a bill that says it is about reducing emissions, but it does not. The result of passing the bill through this Parliament this afternoon will mean that there are more greenhouse emissions coming out of New Zealand than there would have been otherwise. That is just a fundamental truth.

It is also important to talk about the current emissions trading scheme. The emissions trading scheme that exists now is not a great scheme. The Green Party supported it reluctantly because, as David Parker said earlier, the scheme already had very, very high levels of allocations and subsidies to emitters. It was not what the Green Party wanted. It was not our ideal emissions trading scheme, because the level of subsidies was far too high. However, we supported it in order to get the beginnings of a price on carbon and because of the complementary measures that came with it, in particular the billion-dollar home insulation fund.

It is also true that the previous Government’s record in reducing greenhouse emissions was terrible. Emissions increased very significantly from 1999 to 2008, so we were pleased that there was some progress towards the end of that Government, in terms of addressing greenhouse emissions and climate change, but there was still a long way to go. Let us remember that the scheme did not cap emissions. It capped free allocations, which was good, but it did not cap emissions. It meant that people on the margin were paying the real price, but emissions within New Zealand were not capped. It worked within the global Kyoto system. The amended emissions trading scheme, by comparison, not only does not cap emissions in New Zealand but also does not cap free allocations, which is quite extraordinary.

I was just reading an article by Geoff Keey, who works for Greenpeace and has been at a lot of the international negotiations. When he described the new emissions trading scheme to some of the people he has been meeting at international negotiations, they said: “But that just means New Zealand’s emissions can keep increasing and increasing.”, which of course is exactly what it means. If we reduce the price signal, we get more emissions. The fundamental idea of an emissions trading scheme, the idea that the whole thing is based on, is that price influences behaviour. When this emissions trading scheme reduces the price, it will influence behaviour. The result will be more emissions. That is a simple fact about all emissions trading schemes and it is a fact that the Minister for Climate Change Issues tries to deny over and over, but in the House the other day we pinned him on it. He does not like to admit the simple fact that emissions trading schemes work on the idea that carbon pricing over time reduces emissions, so if we have a lower price we will have higher emissions.

It is incredible to think that because the rate of abatement of the free allocations is only 1.3 percent per year, it means that if an industry increases its output, and it is output linked to emissions, at more than 1.3 percent per year, it will get more free allocations every year. That is an extraordinary thing. The taxpayer will be handing over more free allocations every year if an industry increases its output by more than 1.3 percent. For example, DairyNZ tells us that over the previous 10 years the dairy industry increased its output by, on average, 4.4 percent per year. This means that the taxpayer will be increasing the allocation of free carbon credits, which costs money because ultimately the taxpayer has to pay for them, to the dairy sector every year. The subsidy from the taxpayers to the dairy sector will increase year on year. It is uncapped. It is most extraordinary that here we are today, in a world where we are trying to reduce our greenhouse emissions, and this Parliament is about to vote for a bill that will increase the free allocation to the dairy sector and others as they increase their emissions and their output. It is an extraordinarily stupid thing to do.

The other part of it that I think is a real worry, aside from the difficulty of getting carbon dioxide out of the atmosphere once we put it up there and the steepness of the abatement curve we will have to go down in order to get anywhere near reducing our emissions by the amount we need to, is the political problem that has been alluded to in this debate. Because this bill sets in place a whole bunch of give-aways to friends of the Government and others in the form of free allocations, it will be very hard to roll it back politically. There is a particular problem in Australia. The Australian Greens produced a legal opinion that shows that because these rights to pollute are considered property rights under the Australian Federal constitution, it will be even more difficult in Australia. We have the same problem here in terms of trying to roll back these rights to pollute, as they will be seen by the recipients, once this Government hands them out.

We have a further complicating problem about the binding nature of this scheme, which is the bilateral investment treaties that we are signing left, right, and centre at the moment. These are otherwise known as free-trade treaties, but a big component of them is investment treaties. The bilateral investment treaties mean that foreign companies operating in New Zealand will be able to sue the New Zealand Government for indirect expropriation if we change the rules around emissions trading schemes. In fact, if we look at the Cabinet paper that went with this bill, we see that when they talk about why it is that forestry credits have to be tradable internationally, part of the reason they give is the bilateral investment treaties that bind us currently and the fact that if we were to place restrictions on the international trade of those credits, we could be sued under those bilateral investment treaties by overseas-owned forestry companies. We have this problem around the binding nature of what we are about to do and how we are committing future generations to a very expensive process of trying to unravel the bill we are about to pass.

Part of the idea of an emissions trading scheme is to facilitate the transition to a low-carbon economy. One of the things that has been most extraordinary about the process is that we have not had any time to read all the advice we have been getting. For example, Suzi Kerr, senior fellow at the Motu Economic and Public Policy Research Trust and visiting professor at Stanford University Economics Department, gave us her advice right on the very last day at the select committee and of course absolutely canned the bill, as anyone who knows anything about emissions trading has. To quote from her report: “Free allocation redistributes the cost of climate policy away from the owners of protected firms, who tend to have higher than average incomes, towards all taxpayers.”—Māori and Pākehā, I would add. “It also significantly raises the overall cost of the climate policy to the economy. A policy that is fiscally neutral can still have large damaging effects on the parts of the economy and society that do not receive free allocation.” We are passing legislation that is damaging to the New Zealand economy in the long run. Treasury estimates that the cost of putting out all these free allocations, including interest and looking at a price of $50 a tonne, will cost the New Zealand Government around $110 billion by mid-century, and that cost has to be borne. It also results in a misallocation of resources within the New Zealand economy because we are not as efficient as we should be.

