Settlement Systems Futures and Emissions Units Bill — Second Reading 
Settlement Systems Futures and Emissions Units Bill — Second Reading 
[Volume:658;Page:7598] 
Settlement Systems Futures and Emissions Units Bill 
Second Reading 
Debate resumed. 
CHARLES CHAUVEL (Labour) 
: 
 The Settlement Systems Futures and Emissions Units Bill is designed to help facilitate trading in emissions units through the development of carbon markets. It will apply regardless of whether the units are issued by the New Zealand Government via international protocols or by other Governments. The bill allows for a broadening of how an emissions unit is defined—this is very important given that carbon trading is still in its infancy particularly in this part of the world. The bill also provides a basis for establishing the legal title to emissions units much like the title surrounding for example tradable shares. Participants in the carbon trading system—which is voluntary—who wish to become designated and then maintain that status must ensure that their operating rules meet certain standards including international standards and those of the joint regulators the Reserve Bank and the Securities Commission. This provision concerning joint regulation is the result of a change recommended by the Commerce Committee. 
This bill would help—but is no means vital—to set up and implement the emissions trading scheme. The bill was before the House last year because it was introduced by the previous Labour Government in September 2008 but since then we have had a change of Government and seen a drastic shift in policy surrounding climate change and emissions trading. It has not been a shift to the country’s benefit. Because of this Government’s lack of direction on climate change we have missed out on—but could have had—a world-leading carbon market. That could have placed us at the forefront of environmental and climate change policy and reinforced our place as a role model in the international community. However the Government’s lack of direction on climate change has limited the possibility of our making any gains on the environmental and emissions trading front. We have seen dithering from this Government in the areas of climate change policy and emissions trading. 
To begin with the Government’s delaying of the emissions trading scheme has already caused our emerging carbon markets to grind to a halt. The forestry sector has suffered hugely from this due to a documented lack of international investment. Foresters remain unsure of whether to sell their credits trade them or just sit on them—assuming they took an allocation of credits when the allocation became available. The dithering over forestry combined with the repeal of the preference for renewable electricity generation the removal of the biofuels obligation the replacement of the New Zealand Energy Efficiency and Conservation Strategy—for which there is still no alternative—and the confusion in generation policy caused by the confusion evinced by the Minister of Energy and Resources Gerry Brownlee over the existence or not of the 90 percent renewables target has left New Zealand well down the order when it comes to climate change initiatives. So this bill is important and needs to be brought forward quickly in order to allow us to salvage what we can out of the carbon trading space. It is a real shame that it was not brought forward much more quickly. This is just another example of how this Government is mucking around in the important area of climate change. 
Katrina Shanks 
: Nine long years. 
CHARLES CHAUVEL 
: I welcome Ms Shanks back from Europe. I am sure she would have heard much criticism of New Zealand’s backsliding when she was there. This bill provides us with yet more evidence of that backsliding. I do not know what the Government thinks that it will get by way of a welcome at Copenhagen—[ 
Interruption 
]—apart from the “Fossil of the Year” award perhaps as my colleague Moana Mackey just said. It certainly will not be a warm welcome and it certainly will not accord with the Government’s wish to get policy concessions in important areas like forestry and land use. That is certain given the reputation we seem to have garnered in the last year of not taking this area seriously. 
The other disappointment is that this bill has not been given higher priority on the Order Paper—even though the House I might add has been under urgency for the last 6 parliamentary weeks. This is a concern because the bill should have been treated with more urgency. It is one of the few in the urgency motion that actually merits its place. The Government is intending to ram through an undermined emissions trading scheme yet it is dragging its feet on implementing the necessary regulatory framework to create a sound environment for the emissions trading scheme to operate in—namely this bill. If the Government’s attitude to consultation over the emissions trading scheme—which has been to avoid consultation and democracy as we have seen over the last couple of weeks in the select committee—is carried over to bills such as this one which supports an emissions trading scheme then we should be seriously worried that in setting up such a framework stakeholders may not be able to have as much input as would be desirable and beneficial. 
We are fortunate that the financial sector has been helpful in making submissions on this legislation to the Commerce Committee which is so ably chaired by my friend and colleague Lianne Dalziel. I hope that it will continue to make that sort of constructive input because the Government’s attitude to input so far really does not offer much encouragement. If the passing of this bill had been expedited and there had not been the dilly-dallying over climate change policy that we have seen over the last year New Zealand would by now have a leading carbon registry. National could have taken up the previous Labour Government’s initiative on the emissions trading scheme and pushed through supporting legislation such as this. 
