Parker David: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Parker David: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee 
[Sitting date: 24 November 2009. Volume:659;Page:7985. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 I appreciate it I say to Dr Smith. While the Minister is in the chair I also acknowledge that in respect of tree weeds I agree that the amendment that is proposed is appropriate. I thank the Minister for addressing that issue. It is an issue that I came to him about privately outside the House as well as raising it through the select committee process and I accept that the solution is appropriate. But that is about the only good thing in this bill in my opinion. 
I will deal with another of our amendments. We have an amendment in my name saying that if we will not bring in methane at least we should bring in nitrous oxide at a decent date. My nitrous oxide amendment says that notwithstanding any provision under this legislation nitrous oxide comes in from 1 January 2013 with free allocation based on 90 percent of 2005 emissions and any revenue collected between 1 January 2013 and December 2014 shall be used to subsidise the use of nitrification inhibitors. 
I want to return to the issue that Dr Smith talked about—the difference between free allocation being transitional assistance and a subsidy. There is a point of principle here I say to Dr Smith. He has acknowledged that 80 percent of the extra free allocation goes to the agricultural sector— 
Hon Dr Nick Smith 
: 80 percent of the total. 
Hon DAVID PARKER 
: —80 percent of the total—and we know that by 2050 relative to the current scheme that is approximately 80 percent of $50 billion which is $40 billion. Including interest—and I know that the Minister disagrees with that—that is responsible for $80 billion of the $110 billion of extra debt. The question is whether that is a subsidy or whether it is something other than a subsidy. How does one define what a subsidy is? It is not a subsidy if it is a short-term transition assistance for what is already happening. It is a subsidy if it goes on for ever. That is one way in which it becomes a subsidy. It is no longer transitional assistance. It is only abating at 1.3 percent per annum. It is a subsidy. 
Another way it is a subsidy is the way Jeanette Fitzsimons articulated it to me last night and I think she is right. She said that if it is covering existing base emissions one can actually argue that it is transitional assistance as we move into a new paradigm; but if it is covering new emissions because there is increased production or a new factory then that is not transitional assistance; that is a straight subsidy. That answers that point quite clearly I think. 
The reality is that we have now have a “cap and trade” scheme without a cap. There is no cap. That is another point. Dr Smith tried to say that Labour’s scheme had no cap. Of course it did. Free emissions allocation rights were capped. Now they are not. Free emissions allocated rights were capped at 90 percent of 2005 levels. Now they are absolutely uncapped. In the case of agriculture which does not come in until 2015 emissions growth between now and then is largely not covered by the scheme. So between 1997 when the Kyoto Protocol was signed and 2015 all the emissions growth in the agricultural sector will be free for that sector. That is just wrong and it is economically inefficient. As a consequence our country gets poorer rather than wealthier. 
The other example the Minister used was the fishing sector. He said that the fishing sector was like the agricultural sector and that the compensation there was for loss of value rather than loss of production out of the country because the fishing would of course still happen in New Zealand. I absolutely agree. The same would happen in agriculture. The land cannot move the cows cannot move the factories cannot move. Production is not at risk of moving. Therefore the basis of free allocation is not to stop leakage to another country. It is to fairly compensate for lost value as a consequence of the change in value brought about by emissions pricing. 
That will not be done until 2050 and even in 2050 more than 50 percent of the agricultural emissions will still be subsidised. It is economic nonsense. It is like supplementary minimum prices. It is like going back to the 1980s and phasing out tariff production but during the transitional period instead of having tariffs going down increasing the protection during the phase-out period. That is what we would be doing if this system were applied to the tariff example. A better example is supplementary minimum prices where land prices were artificially held up by highly subsidised agricultural prices. That is what is happening here. We have the additional disbenefit here of curbing afforestation which of course soaks up carbon.