What is missing with all of this is all the complementary measures that should have gone alongside an emissions trading scheme, whether it be fuel-efficiency standards; pest control on Department of Conservation land; measures to promote public transport, walking, and cycling; or a reduction in the spending on motorways.

When I was speaking in the second reading of this Climate Change Response (Moderated Emissions Trading) Amendment Bill, I remarked that it was a joy to work with a party like the National Party. I want to expand on those remarks now. The Māori Party has been very impressed throughout the negotiations over this bill by the clear vision of the Minister for Climate Change Issues, and by the good faith shown by both him and the Government in general. It has been a blueprint for a mana-enhancing relationship, and I thank the Minister and the Government.

The Māori Party came to this bill with a clear and comprehensive focus on outcomes for our whānau, our whenua, the Treaty, and the Māori economy. It has been a focus that has sustained our strength, despite the bitter opposition of others in this House who prefer to rely on the worn-out rhetoric of tired campaigners. The nation has observed a vitriolic attack against tangata whenua from the surprise new bedfellows, the Labour Party and the ACT Party. We have heard Labour leader, Phil Goff, describe the scheme as benefiting only a handful of iwi. David Cunliffe added insult to injury by describing the arrangements as being about beads and blankets. We have heard Shane Jones talking of deceit and treachery, and describing the emissions trading scheme as having sold out low-income Māori families “to protect a narrow privileged southern elite”. As member for Te Tai Tonga I have to tell the House that the latter comment has been interpreted by our iwi throughout Te Wai Pounamu as being particularly offensive.

I refer any members who have the view that iwi are somehow removed from their people to the vision of Ngāi Tahu, which is, most simply: mō tātou, ā, mō kā uri ā muri ake nei, for us and our children after us. Ngāi Tahu has a proud history of creative endeavour to ensure that our whānui are culturally enriched, live long, and live well, and that Ngāi Tahu Whānui lead the future. To suggest that our iwi are a privileged elite, when the very definition of iwi is a collective of whānau and hapū, is both ridiculous and insulting.

ACT leader Rodney Hide referred to the emissions trading scheme negotiations as a backroom deal. He said that full and final settlement should not be relitigated, and made a huge issue about the final wording of the Treaty clause being, in his assessment, concluded only 18 minutes before its announcement. Māori have had enough of being told that their capacity to negotiate arrangements is about special privileges or race-based politics, that their numbers are too small or too narrow, or that they did not follow the time frame that others had set for them.

In case this House has forgotten, the Māori asset base contributes $16.5 billion to our economy. This money stays in New Zealand, and will continue to grow over generations to come. Māori are stakeholders. They are taxpayers. They are business people. They are entrepreneurs. The Māori Party has been proud to support their initiative. The Māori economy has unique characteristics. It is rapidly growing in response to being locked into underdevelopment, over history. We want to support the growing billions of dollars of contributions per annum to the New Zealand economy, and that was one part of the package we successfully negotiated in this bill.

Under the previous scheme, the Māori economy took a hammering from being concentrated in all the areas most affected by the scheme—forestry, fishing, and farming. What we have achieved in this emissions trading scheme is the commitment that the Government will work with all iwi on indigenous tree planting, in addition to the specific agreement with Waikato Tainui, Ngāi Tahu, Te Uri o Hau, Ngāti Awa, and Ngāti Tūwharetoa ki Kawerau that has resulted from the Crown’s breach of contract with those iwi. I remind those who have overlooked the record that this is a breach dating back to 1998, when a Government failed to disclose in its negotiations with iwi the fact that a domestic emissions trading scheme was inevitable, and the effects it would have on forested land. The ability of iwi to make an informed choice about its purchase of Crown forest lands with settlement monies was therefore impaired. The bill today finally rectifies that wrong.

It is important that we have indigenous forests grown by New Zealanders, and that iwi are part of the carbon market. The Māori Party will never stand in the way of iwi initiative. I note, too, that the intention of the climate change Iwi Leadership Group was always to lock down a solution for the iwi interests that are represented in this bill, and then to work for and advocate a solution for all pre-1990 exotic forests. Those negotiations have already begun with other pre-1990 exotic forest landowners and the New Zealand Forest Owners Association. The fisheries sector does better under this scheme, by its ensuring that New Zealand owners of quota, instead of vessel owners, receive allocation. The agricultural sector will also be supported by a number of research and uptake-work programmes, to support the sector to transition into more environmentally sustainable practices.

But this emissions trading scheme was never about economic drivers on their own. Māori Party policy has always made it clear that our whenua is the most important inheritance that we will leave to our mokopuna. Our commitment to kaitiakitanga is all-enduring, and reflects the importance that our people place on the whenua. This emissions trading scheme is only a small part of the environmental efforts we need, and we should never expect that any one bill will address the major mind shift we need. We have always said that climate change is our collective responsibility. A trading scheme will never be a complete answer to climate change, but we have done what we could to make the difference.

Our environment has needs, and New Zealanders expect our environment to be protected, because it is part of our national identity. We have advocated on behalf of the environment for trees to be planted and for biodiversity to be valued. The truth is that as a country we pride ourselves on the pristine state of our whenua but in reality our practices do not meet our reputation. The Māori Party negotiated to get indigenous trees planted, and our environment valued, as part of our common inheritance as New Zealanders. Native trees will mean more native species in New Zealand, owned by Kiwis, as well as a reduction in our Kyoto bill. Five iwi will now have the right to plant indigenous trees. The benefit and the ownership will stay in New Zealand, and all our mokopuna will be able to enjoy more native forest. It has been disappointing that so little attention has been allocated to the national policy statement on biodiversity, which we have known is long overdue. The national policy statement is one way of recognising nationally important ecology, and helping district councils to protect it more efficiently and effectively. We are also pleased that the review of the Permanent Forest Sink Initiative will increase the incentives for all landowners to plant trees.

