Climate Change Response (Moderated Emissions Trading) Amendment Bill — Procedure Second Reading In Committee 
Text is incorporated into the Bound Volume 
Climate Change Response (Moderated Emissions Trading) Amendment Bill — Procedure Second Reading In Committee 
[Sitting date: 24 November 2009. Volume:659;Page:7901. Text is incorporated into the Bound Volume.] 
Climate Change Response (Moderated Emissions Trading) Amendment Bill 
Procedure 
Hon GERRY BROWNLEE (Leader of the House) 
: 
 I seek leave that for the Committee stage of the Climate Change Response (Moderated Emissions Trading) Amendment Bill members have unlimited numbers of speeches of 5 minutes each but no more than two consecutive speeches on each part or provision in the bill. 
Mr SPEAKER 
: Is there any objection to that course of action being followed? There is none. 
Hon DARREN HUGHES (Senior Whip—Labour) 
: 
 I raise a point of order Mr Speaker. I have deliberately waited until this point to raise this point of order with you. Ordinarily I would have raised it at question time but I did not want you to think we were trying to delay matters. My point goes to the interaction you have with other presiding officers when we are in urgency and considering a big bill as we will be during the Committee of the whole House stage where there are substantial Supplementary Order Papers that have not had the chance for select committee scrutiny or for a decent amount of time for the Opposition to look at them propose amendments and line them up with the existing bill if there is no revised-tracked version of the bill. I inquire Mr Speaker as to your liaison with the three members who service the Committee of the whole House to ensure that the Opposition gets a fair run to be able to speak in the Committee stage on those parts given that they have been so heavily amended and there has been no chance for scrutiny before that. I am seeking your protection for the minority in that respect and signalling that to you at this stage. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 With all respect to the point of order that my colleague has just raised I think we have just agreed that there not be a limit to the number of speeches that members can make in Committee. Therefore of course any concerns that he might have about closure disappear at that point. 
Mr SPEAKER 
: I appreciate the point the honourable members have made and I think it is incumbent on the presiding officers to make sure that on important legislation such as this the debate is thoroughly heard. The honourable member also makes a perfectly valid point that where there are significant changes to the bill and where there are significant numbers of Supplementary Order Papers then there is obviously a need to make sure that those are properly considered and debated by the Committee. I think that the leave that the House has just given should give some comfort to members that reasonable debate will be enabled on these important measures. 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 I think it is worthwhile for the House to note that this morning I provided copies of the Supplementary Order Papers—both from me and from the Maori Party—and a briefing with officials to all members of the House in order to ensure that they could be informed on those events. 
Mr SPEAKER 
: That action is appreciated. 
Second Reading 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 I move  
That the Climate Change Response (Moderated Emissions Trading) Amendment Bill be now read a second time 
. This bill is about implementing for New Zealand a workable affordable emissions trading scheme which will enable New Zealand to make progress on the hugely complex and difficult issues that confront all nations over climate change. The revised emissions trading scheme is consistent with National’s pre-election commitments. It will align our scheme more closely with Australia’s. It will provide incentives for industry to reduce emissions without encouraging an exodus overseas of industry and its skilled staff. It will amend the scheme so that households farms and businesses will not be funding multibillion dollar windfall gains to the Government. 
In broad terms this bill is about New Zealand doing its fair share rather than taking a position that had New Zealand way out ahead of any other country. I am very pleased to have been able to work with the Maori Party to secure an agreement that ensures it can join us in supporting this bill. The agreement reached with the Maori Party strikes the right balance between protecting the future of our economy and protecting our environment. The revised emissions trading scheme will be good both for iwi and for New Zealand as a whole. It will halve the initial cost increases of the scheme for households and it is workable for business while ensuring that New Zealand does its fair share to combat climate change. 
Some people are questioning the merits of the Government’s ambition to try to pass with the support of the Maori and United Future parties our amendments by Christmas. However if the bill is not passed the existing scheme comes into effect on 1 January. This would increase power prices from that date by 10 percent and it would put $400 million a year on to the costs on industry without allocation plans. There are also a number of serious errors in the existing legislation that would have cost New Zealanders jobs. 
The bill makes a number of important changes to the scheme. Firstly it makes critical adjustments to entry dates. Under the bill the industrial energy and transport sectors will enter the emissions trading scheme on 1 July next year and agriculture will enter the scheme in 2015. There will be a transition phase for the first 2½ years with a half obligation and a fixed-price option of $25 a tonne. These changes will halve the increase for electricity and fuel for both consumers and business. 
