Hodgson Pete: Climate Change Response Amendment Bill — First Reading 
Hodgson Pete: Climate Change Response Amendment Bill — First Reading 
[Volume:625;Page:20394] 
Hon PETE HODGSON (Convenor Ministerial Group on Climate Change) 
: 
 I move  
That the Climate Change Response Amendment Bill be now read a first time. 
 At the appropriate time I will move that the bill be referred to the Commerce Committee for consideration that the committee present its final report on or before Thursday 28 July 2005 and that the committee have the authority to meet at any time while the House is sitting except during oral questions and during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 191 and 194(1)(b) and (c). 
This bill deals with two issues. Firstly it amends the Climate Change Response Act of 2002 in respect of the function of New Zealand’s Kyoto Protocol registry. Under the Kyoto Protocol New Zealand is required to develop and maintain a registry to ensure the accurate accounting of emissions units. Emissions units are defined as the various types of units specified under the Kyoto Protocol that the Crown may offset against New Zealand’s greenhouse gas emissions during the first commitment period of 2008-12. Several domestic climate change policies and the clean development and joint implementation mechanisms under the Kyoto Protocol will require the Crown to transfer emissions units to New Zealand businesses and individuals. Units are awarded in recognition of activities undertaken by individuals to mitigate climate change. This bill will allow individuals to hold accounts in the registry and to trade in emissions units. 
Under the Projects to Reduce Emissions policy the Government has already offered contracts that are expected to result in the provision of 10 million units for around 40 projects that will reduce the emission of greenhouse gases beyond “business as usual”. Further by allowing individuals to hold accounts and trade the Government is providing the opportunity for individuals to participate in the international market for emissions units for speculative or other reasons. Allowing broad participation is consistent with supporting the development of the international market and encouraging the creation of opportunities for new business activities such as brokering. The bill also provides for the accounting of two new types of emissions units in the registry which were created by international decisions taken in 2003 and makes several amendments to provide for the official administration of the registry. 
Secondly the bill enables the establishment of the Permanent Forest Sink Initiative. Forests absorb carbon dioxide one of the major greenhouse gases associated with climate change. The Kyoto Protocol recognises that by allocating forest sink credits for forests planted since its benchmark year of 1990. Permanent reforestation creates forest sinks of enduring value. Part 2 extends the regulation-making powers of the Forests Act of 1949 in order to enable the establishment of a mechanism to allow landholders to access the value of carbon sequestration created under the Kyoto Protocol. Regulations will establish the policy details of the Permanent Forest Sink Initiative and will provide for contracts between the Crown and landowners. There is no compulsion on either party to enter those agreements. To enter the sink initiative the land must be eligible to earn emissions units under the Kyoto Protocol. That means the land must not have been covered in forest as at 31 December 1989 and that the new forest must be “direct human induced”. 
The Permanent Forest Sink Initiative is a business opportunity that has been created by the Government’s ratification of the Kyoto Protocol. The initiative has the potential to attract many millions of dollars of investment into the New Zealand economy. The initiative would allow landowners to make better economic use of their land particularly of isolated and erodible land not suitable for agriculture or commercial clear-fell forestry. The initiative is likely to produce positive environmental outcomes in terms of biodiversity soil and water conservation water quality and flood protection funds for natural forest restoration diversification of forest timber species the development of a special-purpose timber supply and the reduction in agricultural emissions through displacing some marginal pastoral agriculture. As a further incentive for reforestation owners will be able to harvest some timber from their forests but only after 35 years and only on a continuous canopy basis. Earlier harvesting or clear-felling of the forests would incur penalty payments. 
Under current law the tax treatment of the Permanent Forest Sink Initiative income and expenditure is uncertain. In order to remove that uncertainty the Government proposes to amend the tax legislation to deem any business that primarily involves earning forest sink credits under the Permanent Forest Sink Initiative to be a forestry business. That will ensure that the existing forestry tax provisions also apply in that situation. Those amendments are expected to be included in the first tax bill following the tax bill scheduled for introduction in May 2005. 
I commend the bill to the House.