One of the overarching priorities for us, however, has always been he tangata, he tangata, he tangata. We brought to the table the fact that lower-income households would be exposed by the emissions trading scheme, and we negotiated a package to protect their interests. We want to see that all whānau in need get home insulation, and so we are delighted that there will be $24 million in new money to insulate homes. Home insulation is important, because it brings power prices down and improves health outcomes. This fund, and the significant reductions in power and petrol prices, will achieve immediate and long-term contributions to the health and well-being of vulnerable households, and we are proud of that. We have also managed to reinstate the Enviroschools programme.

Finally, we recognise that the Treaty of Waitangi is about doing what is right. It will also deliver greater certainty and stability to the emissions trading scheme. We have negotiated a Treaty clause to give effect to the Treaty, so that iwi will continue to be involved in this scheme. Many of the details of the scheme will come through regulations, and it is important that our people are part of working through those details. There are many challenges ahead of us all. All of us, as members of the public, can encourage emitters to decrease emissions. Public pressure can be a formidable force. All of us can commit to collective action against climate change, and all of us can make the commitment for an open, constructive, and respectful relationship with tangata whenua. We are proud to vote in support of this bill.

The ACT Party opposes the Climate Change Response (Moderated Emissions Trading) Amendment Bill, and will be voting with the Green Party and the Labour Party against it. One of the privileges of coming to Parliament is that one works with many different people from both sides of the House. Our position is different from that of the Māori Party, but I regard it as a privilege to have worked with Rahui Katene over the last 12 months on the Finance and Expenditure Committee, both on its deliberations on the emissions trading scheme and on that select committee generally. I am sorry if she takes exception to the comments made by Rodney Hide earlier today, but he was simply reiterating what the Minister of Māori Affairs, Pita Sharples, had told the Wellington Regional Chamber of Commerce at a breakfast just yesterday. It was, indeed, Pita Sharples who said that the Māori Party was advised that agreement had been reached just 18 minutes before this deal was announced. That was at 12 minutes past 3 on Monday. Those were the words that Pita Sharples said to the people at the Wellington Regional Chamber of Commerce breakfast yesterday.

This has been a reckless process. We have discussed that at length. It gave me no pleasure whatsoever to vote against the National members on this bill. At the select committee Rahui Katene, the Green Party, Labour, and I voted to allow those submitters who had something substantial to say to have the right to say it. We voted for their right to say it, and that vote was won by 7 votes to 5. Five National members were defeated in that vote, and I give some advice to those members and to the new backbenchers, in particular: losing a vote is an unpleasant experience, and they run the real risk, following the 2011 election, that it will happen a lot more frequently if they are in Opposition.

I now turn to the issue of the $110 billion. This issue was seized upon by the Labour Opposition to discredit this bill. The bill had to be discredited, but to quote the $110 billion was the wrong way to do it, because there are many other ways that one can discredit this bill without misrepresenting the facts. The Minister for Climate Change Issues, the Hon Dr Smith, is quite right. Essentially, the way the emissions trading scheme operates is that New Zealand receives an allocation of emissions units based on our historical emissions. We do not know what that allocation will be post-2012, but given that an agreement comes out of Copenhagen or subsequent negotiations, we will be given a target to reduce our emissions, and we will be given an allocation of units. That allocation of units will be based on what our historical experience has been; it will be some percentage of our historical experience. That allocation will continue for a number of years—well beyond 2050.

Under the Labour scheme, the allocation of those units was to be reduced to zero in respect of all sectors by 2030. So at that stage New Zealand would have had surplus units and would have been able to sell those units to emitters. Essentially, it amounted to a huge tax scam, and I think Dr Smith talked about the Government receiving a lesser amount of revenue—those were the words that Dr Smith referred to—under the National scheme. Under the Labour scheme, it is a fact that the Government was going to earn windfall gains of $2 billion a year from 2030. Accumulating those gains through to 2050 would have resulted in a massive tax windfall of something like $50 billion. The Labour Opposition, trying to seize upon that to discredit the scheme, used compound interest to take the figure to $110 billion.

It is interesting that the Labour members focused on the fact that that took the projected deficit from 8 percent of GDP to 15 percent of GDP. They may well have ignored the fact that just 3 or 4 weeks ago Treasury made projections that took New Zealand’s debt out not to 15 percent of GDP but to 220 percent of GDP—10 times the figure that the Labour Opposition has waxed lyrical about over the last 3 or 4 days. The reason that New Zealand’s debt is projected out to 220 percent of GDP is the result of the massive failed policies of 9 years of Labour Government.

I could not believe it when Hekia Parata talked about her constituents in Gisborne and Porirua. She said they were already struggling to pay their power bills. Well, I ask Hekia Parata and all the members of this House what we will achieve by artificially increasing the price of electricity for every New Zealander by 10 percent from 1 January 2013, when it does not cost the companies that sell that electricity, in respect of hydroelectricity, anything more to produce. We are giving them a windfall gain of some $200 million or $300 million. I have made that claim 3 or 4 times today, and it has not been refuted by anyone. Why is that? It is because it is true. It applied under Labour’s scheme; it continues to apply under National’s scheme.

Rahui Katene talked earlier about the savings in electricity and petrol. She talked about the longer-term contributions they would make. Those contributions expire on 31 December 2012, so if Rahui Katene was talking about the savings in electricity for a period of 3 years, I wish her luck, but I got the impression that she was talking about the situation longer term, and there are no savings there. All of the members in this House have condoned a tax on every New Zealander in respect of one of the most basic commodities: electricity. It is little wonder that the Māori Council is railing against this bill.