Let us look at what this has cost us apart from the forestry example I gave earlier. TZ1 could have been the prototype of an international carbon registry. It could have given us a huge competitive advantage given where we were moving in climate change policy and our geographical advantage. Mr Lotu-Iiga knows about this because he has experience in this sector. Given our time zone it could have been of great advantage to us to have a leading international carbon registry. But now that has been sold to overseas interests. Perhaps the outcome reflects the Government’s lack of confidence in managing things or perhaps it reveals more worryingly the fact that it really does not care about implementing sound climate change policy. The tragic truth is that it is probably a bit of both. 
Labour will continue to support the progress of this bill through the House but with reservations in regard to the Government’s treatment of it and the issues that surround it. We reflect with regret on the consequences I have outlined—the loss of a chance to be an outstanding and forward-thinking international citizen and the loss of the opportunity through TZ1 to be a global leader in carbon registries. It is important to record here and now that the blame for those two issues lies fairly and squarely at the feet of the National Government supported on this shameful occasion by the Maori Party. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I am pleased to take a call in the second reading of the Settlement Systems Futures and Emissions Units Bill. I acknowledge the sponsor of the bill the Minister of Commerce the Hon Simon Power and also the chair of the Commerce Committee and the previous Minister of Commerce the Hon Lianne Dalziel who introduced this bill in September 2008. The Commerce Committee of which I am a member received and considered 12 submissions and reported on 22 June this year on the bill. 
The bill is designed to align New Zealand’s clearing and settlement system with international best practice. It is also designed to facilitate trading in futures and emissions units. Firstly it provides that trades in securities and other products can be cleared and settled through designated systems that meet the expectations of international and domestic participants in New Zealand’s financial markets. Secondly it aligns the regulatory environment for exchanges seeking to operate in both the securities and futures markets. Thirdly it allows market participants who are approved by an authorised futures exchange to be deemed to be authorised to deal in futures contracts. Finally it clarifies the regulatory treatment of emissions units to support the development of the market for emissions units. 
The bill provides settlement systems operating in New Zealand with the option of applying for designation. Designation provides additional legal protections to support the integrity of the system in the case of a participant’s insolvency or default. Specifically it provides the operators of a designated settlement system with priority under the Personal Property Securities Act 1999. At present New Zealand’s legislation provides for the designation of payment systems under Part VC of the Reserve Bank of New Zealand Act 1989. As has been stated by the two previous speakers the bill aligns the regulation of exchanges that are seeking to operate in both the securities and futures markets. The Securities Markets Act 1988 currently provides one process for registering a securities exchange and a separate process for authorising a futures exchange. The bill amends the Securities Markets Act so that an exchange registered under Part 2B of that Act may be registered either in respect of securities markets or futures markets only or in respect of both securities markets and futures markets. The choice is open to those who are seeking such registration. 
The bill also provides that market participants who have been approved by an authorised futures exchange under its operating rules are authorised to deal in futures contracts on any futures markets operated by the authorised futures exchange. That does not affect the ability of the Securities Commission to authorise futures dealers more generally but codifies the existing class authorisations granted by the Securities Commission and makes them available to any authorised futures exchange. 
The previous speaker touched on emissions units and I want to comment briefly on them. The Finance and Expenditure Committee is doing good work on the Climate Change Response (Moderated Emissions Trading) Amendment Bill. But this bill clarifies the regulatory treatment of emissions units to support the development of the market for emissions units. This applies as Mr Chauvel has stated to both units issued as part of a statutory scheme and units issued in the voluntary market. It does take into account the Kyoto Protocol. It gives effect to the policy through technical amendments to existing legislation. For example the bill clarifies that emissions units will be treated like other forms of property under the Securities Act 1978. As a result trading in emissions units will not need to meet the requirements of the regulatory regime for offers of securities or the relevant provisions of the Securities Markets Act until they are part of an investment scheme. 
I was a member of the Commerce Committee which sat and listened to submissions on the bill. The key recommendation from the committee to replace the definition of insolvency with a new definition of “becomes subject to an insolvency event”. This is critical because it is the moment at which a participant becomes subject to an insolvency event and it is much clearer. The committee proposed several amendments to avoid potential problems in the event that a participant in a settlement transaction became subject to an insolvency event while the settlement was only partly completed. Although such a situation is unlikely it is wise to close any gap in the difference in timing between those two events especially in the current global financial climate. The bill as introduced provides that the finality protection extends until the earlier of 24 hours after the commencement of the insolvency or the time when the designated settlement systems contact person has notice or ought to have notice of the insolvency. The committee’s recommendation that finality protection would extend for 24 hours after the commencement of insolvency is regardless of when the contact person has such notice. This would remove any uncertainty over the receipt of notice while maintaining a 24-hour window after the commencement of an insolvency in which to complete any settlements that were already in progress. 