The bill also makes changes to support for trade-exposed emissions-intensive industry and the agriculture sector. It is broadly accepted that without these measures all we would do is export emissions-intensive industries offshore which would cost New Zealanders jobs and result in the emissions occurring from some other country. The first change is that a high and medium-intensity threshold is specified. Secondly the allocations will be based on an industry-average basis not just on 2005 levels. This will ensure that we do not reward those with higher emissions and punish those who invested early in improving their efficiency. 
Thirdly the allocations will be production-based. If companies and farmers cut their production their allocations will drop; if their production grows their allocations will increase. This is about the very important issue confronting all nations designing an emissions trading scheme and that is the issue of leakage. This Government is not about exporting jobs offshore; we are about incentivising more efficient production here in New Zealand. Fourthly the phase-out of support after 2013 is being changed. The existing scheme leaves it flat out to 2018 and then reduces it at 8 percent per year. This bill provides for a reduction in that allocation support of 1.3 percent per annum though I think it is very important to note that this will be reviewed each 5 years and as I said in the House earlier the broad principle that it should apply to that phase-out rate is that it is similar to our trading partners. Finally we have introduced flexibility to the point of obligation in the agricultural sector commencing at processor level with the option to move it to the farm gate. 
The bill also makes further technical changes to make the scheme more workable. A good example is removing the liability associated with nitrogen curing of cabling which would have actually cost New Zealanders their jobs in places like New Plymouth if we had left the existing scheme in place. 
This bill was referred to the Finance and Expenditure Committee. It was my preference to refer it to the special climate change committee but members opposite objected to that. We then agreed with them that we would send it to the Finance and Expenditure Committee and as a sign of just how much bad faith there is from members opposite they then voted against the motion for it to go to that committee. The committee received 379 written submissions on the bill and heard a total of 125 oral submissions. It is disappointing that the committee was unable to reach agreement on amendments to the bill because there was actually very broad agreement on many of the changes contained in the amendments to make this bill work. 
The Government will be putting forward Supplementary Order Paper 98 to address a number of the issues that arose from the submissions and from the legal review by officials. As part of the agreement reached with the Maori Party the Maori Party will be putting forward an amendment that recognises the Treaty of Waitangi. This provision will specifically set out the ongoing decisions on which the Government or Crown has an obligation to consult with Maori. Most of the changes contained in the Government’s Supplementary Order Paper are refinements of policies that are already in the bill or simply technical amendments. In relation to pre-1990 forestry amendments are made so that changes in the legal title after 2002 do not unfairly disadvantage landowners when beneficial ownership has not changed. Without these changes some forest owners might unfairly receive a lower allocation. We have also clarified that subject to clear criteria forest owners managing wilding pines from planted source should be eligible to apply for a tree weed exemption. This will help to ensure that important efforts to control tree weeds in a number of areas like the Marlborough Sounds and in Southland are not disadvantaged by the emissions trading scheme. 
In addition the Government has also made a decision to exclude the combustion of solid biofuels from the emissions trading scheme. Given that this is a very small source of emissions and given the Government’s commitment to encourage fuel switching in this area we have made a pragmatic decision to exclude emissions from this local-cost clean energy source from the emissions trading scheme. The cost of that provision is very small and the emissions are approximately 25000 tonnes per year. 
Supplementary Order Paper 98 provides for the exclusion of solid biofuels from the emissions trading scheme. That Government Supplementary Order Paper also contains a number of technical changes in response to submissions. For example in response to concerns regarding the earlier date of entry for liquid fuels a shorter registration period has been provided for large users of such fuels. A number of further amendments are included in the Supplementary Order Paper to improve the effective operation of the bill but they do not make any substantive policy changes to it. 
I note that in the United States Congress there is a vigorous debate about putting in place an emissions trading scheme and I note that the same thing is going on across the Tasman in Australia. In every one of those countries the issue has been fractious it has been divisive and it has been hotly debated. That is proper: this legislation is probably the most significant change and reform of a financial nature since the introduction of GST. But I note that there were public submissions in 2007 there was a select committee process in 2008 there was another inquiry in 2009 and there have been four rounds of submissions. On an issue like climate change there comes a point where it is important to make progress and in my view this bill does a very good job of balancing New Zealand’s environmental and economic interests while ensuring that we do our fair share as a responsible country around this huge challenge of climate change. 
CHARLES CHAUVEL (Labour) 
: 
 The Government has made a mockery of Parliament’s processes by the way it is dealing with the Climate Change Response (Moderated Emissions Trading) Amendment Bill. The amendment itself is flawed on multiple levels. It will make us poorer our economy weaker and our emissions increase. The tragedy is that none of that needed to happen. We could have instead achieved something enduring through good-faith discussions but that is not something the Minister for Climate Change Issues is capable of. By the end of this week every part of Parliament’s consideration of this bill will have been rushed and inadequate particularly given the immense economic social and environmental outcomes at stake. 
