Shaw James; Rurawhe AdrianThird ReadingHon JAMES SHAW (Minister of Climate Change): I move That the Climate Change Response (Auction Price) Amendment Bill be now read a third time. I'd like to start by thanking the Environment Committee for considering this bill over a shorter period of time than normal. When referring the bill to the committee at the close of the first reading I said that the shorter turn-round time was necessary so that a confidential reserve price can be put in place before the emissions trading scheme (ETS) units are auctioned for the first time on 17 March. By meeting this shorter time frame the select committee played a very important role in building trust and integrity in the auctioning process and for that I would like to thank them. I'd also like to thank those who took the time to submit their views on the bill as well as the officials both at the select committee and the Ministry for the Environment who supported members in their consideration of what is I acknowledge a technical and complex piece of legislation. Finally I'd like to thank members across the House for their contributions so far.We know from scientific evidence that to have any chance of limiting global warming to 1.5 degrees Celsius we must cut global emissions by at least 45 percent on 2010 levels by the year 2030. Staying below that 1.5 degree threshold is what the world's leading climate scientists have said is the best chance that we have of avoiding climate crisis. It has been three years since climate scientists told us that. So here we are three years further down the road no longer with 12 years to cut emissions at the level required but nine years. And it's not like the task is getting any smaller.Last week the United Nations Framework Convention on Climate Change the umbrella treaty through which the Paris Agreement was negotiated published its first assessment of country's pledges to cut greenhouse gas emissions in the next decade. It showed that right now the world is on track only for a 1 percent cut in emissions by 2030—a fraction of the effort that is required in order to avoid a climate crisis. If things stay as they are the planet our children will inherit from us will be much less stable. The increased frequency and magnitude of extreme weather events will pose an ever-present risk to homes and to livelihoods to food production and to fresh water and to precious ecosystems. So to have any chance of avoiding these worst impacts of climate change we have to dramatically accelerate action. At the very least we need to get to the point where clean climate-friendly technologies are more cost-effective than those that for so long have locked us into high emissions pathways. One of the best ways that we can do that is by ensuring that the price of pollution in Aotearoa New Zealand is consistent in meeting our obligations under the Paris Agreement and New Zealand's own emissions reduction targets. Introducing a confidential reserve price to auctions in the New Zealand emissions trading scheme will help with that. This bill provides for a simple mechanism that will stabilise prices and improve the performance of the ETS ensuring that it can play its part in building a low-carbon future for Aotearoa New Zealand.Last term the Government put in place the foundations for long-term meaningful climate action in New Zealand. Reform of the emissions trading scheme was a key part of this. Having inherited a system that was not delivering on its primary purpose namely to incentivise emissions reductions we turned the ETS into one of our most effective tools that we have for reducing emissions. A series of rule changes were made that will over time incentivise New Zealand's biggest polluters to invest in the transition to a clean climate-friendly economy. Primary amongst these was the introduction of a cap on the total emissions allowed within the emissions trading scheme—a cap that is pegged to both our domestic and our international emissions reductions targets. To put it simply: the total emissions permitted within the ETS now has to be in line with our obligations under the Paris Agreement and the zero carbon Act. This is a significant change that will ensure that every part of the New Zealand economy plays its part in helping us to bend the curve emissions downwards—something that has never happened before in Aotearoa.The cap also provides much greater certainty about future emissions within the ETS and will enable Governments to issue a supply of emissions units consistent with the climate change targets that we have put in place. Having provided this certainty we can then ask the question of how best to allocate units within the ETS. There are typically two ways of allocating units: auction them or give them away for free. What we see most often in schemes around the world is some combination of the two and that is what we now have here in Aotearoa New Zealand.Auctioning is one of the most transparent methods for allocating ETS units and puts into practice the principle that the polluter should pay for their emissions. It is a complex system but the premise is really quite simple: a proportion of units consistent with the cap and the number of free allowances available is allocated for auction. These are then sold on a specific date to emitters through a single round sealed-bid auction which then provides for an initial price of a unit. Once allocated this way the buying and selling of units between emitters and other intermediaries can then take place on what is known as the secondary market.Such trading is a well-established practice in a great many emissions trading schemes around the world. Secondary markets provide a means for auction participants to sell units or to purchase any shortfall and as such create a powerful incentive for organisations to reduce their emissions. But to do this participants and other intermediaries trading in ETS units need to have the confidence that the price that they are paying and are basing their investment decisions on will remain stable. To create a stable and credible framework for the sale and purchase of New Zealand units both the primary and the secondary markets need to operate in a way that is complementary supporting stability liquidity price discovery and transparency. This bill and the introduction of a confidential reserve price below which no units can be sold at auction will ensure that. When the Climate Change Commission published its draft advice a few weeks ago I said that I was more confident than I had ever been that a strong inclusive and climate-friendly economy that supports our recovery from COVID-19 creates new jobs and encourages innovation was within reach. The institutional and legal framework that we put in place last term with unanimous support across the House laid the foundations for change at the last possible moment before the window of opportunity closes forever. The reforms also sent a critical message to the market place: that the future was low-carbon and businesses are responding.Over the course of the last three years I have seen examples of the sort of transformation that we need to take hold in many businesses around the country. I've met with business leaders and with innovators who are on the right path but just need policy certainty in order to continue making the right investments. Because of the many small but necessary decisions that businesses all over Aotearoa are taking every single day I do not believe that the progress that we have made or can make will be reversed. The question then is not whether we will transition to a low-carbon economy but whether we can do it quickly enough; whether we can make the transition in time to cut emissions in line with what the science requires. Essentially what we are doing here today is providing an answer to the question that says we can change that we can do things differently and avoid the worst impacts of the climate crisis and build a zero-carbon world that meets the needs of every New Zealander.I acknowledge that this is a complex and technical piece of legislation. I'm sure that many New Zealanders will not be sat at home right now watching our progress this evening—not discussing a confidential reserve price over the dinner table. But victories of formal change such as the passing of world-leading climate laws like the zero carbon Act or reforming the emissions trading scheme must always be followed by detailed change. Even though it may not be noticed it is no less important. With that I would like to thank the members for their contributions today and over the preceding weeks. Nō reira tēnā koutou tēnā koutou tēnā tātou katoa.DEPUTY SPEAKER: The question is that the motion be agreed to.