Mooney JosephJOSEPH MOONEY (National—Southland): Thank you very much Madam Speaker. I rise to speak on the Climate Change Response (Extension of Penalty Transition for Forestry Activities with Low Volume Emissions Liabilities) Amendment Bill in the first reading—quite the mouthful.This bill will amend the Climate Change Response Act 2002 to extend the transition period it provided for New Zealand emissions trading scheme (ETS) participants with low-volume emissions liabilities related to forest activity within which they must comply with the penalties and compliance regime introduced by the Climate Change Response (Emissions Trading Reform) Amendment Act 2020. The extension until 1 January 2025 will mitigate the risk of serious hardship to small forestry participants who would fail to surrender or repay units by the previous date which is 1 January 2023.The complexity of the New Zealand emissions trading scheme for forestry means that small forestry participants are more likely to make unintentional errors that result in unexpected unit-surrender obligations. Small forestry participants may find it difficult to meet unexpected unit surrender or repayment obligations particularly at high carbon prices. I note the spot price now is $81 so it's gone up very very rapidly. Meeting these obligations could create serious hardship for these participants potentially putting key assets such as their home or farm at risk. Extending the current deferral arrangement until the end of 2024 will mitigate risks of such serious hardship for small forestry participants. It will allow time for a new surrender or repayment penalty for small forestry participants to be finalised and it will allow time for participants to be educated and informed of changes before implementation of the new penalty which is effective from 1 January 2025.This deferral will also give officials a window of time to consider the impact of the penalty on participants with small-volume liabilities including whether further amendments to the penalty provision may be required. For those listening in who do not know what the penalties are about the penalty applies when a person fails to surrender or repay carbon units to the Crown by the due date the so called surrender repayment penalty. In their revised penalty regime the regulator's discretion to reduce the penalty was also removed and the size of the penalty was increased to three times the price of carbon as set in regulations. Therefore one of the implications of the new payment regime is the risk of serious hardship to small forestry participants resulting from the significant size of the penalty and the personal nature of the assets they hold. To mitigate that risk legislative change is required to ensure that those small forestry participants are not subject to the three-to-one penalty and avoiding the resulting impacts on them.New Zealand has a total of 10.1 million hectares of forest covering 38 percent of New Zealand's land area. Of this 8 million hectares are native forest 2.1 million hectares are plantation forest. Of that plantation forest 1.7 million hectares are productive and the remainder is in reserves and unplanted areas near bodies of water and infrastructure. Based on reported emissions in 2021 the largest participants in the New Zealand ETS were forestry participants: 2205 were voluntary post-1989 forest participants 42 were mandatory pre-1990 forest participants who deforested more than two hectares 141 were mandatory non-forestry participants with surrender obligations and there are also 211 mandatory non-forestry participants including in the agricultural sector who do not currently have surrender or repayment obligations only an obligation to report emissions. But the complexity of the New Zealand ETS for forestry means that small forestry participants are more likely to make unintentional errors that result in unexpected unit-surrender obligations. Initially the deferral was developed in response to submissions during a previous select committee stage and feedback from forestry stakeholders reflected two main issues: the size of the penalty was viewed as excessive and posed a risk to participants who may be having trouble meeting their surrender obligations due to no fault of their own; and secondly they reviewed that the absolute liability approach to the regime allows no flexibility to regulators to mitigate the penalty in certain limited circumstances for example when a force majeure event means participants cannot meet their surrender obligations on the due date.Two-thirds of post-1989 forestry participants have less than 50 hectares of registered forest in the scheme. Participants are usually natural persons or small businesses including farmers with small forestry blocks Māori landowners forestry syndicates and conservation groups. Landowners with pre-1990 exotic forests may be unaware that their land is subject to deforestation liabilities. It is difficult for landowners to determine if their land is pre-1990—it is not recorded on the land title. Mandatory participation is on a regular familiar obligation but arises in circumstances where they have mistakenly or unintentionally deforested their property.I heard a bit of criticism from the Green Party in an earlier submission. I just want to respond to that very briefly. The Green Party was claiming the National Party didn't care about climate change and the response to it and I would absolutely refute that. The National Party very much cares about it and we've worked hard on this for many years. However we need to have a system that will actually balance our climate change mitigation responsibilities and ensure we don't have what's called emissions leakage which means sending emissions offshore which will increase the planetary emissions profile which unfortunately is what we're looking at at the moment which the Green Party was criticising.We need to be very careful. I would just say again very briefly how we do this because if we reduce food production in this country and we shift that overseas with the resultant emissions leakage shifting that emissions profile overseas to less-efficient farmers than we have here in New Zealand; we have the example unfortunately of Sri Lanka which ended nitrogen fertiliser use last year as the Green Party is calling for in New Zealand. The result is that over a quarter of their population now is reliant on food aid—2.4 million children. That was a country that pre-pandemic had reached upper middle class status. So they brought on a complete stop to nitrogen fertiliser last year that meant they went from being self-reliant in food production—they were self-reliant on rice production—to not having enough rice to feed their population and also reduced their tea plantation which was their primary foreign exchange earner and therefore they didn't have the foreign exchange to buy food. So as a result they now have more than a quarter of the population in extreme food poverty and reliant on food assistance. So I would just suggest to the Green Party that they carefully consider policy settings that they propose around this space.So just back to completing my submission on this bill I'd say given all the considerations and potential issues that the current deferral arrangements would pose National supports the bill's aims to extend the current deferral arrangement until the end of 2024 because this is a practical solution that's being proposed. Doing so will mitigate the risk of such serious hardship for small forestry participants it will allow time for a new surrender or repayment penalty for small forestry participants to be finalised and it will allow time for participants to be educated and informed of changes before implementation of the new penalty which is effective from 1 January 2025. This deferral will also give officials a window of time to consider the impacts of the penalty on participants with small-volume liabilities including whether further amendments to the penalty provision may be required.So it is a practical change taking into account the complexity of this climate change response which is very very complex and this is something we are seeing right across this. As we see with this bill don't get it right the first time and have to be very responsive to the impacts on our communities. For that reason the National Party is supporting this bill.