We heard from the Federation of Māori Authorities, which said this bill represented the greatest confiscation of Māori wealth since the 1800s. I will explain why that is so. It is because Māori have many thousands of hectares of forest land that could be converted into pasture. Trees could be felled and we could convert that land into pasture and dairy farms, and we could create some wealth for New Zealand. And if we created some wealth for New Zealand, we would actually set about reducing that projected deficit that Treasury makes of 220 percent of GDP down to something much more manageable. But the Māori foresters who have that land are denied that opportunity under the emissions trading scheme, because if they fell the trees and convert that land into pastoral land to create greater wealth for New Zealanders, they are faced with a penalty of some $20,000 a hectare, which makes it inefficient to do so. So in the absence of a change of approach in Copenhagen or subsequent agreements, doing that will be inefficient because those foresters will be taxed, and there will be a massive devaluation of Māori forest land. It would have happened under the Labour scheme, and that has not been fixed under National.

Rahui Katene talked about how Māori will do by having the free emissions units allocated to quota holders as opposed to fishers. I accept that, but I explain to this House, to all Māori, and to all New Zealanders that that will apply only up until 31 December 2012. Why is that? Because there is no free allocation from 2013 onwards. The farmers get it, and we can be thankful that both Māori and non-Māori farmers will continue to get an allocation of free units well into this century. But fishers will not. The fishing industry is trade-exposed, and it is energy-intensive. The Minister for Climate Change Issues knows that, because when he was in Opposition he wrote about that in his own National Party minority report just on 1 year ago.

I sat up in the gallery 2 years ago and listened to the debate on the Electoral Finance Bill, knowing that the Labour Government was going to vote into law a totally undemocratic change. Nothing can be more frustrating than speaking against this bill, highlighting its deficiencies, and knowing that in a very short time exactly the same thing will happen, but it will be done by the National Government. Thank you.

First of all, I congratulate Minister Smith on getting the Climate Change Response (Moderated Emissions Trading) Amendment Bill to its third reading, and on all the work that has been done, both in the previous review committee and in the Finance and Expenditure Committee when the previous work came through from, I think, 2007. We all learnt a lot, and there has been a lot of good information for members to rest on.

I need to pick up a couple of points that the previous speaker, John Boscawen, made. He missed a key point when he talked about submissions. I tell that member that the only instruction I took about the number of submissions to be heard was an instruction from the committee. Actually, the member is right: there was a vote. The member said “substantive submissions”, but he is wrong. I tried to get the word “substantive” and the word “material” in there; that was missed by certain members. Thus, all those submitters who wanted to be heard were heard. That is absolutely fine, but speakers should not try to put heat on me, because I could produce lists of submissions that various members wanted to hear, and some of the stuff that is coming back is very cute.

Anyway, let us put that aside. The Climate Change Response (Moderated Emissions Trading) Amendment Bill is a very, very good response. It is a response to the will of the electorate, because the National Party put this issue before the electorate before the 2008 election. We laid out our principles: having intensity without a cap, aligning with our partners, keeping an eye on our competition, balancing a scheme with our economy—you name it. I think most members acknowledge that we cannot look after our environment if we are not looking after our economy. Some parties, I think, would like to address only one side of that equation, but their members get on jet aircraft, use the Internet, and globalise all sorts of things, which seems to be contrary to every other speech they make. But I digress a bit.

This bill is a response to climate change. It is a balanced response and it is a good legislative response. What seems to be missed is that on probably 80 to 85 percent of the points we and the other major party in this House are in general agreement. Some details about 5 or 7 years out are actually the key points. Some members are making more politics of this than others; I do not know what they will talk about once this bill is passed. This bill is also a good response to the recession that New Zealand finds itself in—not only the economic conditions this new Government inherited but also the recession that the whole globe is in at the moment. It looks as if we are possibly coming out of it, so what Government would do anything to put New Zealand back into recession? What Government would do anything to impose higher input costs and a burden on households in a recession, when it looks as if we just might be coming out of that recession? But with the fiscal record of the previous administration, I am not surprised that they seem to be taking off down that track.

This bill is a very good response to the New Zealand economy—to our profile and to our trade-exposed economy. We are an exporting economy, so we want to be exporting goods and services, and getting funds back into the country. We do not want to be exporting jobs, factories, and our kids’ futures to the rest of the world, to pollute somewhere else in the world, to the detriment of the future of this country. It is interesting that not one member on the other side, when they got up and talked about children, etc., raised that point.

There are a couple of things I cannot let go. I fiscally embarrassed the members on the other side. I ask them just to be consistent. The $110 billion figure keeps coming up. As Minister Smith said earlier, we will now apply the logic that seems to have been adopted by members on the other side, including their leader. If he wants to earn his stripes, he should not go down this path, because on every single spending announcement made by Opposition speakers from now until the next election we will price the figure up and compound it at whatever the cost of capital is at the time. Members should just watch the figures blow out—the decade of deficits we inherited is about to blow.

I will wrap up with one particular point that I found very offensive today. I am so surprised about what some members have said. I am really offended; they could have said much of what they were trying to say in different language. Quite frankly, I am disgusted by the term “brownwash”, which the Green Party has been using. I am disgusted by the term, and by its implications and insinuations of trinkets, beads, and blankets in exchange for an arrangement National has with one of its coalition partners. Sure, members can make their political points, but they should not go down that line. If anyone ever said that of them, they would be the first to go off to the Race Relations Commissioner, so members should not go down that line. That phrase says so much more about their true selves and where they really stand. Now members seem to be backing away from the term, but it is on the record. Its use was absolutely disgraceful—absolutely disgraceful. [Interruption] This member did not use the terms that those members used during the debate, or the term that that member over there used during question time. I think members should just taihoa, look in the mirror, and look at the rest of their caucus, and they may see that many of them are very, very offended by some of that language. I respect members’ points of view; I do not respect—and I am totally offended by—some of the language that was used by some members in this House today in and around this bill. I think I have made my point.