I will now touch on penalties. The bill proposes various penalties for offences relating to designated settlement systems ranging from fines and imprisonment to the revocation of designation. It was submitted that the revocation of designation was the only necessary and effective penalty. But the committee concluded that a range of penalties is more appropriate as revocation is an extreme measure under any circumstance. Without lesser penalties minor or even moderate offences that did not warrant revocation might go unpunished and that would inevitably undermine the system. There is also a need for penalties against individuals as the committee believes the possibility of employees being held personally accountable would greatly increase the incentive to comply. After comparing those penalties with penalties in other jurisdictions the committee proposed one change to the level of penalty for corporate bodies. It recommended that the maximum fine for a body corporate should be reduced from $1 million to $750000 bringing it into line with fines in other jurisdictions. 
I have given a summary of the key issues that were involved within the committee in bringing this bill to its second reading and I commend the bill to the House. Thank you. 
MOANA MACKEY (Labour) 
: 
 I am very pleased to be able to stand and take a call on the second reading of the Settlement Systems Futures and Emissions Units Bill. I acknowledge the work that was done by the Commerce Committee on this bill. 
Todd McClay 
: A very orange speech. 
MOANA MACKEY 
: I thank Mr McClay. I also acknowledge the work of the Hon Lianne Dalziel who was the Minister who brought this legislation into Parliament. As my colleague Charles Chauvel has said this bill has a very complicated title and is technical in its substance but it is very important. It helps us to facilitate trading in emissions units through the development of carbon markets. As has been said it does so regardless of whether those units are issued by the New Zealand Government or issued internationally. 
I am also pleased to see the broadening of the definition of “emissions units” which allows for the innovation and development of what will inevitably happen in a carbon-trading market that is in its infancy. The bill provides the basis for establishing a legal title for emissions units which will be important as we move forward and as carbon markets become far more important both domestically and around the world. The system is voluntary and those who want to become part of it become designated and to maintain that status must ensure that they meet certain rules and standards. Although this bill is obviously very important to the emissions trading scheme that scheme does not rely on it for its implementation. 
I come back to some comments that were made by my colleague Charles Chauvel. This bill was introduced into the House last year. It was reported back from the Commerce Committee in June and has languished on the Order Paper while other legislation which in all honesty would be deemed to be far less important was progressed through the House. The fact that the Government has allowed this bill to languish is an indication of how seriously it takes emissions trading schemes. This is a very important bill for our international credibility and I think the Government did this while being well aware that it was going to dither and faff around on emissions trading so there really was no reason— 
Aaron Gilmore 
: How do you spell that? 
MOANA MACKEY 
: It is f-a-f-f. It is a technical term. It is a word Mr Gilmore did not invent which is hard to believe! I come back to the bill. I endorse the comments my colleague Charles Chauvel made. I am currently a member of the Finance and Expenditure Committee which is looking at the legislation to amend Labour’s emissions trading scheme. That legislation is being pushed through with unnecessary haste after no action since this Government came into power. 
The committee members are in the position that we do not have time to do the work that we are meant to do as a service to this House and as elected members of Parliament. We do not have time to consider departmental reports and revision-tracked legislation. I have never been on a select committee that has been under such ridiculous time pressure—ridiculous. When that committee reports back and members of the public can see what went on at that committee and see what members may or may not have done to try to get more time I think it will be quite clear that this Government does not take emissions trading seriously at all. I say that with great regret because there are missed opportunities as a result of this legislation and the emissions trading scheme being delayed. 
One missed opportunity was the chance to have a world-leading carbon registry based here in New Zealand. It was from an organisation that wanted to look for a country that was in the time zone New Zealand is in. It wanted a country on the opposite side of the world so that when people in that organisation were asleep New Zealand was awake. It would have been a 24-hour service. That organisation looked and it found a country that was not the first in the world to have an emissions trading scheme but it was certainly taking it seriously and putting in place a scheme that had environmental and economic credibility. It was a country that would have been perfect for establishing a carbon—[ 
Interruption 
] I tell Dr Mapp to wake up. OK clearly my speech is as enthralling as that. His colleague might like to wake him up. 
We had the opportunity to have a carbon registry in New Zealand that would be world leading. It would have provided jobs and wealth to New Zealand and we lost it. We lost it because of this Government’s actions on the emissions trading scheme. The Government should be ashamed of that. Labour supports this legislation. We brought this legislation into the House. We brought it in at the time when we had a functioning emissions trading scheme and the possibility of having an active carbon market in New Zealand. That has been shot to bits by this Government. People in the forestry sector do not know where they are. They do not know whether to get the credits and they do not know whether they can sell them or sit on them. They do not know what to do because no one knows. We do not have any certainty around this emissions trading scheme. 
The only certainty we have is that generations of New Zealand taxpayers will be paying billions of dollars—billions of dollars—to prop up the heaviest emitters in New Zealand. That is not fair and it should not be happening. 