At the Finance and Expenditure Committee submitters experts and officials were all given impossibly abbreviated time frames in which to contribute effectively. The committee was given less than 2 months to scrutinise extremely substantial amendments and to consider 379 written submissions. Oral submitters were given only 10 minutes to speak—if they could do so given the short notice they were provided with. Our independent expert Dr Suzi Kerr was not able to provide information until the final day of deliberation. As such her advice was not able to be incorporated into departmental reports which were likewise unable to be provided until the final couple of days of deliberation. The Parliamentary Counsel Office could provide only an untested draft of revision-tracked amendments on the day of deliberation itself. There was a fundamental lack of robust supporting information available to assist the committee and submitters in evaluating the rationale for and costs associated with the amendments. 
The bill was roundly and publicly condemned by Treasury. Treasury said that the level and quality of the analysis available were just not up to the significance of the proposals and that the analysis did not provide an adequate basis for informed decision-making. Treasury is right: there is no analysis of what drives the key changes in this legislation and throughout the Minister has obstructed attempts to obtain background information that might assist the committee or the public to assess the bill—just like his selective quoting of documents in question time today. This includes key documents such as Treasury’s long-term analysis of fiscal costs. 
The committee and submitters were completely unable to scrutinise the forthcoming amendments foreshadowed prior to the first reading of the bill; they comprise 121 pages and were tabled in the House at 2 o’clock today. They include changes that were settled on only yesterday in exchange for the support of the Maori Party—apparently as the proxy for the Iwi Leadership Group. The impacts fiscal and otherwise of these backroom deals will never receive proper parliamentary scrutiny. 
How can the process I have described give anyone confidence in the end-policy outcome? Given the shambolic process that the bill has been subjected to it is no surprise to find that it is fundamentally flawed but the magnitude of the policy incoherence is breathtaking on many different levels. It will make New Zealanders poorer our economy weaker and our emissions higher. 
The worst area of the bill concerns the level duration and model of the allocation of units—in other words the way that it gives emitters ongoing rights to pollute. The bill puts in place an uncapped intensity-based allocation model. This allows the overall level of allocation and therefore emissions themselves to actually increase. In other words there is no cap in this “cap and trade” scheme. The lack of a cap obviates the whole point of an emissions trading scheme which is to reduce emissions over time at least cost. It should do this by allowing the trading of permits under a cap and then reducing the cap over time. If production of emissions-intensive trade-exposed activities increases by more than 1.3 percent a year as it almost certainly will in many years then absolute levels of allocation will actually increase. So therefore will emissions. The Parliamentary Commissioner for the Environment rightly advised us that a cap is vital to create the right incentives to reduce fiscal risk and to create policy certainty for business. The intensity-based nature of the allocation model does not support emissions reductions appropriately and it does not provide the incentive of the full emissions price at the margin. 
The level and duration of allocation here is overly generous and too slow. Both the Parliamentary Commissioner for the Environment and the independent expert Dr Kerr say this. The phase-out rate of 1.3 percent for at least 80 years defies any common-sense notion of transition and as with any protection or subsidy future Governments will find it very difficult to reduce previously promised protection levels. The bill makes it very difficult to alter levels of allocation with additional 5-yearly reviews following any change recommended. If levels of allocation are no longer appropriate surely they should be altered promptly. It is unfair to the taxpayer to do otherwise. Indeed the Institute of Policy Studies sums up this point up. It told the select committee: “the bill [is] designed more to tie future Governments’ hands with red tape rather than to enable flexible and effective policy …”. Also problematic is the proposed transitional period which provides a half-obligation and a fixed $25 per tonne price to the energy transport and industrial processes sectors until the end of 2012. This shifts more than half the costs of emissions until 2012 from the polluter to the taxpayer and reduces incentives for appropriate levels of emissions-reducing investment and behaviour. 
A further concern is the delay in the inclusion of agriculture from 2013 to 2015. The Parliamentary Commissioner for the Environment notes “there is insufficient evidence to justify delaying the entry of agriculture to the [ETS].” It will keep the costs of emissions with the taxpayer until 2015 and will delay appropriate levels of emissions-reducing investment and behaviour in this sector. 
So why are these changes being made? In reading through the regulatory impact statement it appears that the primary official reason is to prevent “carbon leakage” especially to Australia. And there is not much more analysis than that. Just how much economic activity will move in the absence of this bill? How many jobs would be lost? How does the value of these losses compare with the value of the subsidies provided? None of this most basic information has been made available. It may exist; it may have been withheld by the Minister along with much other vital information. We as a Parliament will never know. Treasury itself concluded that there is no clear analytical basis to align with the currently proposed Australian Carbon Pollution Reduction Scheme given New Zealand’s and Australia’s unique emissions profiles and industrial structures. The fact that the Australian scheme is still proposed only and could be subject to further revision—assuming that it survives the Liberal Party caucus room in 3 or 4 minutes when its meeting finishes—only adds to the incoherence of the proposal to harmonise. 