I thank the Minister for Climate Change Issues, I thank the officials, and I thank the other members of the Finance and Expenditure Committee.

I acknowledge Craig Foss, the member who has just resumed his seat, who is the chairperson of the Finance and Expenditure Committee, which considered this bill. I acknowledge all members who have contributed to this debate, on all sides of the House. More than many debates, this debate has been a multi-sided debate. I particularly acknowledge Charles Chauvel, Labour’s spokesperson on climate change, who, I think, has done a sterling job in bringing forward a range of facts for the public’s consideration, and David Parker, the previous climate change Minister, and the current Minister, Nick Smith, who has been prepared to debate with other colleagues the pros and cons of this bill, and who has made a contribution in this House.

Having said that, it is with both great sadness and, I guess, a slow-burning kind of anger that I rise to speak in the third reading debate. This debate is the bottom of the third innings—the time to sum up the various arguments, if you like—and this is where we try to draw together the threads so that the public can make sense of the debate when they look back, in the future. My sadness comes, as I have repeated several times, because this bill bequeaths to our children a harder problem than we inherited.

This bill is fundamentally flawed. It will make New Zealanders poorer, it will make our economy weaker, and it will increase greenhouse gas emissions relative to the law that was on our books before we started the debate. Of course, the bill locks in subsidies and condones the proposition that we have created property rights to pollute, which is a precedent that this House will come to regret. My anger, I think, comes because National’s conduct over climate change policy has been, I am afraid to say, both sneaky and shambolic.

The Finance and Expenditure Committee process has been the worst I have ever seen. It was nothing short of a travesty, which is all the more ironic because the substance of this bill is crucial to the future of our country and our planet. Official information was withheld from the committee process. Only a minority of public submissions were heard, and then only after much debate. There was no clause-by-clause departmental analysis. There was a regulatory impact analysis that Treasury described as inadequate. There was no revision-tracked bill, because there was not time. There was no supplementary economic analysis, no sensitivity testing, and no justification of the numbers.

The result is, I am afraid to say, a “Nick Smith shambles” of the very worst kind. We are left with a “cap and trade” system with no cap, and intensity-based emissions subsidies that are, effectively, infinite and will cost $110 billion, including compounding interest, by 2050—in other words, an extra 17 percent of Crown debt, which effectively doubles the total amount of debt that this Government inherited at the time it took office.

What is wrong with the bill that has led us to this conclusion? There is almost too much to cover, but let me offer a few potted highlights. The essential and obvious flaw is that the bill is so generous to large emitters in industry and agriculture that it shields them from the very incentives they need in order to be able to plan with certainty an adjustment path that would lead New Zealand into a low-carbon future at the least cost. By succumbing to lobbying pressure, the Government has neutralised the very point of the exercise from its inception.

Big industrial emitters already received a generous 90 percent free allocation and a 10-year window before abatement commenced at 8 percent per annum under Labour’s legislation, and this Government has made that even more generous. Now big emitters will have a two-for-one lead-in deal for the first 2 years, and an artificially low carbon price of $25 a tonne. Carbon is trading at about $40 a tonne at the moment, I am told, so the taxpayer will wear the risk and cost of the difference. There is no cap in the “cap and trade” system globally; there is, instead, an open-ended, intensity-based system that subsidises the worst polluters the most.

There are inappropriately placed, arbitrary deals that provide windfall gains to people who cannot control the emissions. In fisheries the allocation is to the quota holder, not to the fisher, who is in the position to make the decision at the margin about how much fuel to use. It does not go to the farmer, who is able to decide what feed to use or what strain of animal to run, but to the processor, who is removed from the decision point. Of course, at the end of the day there has been a refusal from the Government to negotiate in good faith, either prior to when the bill was introduced in the House or when it was going through the House, and not one single constructive amendment from the Opposition has been accepted.

What is the effect of this sorry tale? Well, these are the facts: the Sustainability Council says that actual emission reductions will be only half what they would have been under the existing Labour scheme. Large industry makes up 13 percent of the emissions and now faces only 1 percent of the cost. By contrast, the activities of people in small businesses, many of whom voted for National at the last election, make up 11 percent of the emissions, and those people will face 38 percent of the cost because they cannot lobby as much or as well. Agriculture makes up 49 percent of the emissions, but it now faces only 3 percent of the cost. Total fiscal cost on agreed carbon price paths, which is now bipartisan, is between $50 billion and $110 billion by 2050.

Hon Dr Nick Smith: You don’t believe that.

Hon DAVID CUNLIFFE: Yes, those are Treasury numbers, I tell the Minister. I do believe it, and so does he. The only argument that remains is whether to include the compounding effect. That may be arguable, but at the end of the day, even $50 billion is a big, big number, and it will affect our children.

The bottom line is that polluters gain and New Zealanders pay. They pay through their taxes, through forgone debt reduction, tax relief, or alternative expenditure as well as, at worst, through paying charges through an international carbon system. This is not balanced nor affordable, and it is neither environmentally nor fiscally sustainable.