Hon David Parker 
: What’s the subsidy per employee? 
MOANA MACKEY 
: The subsidy per employee at Rio Tinto interestingly enough is about $200000 a year. It is $200000 per employee per year and subsidies are going to Rio Tinto. It might have been cheaper if that employer had— 
Aaron Gilmore 
: The member needs to get a calculator and learn some literacy and numeracy lessons so she can actually count. 
MOANA MACKEY 
: That employer would probably just want the $200000 because I bet that the employees are not being paid $200000. Mr Gilmore is going very red in the face at the moment now. I realise that he was instrumental in setting up the Kyoto Protocol and we need to show him respect for doing that. In fact I think he defined the terms “global warming” and “climate change” and I bow before his greater knowledge. I look forward to his speech when he will regale us with the way that he has worked largely in this area and has developed a system around the world. 
But the fact is that the scheme we have now has no economic credibility and no environmental credibility. We are setting up a carbon registry system that we will not even be able to use properly because we have legislation that will not work. 
KEVIN HAGUE (Green) 
: 
 I will take just a short call to outline a few points behind the Green Party’s decision to support the Settlement Systems Futures and Emissions Units Bill at its second reading as we did at its first reading. 
First of all I state that the Green Party shares absolutely Labour’s critique of the Government’s climate change policies but we note that the regulatory framework that this bill sets up will be necessary for the development of a viable emissions trading scheme and carbon trading market in the future. Who knows? Possibly even the groundswell of public opinion and indeed the international opprobrium that the Government will encounter in Copenhagen may be sufficient to change this Government’s policies on climate change and we may find the regulatory framework to be of use sooner than we thought. 
In general I will make about four points. The first is that it is important that New Zealand’s regulation of settlements is brought up to date and is in line with world best practice. The Green Party supports the bill from that perspective. Secondly the bill goes a long way towards clarifying how settlements are made and the mechanisms for resolving issues when disputes arise. That is very important in order to avoid unnecessary litigation and it will give participants a lot more certainty on how they manage their risk. Thirdly clarifying who carries the risk at what stage of a transaction is vital if our stock market is to function competitively. We support the bill for that reason also. There is inherent risk in the Reserve Bank being both a regulator and a participant. The Commerce Committee has made some adjustments and it has retained the Commerce Commission as a co-regulator. That may well address the issue adequately but we must remain vigilant and monitor that particular aspect. 
In finishing—I did say that this would be a short call—I am struck by the contrast between the debate we are having on this bill and the speech the House heard from my friend and colleague Sue Bradford immediately prior to the dinner break. I remind the House that Sue spoke about the warning we have been given over I guess the last 18 months of a collapse in the global economy that is inherent in the way it is structured. That economy has acted as a huge imposition on the real economy. When we examine the factors that have been implicated in the warning that we have been given by the crisis that we have faced over the last 18 months we see that the speculative economy has played a very great role. It is clear from most of the world’s Governments and international organisations that part of the formula for remedying that problem is to have greater regulation of the speculative economy. Members of this House would be familiar with the Green Party’s policy of trying to redirect investment away from the speculative economy and into the real economy and aware of our proposals for various measures to achieve that: transaction taxes a capital gains tax and limitations on losses that could be attributed to loss attributing qualifying companies. All of those measures will be important. Fundamental regulatory change to the way that we handle the speculative economy will be necessary. 
In some ways the adjustments that we are making to the regulatory framework today seem like tidying up rather than rearranging the deckchairs on the  
Titanic 
. A much greater reform of that framework will be required and the Green Party remains committed to holding the House to that obligation. But that said the changes the bill makes to the regulatory framework are necessary and the Green Party will continue to support this bill. 
KATRINA SHANKS (National) 
: 
 It is my pleasure to take a call and speak in favour of the Settlement Systems Futures and Emissions Units Bill this evening. This bill was first brought into Parliament in September last year by Lianne Dalziel who was then the Minister of Commerce. The current Minister of Commerce the Hon Simon Power is now in charge of it for its second reading and its Committee of the whole House stage. 
This bill addresses three areas. The first is to do with settlement systems. The Reserve Bank of New Zealand Act 1989 is amended to provide for the designation of systems that clear and settle products not just payments. The second area is futures. The Securities Markets Act 1988 is amended to align the regulatory environment for exchanges seeking to operate in both securities and futures markets and to provide that market participants approved by an authorised futures exchange are deemed to be authorised to deal in future contracts. The third area is emissions units. The Securities Act 1978 the Securities Markets Act 1988 and the Personal Property Securities Act 1999 are amended in order to clarify the legal treatment of emissions units. 
This bill had some quite complex issues attached to it so I take this opportunity to thank the officials. They gave us some fantastic advice and kept on simplifying these complex issues so that we understood them properly and understood the impact that this legislation will have on the sector. I also thank the submitters who made some very complex detailed submissions to the Commerce Committee. I acknowledge the NZX for its submission; it was very detailed and very informative for the committee. Our officials used that submission a lot when we were formulating decisions as to what changes we would make to this bill before it was brought back to the House. So I take this opportunity to thank officials for their work. 
In 2007 the New Zealand Exchange requested that the Government urgently provide legislation to support an upgrade of its existing clearing and settlement system and the expansion of its exchange-traded products to include futures and emissions units. In response Cabinet approved the introduction of this bill which we saw at the end of last year. A robust market mechanism is necessary to facilitate improved risk management and functioning of New Zealand’s capital markets to develop the products that exist in the market including preserving the ability for businesses and to develop carbon and other derivatives and over-the-counter markets that offer a regulated and authorised clearance of settlements function. If we are serious about getting our economy going we must be serious about the capital markets as well. 
I would like to talk particularly to the emissions units part of the bill. The bill clarifies the regulatory treatment of emissions units to support the development of the market for emission units. This applies both to units issued as part of a statutory scheme such as the Kyoto Protocol and to units issued in the voluntary market. It gives effect to this policy through technical amendments to existing legislation. For example the bill clarifies that the emissions units are to be treated like other forms of property in the Securities Act 1978. As a result trading in emissions units will not need to meet the requirements of the regulatory regime for offers of securities or the relevant provisions of the Securities Markets Act unless they are part of an investment scheme. The bill also amends the Personal Property Securities Act 1999 to enable persons to take possession of and security interests over both statutory and voluntary emissions units. 
The select committee made some recommendations in relation to the definition of “emissions units”. It recommended that clauses 27 33 and 36—covering the definition of “emissions units” to be inserted into the Securities Act the Securities Markets Act and the Personal Properties Act—be amended to include units in accordance with any enactment of a jurisdiction within another country or any international treaty or protocol. That is very important. These clauses should also be amended to include the storage of greenhouse gases in the definition. The carbon market is still quite new so the definition of “emissions units” should be broadened to allow for the evolution of this market and the changes that we will see in the future. This might involve technological developments in the way carbon is managed and stored and developments in the sources of carbon credits. Regarding sources for example the committee noted that “increasingly carbon credits are being issued by state or local governments under international treaties and protocols and through legal or contractual arrangements in addition to being issued by central governments.” The definition specified in the bill needs to be wide enough to cover all potential sources of credits so that this bill stays relevant for a period of time. 
The bill is designed to align New Zealand’s clearing and settlement system with international best practice and to facilitate trading in futures and emissions units. It provides that trades in securities and other products can be cleared and settled through designated systems that meet the expectations of international and domestic participants in New Zealand’s financial sector. It aligns the regulatory environment for exchanges seeking to operate in both securities and futures markets and provides that market participants in approved and authorised futures exchange are deemed to be authorised to deal in all these future contracts. This bill clarifies the regulatory treatment of the emissions units to support the development of the market for emissions units. That is just one part of the changes that we made in this bill. I will leave my colleagues to expand on the other two parts. It is my pleasure to support this bill tonight. Thank you. 
Hon DAVID PARKER (Labour) 
: 
 I thank the previous speaker on the Settlement Systems Futures and Emissions Units Bill Katrina Shanks. I thought her contribution was thoughtful and useful in terms of the way in which carbon markets could evolve. I agreed with the comments she made. 
I think it is probably timely to reflect on why we are creating carbon units in New Zealand. The world has to reduce carbon emissions if we are to avoid some of the catastrophic changes that are predicted by many scientists to occur if carbon dioxide and other greenhouse gases continue to build up in the atmosphere. We have changes in temperature rising sea levels changes in patterns of food production acidification of oceans loss of reefs and loss of species in the sea that produce calcium for shells—they will not be able to produce that calcium because of higher levels of acidity in the ocean. These are very serious matters. The theory that lies between the creation of carbon rights and emissions pricing is that we need to create an economic incentive for the businesses that produce the goods we all consume so that businesses are encouraged to produce goods and services for us to buy that do not cause carbon emissions and to make it more profitable for them to produce a different product where those carbon emissions are absent. 
We do that by charging emitters for the cost of their emissions. We put a price on carbon dioxide methane and other greenhouse gas emissions and that price is avoided by those who produce goods and services in a way that does not produce carbon dioxide and other emissions. So those emitters that are going down the clean route have a price advantage compared with those that are producing carbon emissions and then suffering a price disadvantage. In that way we bring forward renewable electricity instead of coal-fired electricity. We change lots of little decisions in society. It becomes cheaper to run a light car so an aluminium car becomes more viable compared with a heavier steel car because the aluminium car uses less fossil fuel and therefore has lower carbon emissions. All of these complex pricing decisions which we will never notice happen because we price emissions. This bill sets up some of the regulatory framework to make sure that those carbon obligations can be dealt with in commerce in the way that other securities can so this bill is worthy. 