The Government has put forward some fiscal counterarguments. The first is that it is not really debt. Well, yes, it is. Provided that one is carrying any debt at all, then one faces an opportunity cost of reducing that debt, purchasing other essential services, or adapting to climate change. In plain English, it is like when we have a mortgage and a credit card bill, and we have income that we could use either to pay down our credit card or, if we are not using our credit card, pay our mortgage. This is a carbon credit card that prevents us from reducing our national mortgage by 17 percent of GDP by 2050, and that is huge.

The Government is prepared to accept Treasury’s advice at face value on the long-term fiscal outlook, but it is not prepared to accept the Treasury’s equivalent criticism of this bill, because, as the Minister of Finance has said: “Good advice is that which we agree with. Bad advice is that which we do not agree with.” That is devoid of integrity, and it is no way in which to make good decisions. The second argument is that it does not matter anyway—that is Nick Smith’s favourite. He says that it does not matter whether it is a 1.5 percent abatement or an 8 percent abatement, because it will be reviewed every 5 years.

Business is crying out for certainty. Business people want a bipartisan agreement. They need to plan their affairs. That is why it does not help them for the Minister to artificially have a 1.3 percent abatement now but frighten them by saying that he will change his mind in 5 years’ time. That is a worst-case outcome.

The final argument is that New Zealand is already out in front. Fifty percent by 2050 will not be out in front at Copenhagen. In any case, independent authorities—including the statutory authority on that matter, the Parliamentary Commissioner for the Environment—have stated on the record that even if one accepted the target, there is no conceivable way that this bill can achieve it. Even if one accepts every other argument that the Government has made, the mechanics of this bill fail to deliver even the Government’s own outcome.

The lessons of this process are that no Treaty settlement is now final. In Rajen Prasad’s day as Race Relations Commissioner, he and his team worked hard to get the citizens of New Zealand to accept the Treaty process as final. It is no longer final, because Pandora’s box has been opened, for $24 million - odd.

I support the Climate Change Response (Moderated Emissions Trading) Amendment Bill because it is a common-sense response to an enormously difficult problem. After a couple of decades of debate, discussion, and policy making, and after three select committee processes, we finally have a practical and workable way to deal with New Zealand’s emissions.

I thank Rahui Katene for her comments this afternoon. The Māori Party is a valuable and respected part of our Government, and we enjoy working with it. I am also pleased that our Government has been able to sort out Ngāi Tahu’s Treaty issues. We have come up with an intelligent solution—an intelligent solution culturally, an intelligent solution environmentally, and an intelligent solution economically.

Although New Zealanders are very aware of and love our natural environment, many of them have little capacity to financially contribute towards managing climate change, particularly right now, at a time of financial turmoil and recession. So for the first 3 years of this scheme, as Kiwis learn better ways in which to deal with carbon emissions, the bill will halve the costs for businesses and households. Labour’s scheme put a price on households of approximately $6 per week; National’s scheme will cost households about $3 per week.

But the long-term motivation is to encourage all New Zealanders to embrace a low-carbon lifestyle and to modify their behaviour accordingly. The carbon charges will be a reminder and a stimulant for lower carbon use. Just as we saw a slow-down in the use of cars when petrol prices went up, we expect the carbon charge to help people make better transport choices. To mitigate the increased costs of energy, we have introduced the $323 million Warm Up New Zealand: Heat Smart home insulation scheme, which has already, within its first 6 months, insulated over 20,000 homes. Adding to that funding the provision for another 8,000 low-income homes will mean that nearly 200,000 homes will be insulated within the next 4 years.

We are also making significant changes around industry allocation, so that industry allocations are production-based and more closely aligned with the approaches of other countries, particularly Australia. We do not want to cripple industries by making them uncompetitive with our trading partners. We need to challenge our businesses and organisations to embrace change and embrace new, cleaner technologies, but the key to this legislation is to support vulnerable, trade-exposed businesses and to ensure that they, and the jobs that they provide, survive as the world transitions towards a lower-carbon economy.

I have already discussed in earlier debates the lack of accurate information, the partial information, and the misinformation around this bill. Sadly, we are still hearing it from the Opposition. I am prepared to accept faulty arguments when they are based on ignorance, but there is no excuse for deliberately misleading the public. That is not right.

In conclusion, I reiterate five points about this bill. First, the bill will ensure that New Zealand does its fair share in tackling the problem of global climate change. Second, there is no taxpayer subsidy. Free international carbon credits that are allocated to New Zealand will be passed on to trade-exposed and emission-intensive industries. They will be used as they were designed to be: to support businesses to remain competitive internationally and to continue to provide jobs. The Minister for Climate Change Issues has already assured New Zealanders that the National Government will not be purchasing carbon credits to allocate to industry. Third, the scheme will be fiscally neutral. There will be no windfall profits for the Government, but also no long-term debt for the New Zealand public. Fourth, the legislation is flexible. The first review is scheduled for 2011, and then every 5 years thereafter. In the face of international uncertainty and ongoing change, flexible legislation is the key to a good outcome for New Zealand. Fifth, this bill is the culmination of decades of discussion, debate, research, and policy making. With the exception of ACT, everyone in this House agrees that we need to take action to deal with climate change, and that an emissions trading scheme is a reasonable way to go. The debate is only around the details.

This is a good bill. It is workable, and it is an affordable piece of legislation. It is high time that it was passed.

This is a very, very sad day for this House, and this is a very sad day for a Minister who once used to tout his blue-green credentials, but Dr Nick Smith will for ever go down in history as the man who put in place climate change legislation that damaged New Zealand’s economy, weakened our position with our trading partners overseas, and had no environmental credibility whatsoever. He will go down in history as the man who came into this House as a proud blue-green National Party member, and will exit his role as Minister for Climate Change Issues by being known for putting together and passing legislation that makes New Zealand and New Zealanders poorer, and I think that is sad.