The bill was introduced by the previous Government over a year ago and it has taken a year for this Government to get it back from the Commerce Committee which is a bit long. Why did the New Zealand Exchange as the previous speaker said come to the Government with a sense of urgency a year and a half ago to get this legislation progressed? The answer to that is that at that time there was an opportunity for New Zealand to lead in this way given that emissions pricing was clearly on the way in New Zealand and around the world. Given that that was going to happen our stock exchange figured that it might as well take advantage of the commercial opportunities that arose in any way that it could. It spent quite a bit of money on developing a business plan to take advantage of the fact that New Zealand was leading in this arena so that it could take advantage of the service industry opportunities that would arise from New Zealand being at the forefront of developing this new market. 
That did not mean that New Zealand was going to slay the economic interests of emitters. We were not going to cause aluminium smelters to shut down or farming to go broke. We were not going to cause the steel mill to go broke or anything like that. But we were going to start pricing emissions because since the start of 2008 New Zealand has already had to face the cost for increasing emissions. It was important that that reality was reflected in the economy and that we sent the signal to emitters in New Zealand to stop producing increases in emissions at a cost to the country. We do that by making them pay for some of their emissions. 
Unfortunately in the last year since we have had a change in Government the impetus has been lost. Nowhere is this clearer than in respect of what has happened with the New Zealand Exchange. It has now effectively abandoned its efforts to be a leader in this field. It has given up on the business opportunity that had arisen as a consequence of the previous Government’s actions. That has had a real economic effect on New Zealand: instead of New Zealand having an additional profit centre as a consequence of our leadership in this area New Zealand has a Government saying that somehow we should not lead in this area despite the enormity of the environmental challenge. It says that we should just sit back and be a follower of the rest of the world. One of the prices of being a follower rather than a leader is that we cede the economic opportunities of being the advanced guard in running the related service industries for other jurisdictions. Instead of New Zealand having that economic opportunity it is falling instead to other countries around the world including Australia. It is with sadness that I reflect on the fact that although this bill is still necessary it does not provide the point of advantage it would have had for the New Zealand Exchange and the service industry because New Zealand has lost both its moral authority in this area and the business advantage it accrued from the fact that the previous Government was treating these issues responsibly. 
I do not think there is much more to say than that. Fewer units will be traded than would have been the case because of course the softening of the emissions trading scheme on major emitters is such that billions of dollars of units will now be paid for by taxpayers over the years rather than by emitters. They will have to buy fewer emissions units in the market therefore there is less of a need for this bill than would otherwise have been the case. That is another reason why the business opportunity will not be as great for the service industry. With those comments I say that the Labour Party is happy to support the bill but I feel that it is sad that the business opportunities that surrounded the service industry have been lost to New Zealand because of the short-sighted measures the National Government has taken. Thank you. 
JONATHAN YOUNG (National—New Plymouth) 
: 
 It is my pleasure to stand and speak in support of the Settlement Systems Futures and Emissions Units Bill. I believe that our Government has brought changes to the emissions trading scheme because we are seeking to bring a better balance between our economic opportunities and our environmental responsibilities. We felt that the advantages that the previous speaker the Hon David Parker spoke of would bring very strong disadvantages to other sectors of our community so we believe that our more measured approach is far more sustainable. 
This bill which was introduced by the Hon Lianne Dalziel towards the end of last year was reinstated in the 49th Parliament in December because it is essential legislation particularly with regard to emissions trading in the global sense. Putting regulation in place for that to happen is very important. The member in charge of this bill is the Hon Simon Power the Minister of Commerce. It returned from the Commerce Committee in June this year. 
There are a number of issues that this bill addresses. It is a very complex bill. Most New Zealanders probably will not understand it but people in the foreign exchange securities and futures area of work and interest will be very interested in this bill. One of the areas that was discussed in the select committee was the choice of a regulator for designated settlement systems. Several submissions questioned the efficiency of appointing joint regulators for the designation of settlement systems. However we recommend the joint regulator model be retained because it is effective without compromising administrative efficiency. 
We considered these two potential models of regulator: the Reserve Bank of New Zealand as a sole regulator with a duty to consult with the Securities Commission and the Securities Commission and the Reserve Bank as joint regulators. It has been suggested that the oversight of settlement systems is primarily a matter of prudential regulation and as such the Reserve Bank is best placed to perform that role. However the settlement of transactions per se is primarily a regulatory matter for the Securities Commission. Thus both the Securities Commission and the Reserve Bank have a legitimate interest in the operation of settlement systems in the financial sector. To provide for a sole regulator with a duty to consult the bill would need to be amended to provide protocols around the duty to consult the other party its role in the process and the extent to which the views of the other party need to be taken into account. That would be less flexible than providing for joint regulators that may coordinate internally and more seamlessly. 