The one thing that I will be happy about when we finally pass this Climate Change Response (Moderated Emissions Trading) Amendment Bill is not having to be lectured any more by Nicky Wagner from a high moral ground that she has absolutely no right to inhabit. I noticed that there was an article in the Christchurch Press today in which Nicky Wagner explained how the Government’s emissions trading scheme will work—but, actually, she did not. In that article, Nicky Wagner explained how the previous Labour Government’s emissions trading scheme works, in terms of putting a price on carbon and influencing behaviour in that way. I say to Mrs Wagner that the legislation we are about to pass now does absolutely nothing like what she stated in that article. It will not reduce greenhouse gas emissions, it will not put the full price of carbon on the emitters by 2030 rather than on the taxpayer, and it will not change behaviour.

We need to remember why we are here doing this, because when we get rants from the National Party that we will be shutting down New Zealand if we try to do anything about climate change, I think we forget why we are here. We are here because all the parties in this House, with the exception of ACT, and I acknowledge that, believe that we need to do something about climate change and believe that this issue is so important that New Zealand needs to be seen to be playing its part. We also need to do this because we are an export-driven economy. We are incredibly susceptible to mood changes overseas and smear campaigns against our products, so it is even more important that we are seen to be doing our bit, even if that bit in percentage terms is not great when we look at the entire world picture.

I was at a Commonwealth Parliamentary Association conference in Tanzania, and the President of Tanzania gave a very powerful speech in which he talked about climate change. He said that the snowcaps of Kilimanjaro are disappearing.

Nicky Wagner: What is their emissions trading scheme like?

MOANA MACKEY: If Nicky Wagner listens to me, I will tell her that he said that this is not a problem that Tanzania created. This is not a problem that Africa created, but it is living with this problem every single day. The snowcaps of Kilimanjaro are disappearing. That is a water source for millions of people; it is a water source for their irrigation. The safari animals are starving, the cattle are starving, and the people are starving. The President said that his people do not have the luxury of sitting in a First World country, arguing about the science and about which economic model to put in place that will cost their country the least, because his people are suffering right now. He also said that we should not try to tell him that our farmers feed his people, because they do not, and they never will. He said: “You know what? Our farmers want to be able to feed themselves. That is what they want.” He begged the Western countries there to take action on climate change and to show some leadership.

We also sit in the Pacific region. We need to be able to go to our Pacific neighbours, whose islands are disappearing under water as we speak and who are facing salination issues because of the repeated floods and severe weather events in their region, and show that New Zealand, which has always been a strong advocate for our Pacific neighbours, is doing its part. We can no longer do that.

I think that if the National Government is not worried about what this might do in terms of our trading partners, it only needs to look at the Guardian article that appeared in the UK. This is another in a long line of campaigns against New Zealand products in Europe and in the UK. The Guardian slammed New Zealand’s “clean, green” and “100% Pure” branding as a cynical ruse and a shameless two fingers to the global economy. The article went on to state that, per capita, New Zealand is one of the world’s worst polluters, with carbon emissions that are 60 percent higher than those of Britain. It decried our weak revised emissions trading scheme and mocked our reputation as a global leader in tackling climate change. If the Government—

Hon Dr Nick Smith: Who’s been in Government for the last 9 years?

MOANA MACKEY: The Minister should let me read that bit. The article decried our weak revised emissions trading scheme. The emissions trading scheme we have in place already is not that scheme, I say to Dr Nick Smith.

This is not an easy issue for Governments, because everyone says that something needs to be done about climate change but no one wants to pay for it, and that is what we found out at the select committee. Everyone has a reason why their sector is special or should be excluded. We acknowledge that it is difficult, but that is why a Government has to show leadership and not just buckle to the strong lobbying of big corporate business interests, as this Government has.

What we have learnt in this process is that everyone in the world is wrong about climate change, except Dr Nick Smith. We only need to look at the editorials. The Christchurch Press headline was “Authority lacking” and the New Zealand Herald had “Another sorry chapter in emissions farce”. We also had “Key should pull the plug on this dog of a bill”, “Compensation deal discredits all involved”, “Climate bill $92,000 per person”, “$50 billion rise in carbon scheme costs ‘shows process too rushed’ ”, and “Carbon bill time bomb for taxpayers”. I ask why everyone in the country is wrong, except for the Hon Dr Nick Smith.

I thought it was interesting that when we were talking about Suzi Kerr, who is a visiting professor at Stanford University and a well-known expert on emissions pricing, Chris Tremain asked how good she could be if she had not managed to get the United States to put agriculture in its scheme. Suzi Kerr is not actually an elected representative of the US House of Representatives, I say to Mr Tremain, but that raises an interesting point about the United States. Dr Nick Smith is very, very keen on aligning New Zealand with Australia and on going with an intensity-based approach, because that is what Australia has done—

Hon Dr Nick Smith: As is Europe.

MOANA MACKEY: —and Europe. But what he did not tell people is that this would exclude us from working with the United States, which will be one of the biggest markets for purchasing carbon credits. It will be one of the biggest sources of investment for clean technology. Section 728 of the Waxman-Markey Bill on climate change, which was passed by the US House of Representatives, explicitly bans the United States from linking its emissions trading scheme with any country that moves away from volume caps and goes to intensity-based allocation. That is precisely what we have done in this legislation, and it did not have to be that way. It did not have to be that way.