The assessment of an application for designation is a complex task. The work of preparing guidelines in assessing an application is split between two regulators under the joint regulator model. Such work can be allocated according to the expertise of the agency and its particular interest in settlement systems. In this regard the joint regulator model is underpinned by provisions in the bill that allow the joint regulators to share information and have regard to and rely upon any relevant information work or matters held or produced by the other joint regulator. There are expected to be only a handful of applications for designation during the life of the legislation. Potential opportunities for both the applicants and the regulators to refine procedures and reduce costs over time are therefore low. One application will likely come from the Reserve Bank in its role as operator of Austraclear. As a joint regulator the Securities Commission can be a witness to the separation between the Reserve Bank’s role of settlement system regulator and operator. The joint regulator model does not require applicants and designated settlement systems to duplicate effort across two regulators. The applicants are able to choose which regulator to lodge their application with. 
As I mentioned this is a complex bill and a complex matter. I thank the officials who have put in a tremendous amount of work in preparing a bill that has this level of importance for securities settlements and emissions trading in our country. Thank you. 
JOHN BOSCAWEN (ACT) 
: 
 It is a pleasure to take a call in this debate on the Settlement Systems Futures and Emissions Units Bill. This bill is designed to align New Zealand’s clearing and settlement system with international best practice and to facilitate trading in futures and emissions units. The bill contains various technical amendments to existing legislation and Katrina Shanks listed the three Acts that are being amended. The bill is designed to facilitate the development of markets for emission units. 
The Hon Nathan Guy Sam Lotu-Iiga and Katrina Shanks have already outlined in some detail the inner workings of this particular bill. I do not wish to repeat what they said other than that I would like to acknowledge the work of the officials who diligently attended the Commerce Committee of which I am a member. In particular I thank submitters to that committee because although there were not a large number of them they brought a lot of expertise. However I have to say that in respect of some of them I could not help thinking that they were there out of self-interest. I also acknowledge the work of the chair the Hon Lianne Dalziel. 
I would like to spend the bulk of my speech responding to the comments of Charles Chauvel and David Parker. They used this opportunity to open up the debate to the whole wider issue of the emissions trading scheme. I cannot leave some of the comments of Mr Parker and Mr Chauvel unchallenged. However let me start by saying that certainly in one respect I totally agree with Mr Chauvel. I think it is a disgrace that the legislation to amend the emissions trading scheme is being rushed through this Parliament with such undue haste. It is the role of Parliament to question and investigate the work of the executive and the bills it puts up. Submissions closed on the amendments to the emissions trading scheme on 13 October and the Finance and Expenditure Committee is due to report back by 15 November. In the space of just a month we have to analyse some 380 submissions hear the views of the officials listen to the recommendations and debate those recommendations. 
As a matter of public record certainly in the early stage there were a number of submitters who had less than 24 hours’ notice. Labour members on the Finance and Expenditure Committee regularly asked the submitters to the committee when they had received the advice that they were required to attend. Some of them had been given 12 hours’ notice some even 15 hours’ notice. I think the record was probably 4 hours’ notice. One gentleman took a phone call at 4 o’clock on a Thursday afternoon and was before the committee at 8 p.m. that evening. 
I raise those points because I think the bill to amend the emissions trading scheme is being done in undue haste. Why is that? We all know that New Zealand is a signatory to the Kyoto Protocol and the world community is looking to extend the protocol at the upcoming meeting in Copenhagen. It seems that New Zealand is hell-bent on pushing through its amendments to the scheme before that Copenhagen meeting. But those amendments are based in substantial part on the proposed scheme for Australia. I say “proposed scheme” because the scheme is not legislated for in Australia; it has not been passed. The United States does not have emissions trading legislation. 
Earlier this afternoon Mr Phil Goff in seeking to embarrass the Government made a point about an increase in power prices. He accused the National Government of pushing up power prices. Well nothing will do more to push up power prices which will result in subsidies and huge massive profits than the emissions trading scheme. As Mr Parker said in his speech earlier the emissions trading scheme seeks to put a price on carbon. It seeks to increase the price of energy and therefore every single New Zealander will pay a higher price for electricity. It is already legislated for; the scheme is there. It currently takes effect on 1 January next year. The National Government’s solution is to delay its introduction and to reduce somewhat the costs for the first 2½ years but we will all pay a higher price for electricity. 
But it is worse than that. The generators that generate electricity from hydro sources and from other renewable sources will get windfall profits. So TrustPower which owns a suite of hydro dams and is a company in private ownership along with Genesis and the Meridian Energy which are both companies that are State-owned enterprises and also have a suite of hydro generation and renewable electricity will all have windfall profits. The emissions trading scheme the one that is currently on the books and the one that is in the process of being amended will result in a higher price of electricity. Those generators of electricity that generate at a hydro dam or through a geothermal field will not pay that price of carbon. They will receive a higher price for their electricity and they will make windfall profits. 
The Green Party member commented on Sue Bradford’s valedictory statement made this afternoon when Sue Bradford talked about wanting to be known for more than the amendments to section 59 of the Crimes Act. She referred in part to her desire to reduce the deepening gap between rich and poor. I suggest that nothing will do more to make that gap wider than raising the price of the most basic commodity—electricity. 
I wish this were just an issue of looking to protect the environment—we have signed the Kyoto Protocol—but it is not. We heard from a number of submitters who have forestry interests. In particular we heard from Te Arawa Group Holdings which is owned by a number of iwi who own in excess of some 30000 hectares of central North Island forest. This forest is capable of being converted into pastoral farm for dairying to create wealth and employment for New Zealanders. But Te Arawa Group Holdings is not able to convert that forestry into pastoral land to create wealth for New Zealanders. To do so would require the company to surrender some 800 emissions units at a current market price of $25 a unit or $20000 a hectare. Te Arawa Group Holdings estimated that the cost to it of the current emissions trading scheme on the books is some $600 million. What will the National Government’s amendments to the scheme do? They will increase that cost by a further $30 million. So Te Arawa Group Holdings was up for a cost of $600 million but it will now cost $630 million. 
It would not be so bad if Te Arawa Group Holdings were in a position where it could chop the trees down on the land that was good for dairy conversion and replant those trees on other land. The company would like to do that; it has offered to do that. New Zealand has much terrain that is mountainous and is not suitable for pastoral and intensive farming. The company would like to replant those trees so that in time those trees in their new location would sequester as much carbon as they do right now. Under the terms of the treaty that we signed up to the company cannot do that. If it chops those trees down it is up for a charge of $20000 a hectare. 
I understand that New Zealand is going into the Copenhagen round in the hope of negotiating an offset so that Te Arawa Group Holdings and others—like Wairakei Pastoral—can replace those forests on other land. But there is no guarantee that they will be able to. It is quite likely that many billions of dollars will be taken from Maori in terms of a diminution in the value of land that they have been given for Treaty settlements. Why the rush on this bill? In 5 weeks’ time we will know the outcome of the Copenhagen round. Why the rush? I say to Sue Bradford that she has every right to be concerned about the deepening gap between rich and poor. New Zealand is not a rich country. We are a heavily indebted country yet those 30000 hectares in the central North Island could be converted to dairying and could earn overseas exchange for New Zealand but we have signed up to a treaty that denies those people and others like them the opportunity to do that. 
I could go on to talk about the fact that although amendments are being made to allow an offset or allow a phase-in period—Mr Chauvel was very keen on his scheme—it would put New Zealand industry at a massive disadvantage and would cause huge additional costs and job losses. Thank you. 
AARON GILMORE (National) 
: 
 I will talk a little bit about the Settlement Systems Futures and Emissions Units Bill. It represents another step along the way of our putting in place a sustainable emissions trading scheme. This bill concerns emissions units and futures trading. 
I will also fisk a bit. A bit of fisking was going on in prior speeches particularly from the other side of the House. We heard from Mr Chauvel that we are in danger of becoming the fossil in Copenhagen. Well under his Government’s emissions trading scheme the only thing in danger of becoming a fossil was the New Zealand economy. Thousands of New Zealanders would have been put out of work and for what? So that Labour could go to some international convention somewhere and say: “Look at us; aren’t we so clever?”. Well we thought this through a bit more and we think that jobs are important. In the worst recession that this country has had for over 60 years we think that helping industry through the transition of introducing an emissions trading scheme is incredibly important. That is a good thing to do. People who have jobs in trade-exposed industries will thank us but I tell members that they will not be thanking Labour. 
This bill along with our other emissions trading bill—the Climate Change Response (Moderated Emissions Trading) Amendment Bill; the greater parent bill—is a good step in the right direction. It clarifies the regulatory treatment in support of and develops the market for emissions trading and that is a good thing. 
A party vote was called for on the question  
That the Settlement Systems Futures and Emissions Units Bill be now read a second time. 
Ayes 115 
New Zealand National 58; New Zealand Labour 43; Green Party 7; Maori Party 5; Progressive 1; United Future 1. 
Noes 5 
ACT New Zealand 5. 
Bill read a second time.