I will now come to the Māori Party comments. I appreciated the contribution of Rahui Katene at the Finance and Expenditure Committee and I very much appreciated her support for Labour, the Greens, and the ACT Party in ensuring that all the submitters who wanted to be heard were heard. I genuinely mean that. I also think that she was in a very difficult position at that select committee, and I would not have wanted to have had to sit through all those submissions. It was difficult for her and she handled it with grace, and I congratulate her on doing that. I am pleased that Rahui Katene has enjoyed working with the National Government so much, and I am pleased it has been such a positive and self-affirming experience for her. It kind of misses the point on what I am complaining about in this legislation, though.

I will point out one of the things that I find really offensive. I have sat in this House, both up in the public gallery and as a member of Parliament, and I have listened to things that the Hon Dr Nick Smith has said. He stood up and peppered his speech today with words like mokopuna, and Papatūānuku. I remember sitting in the House and listening to the debate on the local government bill that the previous Labour Government passed, and hearing the Hon Dr Nick Smith say that Labour’s provision to allow councils to have Māori seats, as we have in the Bay of Plenty, was apartheid. He called that apartheid.

Hon Dr Nick Smith: I did not.

MOANA MACKEY: Yes, he did. He is smiling now, because he knows that he did. I find it incredible that a member whose party had “Iwi/Kiwi” billboards up not that long ago, and who had a big ““One law for all, the beaches belong to everyone” billboard paid for by the taxpayer, called having Māori seats apartheid, and is now standing up, peppering his words with Māori, and acting as though those things did not happen. That is not sustainable.

I say to Rahui Katene that the fact that ACT and Labour have been such strange bedfellows on this legislation and have both voted against it shows just how bad the bill is and how bad the process has been. We oppose the bill for very, very different reasons, but we both agree on the process. The process has been one of the worst I have ever seen in my time in Parliament. The bill went through the select committee process in 6 weeks.

Hon Dr Nick Smith: Oh, rubbish! What about the 800 amendments on Auckland?

MOANA MACKEY: I ask Dr Smith how other many bills he has seen that have not had a revision-tracked version and have not had a clause by clause analysis. The answer is none; that is exactly how many.

Rahui Katene commented on fisheries. She praised the move from vessel operators to quota holders, and I think that really sums it up. That means that the Māori Party is favouring big corporate interests over the small-business people who run those fishing boats. I think that is—let us be honest—where we got on this, because the average cost to Māori households will increase dramatically. Power prices will not go down. The Government cannot force companies to drop power prices. It will not do that. It did not happen in Europe; it will not happen here. It is simply another handout that will not result in any lowering of costs for the New Zealand taxpayer. Power prices will not go down or be halved as a result of this bill.

It falls to me to take the last call on this third reading debate on the Climate Change Response (Moderated Emissions Trading) Amendment Bill. I am very pleased to say that this bill gives us a good balance between environmental objectives and economic realities. That is what it does; it takes the two most important issues facing the world and facing New Zealand—the environment and the economy—and says that we need to come up with a solution that is responsible, that does our part environmentally, but that also protects our economy and our jobs. It is a balancing game; there is no question about that. We have deeply ingrained zealots on both sides of the debate who will not see any other position but their own. But the answer has to lie in the middle between balancing those two positions. I think the Minister and the officials, as I said in my earlier contributions, have done an excellent job of that.

We are doing our part as a country, in this debate. We should remember that New Zealand produces 0.2 percent of the world’s emissions; that is what we are talking about here. When we talk about the seas rising over Pacific Island countries, 99.8 percent of that we cannot influence, so let us get real about it. Do we really want to throw our businesses under the train so that they can beat the drums about what they are doing? The reality is that New Zealand can only play its part—and this bill does play its part.

I find it really interesting that, when we look at this bill, in actual fact members across the House agree on more about the structure of this system than we disagree about. Labour wanted an emissions trading scheme; we are proposing an emissions trading scheme. Labour was going to give free allocation to business; we are giving free allocation to business. Labour was going to give 90 percent of its top level of free allocation; so are we. So when Labour members talk about subsiding business, let us remember that Labour was going to give 90 percent allocation to industry.

Interestingly enough, it has come out in subsequent discussions that even Labour members conceded that there were problems with their bill and the 8 percent phase-out was not going to work—it was going to be too tough. They knew that. They were prepared to compromise on it. I tell members that they were even prepared to agree that industry should get an increased allocation. We were getting very close.

Do members know why we do not have broad bipartisan support on this? Do members know why? I will tell members exactly why. It is because Labour hates farmers. It has a visceral, deep, abiding, hatred for farmers. I cannot wait for 2011. I cannot wait to get up on the hustings versus a Labour candidate who will tell rural New Zealand that Labour will unwind the National bill and increase their costs from $3,000 a year to $30,000 a year. That is what the bill for the average farmer would be if Labour had its way. It would not be the $3,000 a year that we are talking about—it would be $30,000. And to any Labour candidate who wants to campaign in rural New Zealand on a platform of Labour putting farmers out of business because that is ideologically right, I say good luck. If Labour candidates think they will go to rural New Zealand and tell people there that they will put up their costs tenfold, and give them a $30,000 bill, and that Labour is prepared to give intensity allocations to industrial sectors but not to farmers, I say good luck with that.

This Government realises that farmers are the backbone of this economy. They are getting 80 percent of the $50 billion allocation that members talk about. When Labour talks about that money going to big industry, I point out that it is not going to big industry; 80 percent is ensuring our farming sector can continue to survive and can continue to put food on the shelves to feed the world. I say “Come on, 2011.” If Labour is going to honestly campaign on a platform of putting up the costs to farmers to $30,000—a tenfold increase—good luck!

This is an excellent bill. It is a very good balance between economic and environmental responsibilities. I am pleased to see that this Government is taking steps to halve the cost for Kiwi households. It is a good bill and I support it.