Dr Suzi Kerr advises that free allocation should be phased out relatively quickly irrespective of our competitors’ behaviours. She says that this is for the same reasons that we do not subsidise agriculture even though the US and the EU still do. In her words: “The benefits to the protected activities are vastly outweighed by the costs to the economy as a whole.” She considers that the phase-out of free allocation in the current Act at 8 percent ending at 2030 was probably already too slow on economic grounds. It is proposed to be replaced by a phase-out of allocation at 1.3 percent for the next 80 years. This bill would make highly undesirable changes in order to achieve objectives that Treasury the Parliamentary Commissioner for the Environment a leading independent expert and others tell us are without any clear analytical basis. 
The tragedy here is that Parliament could instead be assembled today to debate a politically sustainable scheme. It is a matter of public record that early this year Labour offered talks to National as to what amendments might be needed to reach enduring certainty over climate change policy. When National walked out on those negotiations in favour of advancing the amendments contained in the bill there were only three issues outstanding. The first was the entry date of agriculture; the second was the transition period half-obligation and fixed price; and the third was the allocation model level and phase-out rate. We were prepared to compromise on these in order to achieve an enduring emissions trading scheme. We would likely have agreed to a compromise agriculture entry date of 2014. We would likely have accepted the transitional price cap and half-obligation. We would likely have accepted an intensity-based allocation within a cap subject to reasonable phase-out rules. All were less than ideal compromises but we were prepared to make them in the interests of achieving an enduring emissions trading scheme. 
We negotiated in good faith and we could see no reason for National not to do so as it appeared that the only significant issue for it to compromise on was the issue of the cap on free allocation in agriculture. If National had done that an enduring and effective emissions trading scheme could have been achieved. We forgot whom we were dealing with. Instead we have a bill that will make New Zealanders poorer our economy weaker and our emissions higher. If Parliament passes the bill in anything like its current form a priority for Labour will be its repeal and its replacement with legislation providing for a robust emissions trading scheme and fit-for-purpose complementary measures. 
CRAIG FOSS (National—Tukituki) 
: 
 I thank members for the applause! I am speaking on the second reading of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. I am the chairman of the Finance and Expenditure Committee which the bill was referred to. The Minister for Climate Change Issues noted that the original preference was to send it to a specialised committee or to renew the previous climate change committee. But having said that I tell the Minister that the committee welcomed it with open arms when it arrived. 
It would be courteous and correct of me to acknowledge the members of the committee. The process we went through was somewhat unusual—but I have been here for only 4 years. On the whole with some exceptions the contribution of members was valued of course. I particularly acknowledge the officials advisers and anyone and everyone who participated in getting the bill at least to its second reading. Politics aside there were some tensions stresses and strains around the bill. Sometimes I think the officials in some of the goings-on very unfairly bore the brunt of some members’ frustrations. I need to give my personal thanks to the officials for their work. Actually some of them are almost old friends because this was the third time that many of them had sat down at the end of a committee table to look at the emissions trading scheme. The Minister alluded to the 2007 committee and the review committee earlier this year. We must have had well over 1500 submissions on the policy. 
The Finance and Expenditure Committee normally operates quite well. Members acknowledge their policy positions there is good robust debate and we go on quite well. I reiterate my personal aim and what I like to uphold which is that all members at all times treat all people as they themselves would like to be treated: with respect. Acknowledging the various positions I say that of course there is going to be disagreement. I acknowledge some members’ frustration at the tight time frame for the bill but the Minister in his first reading speech explained why that was. It was always a given that the bill would come back to the House on 16 November or earlier. 
There has been a lot of comment about the process of the bill as it went through the select committee. Some of the comment in the media has been criticism of me and of the committee. I have remained silent on that criticism because some of the allegations were made in the committee and I will not go outside of that. But in terms of some of the points that were raised I was on the other two committees and a 5-minute submission time for many speakers was quite the norm. I recall that in 2007 four submitters had 15 minutes to share amongst themselves that submitters were grouped etc. I want to point that out because some of the criticism of the process and of our committee is not quite fair. Sure there is politics involved but I do not think the criticism is quite fair. 
I point out that many members were actually asked for lists of those whom they thought the committee should hear. Virtually without fail those names were asked to submit without problem. At no time did this chair actually say that all submissions should be heard on one night in a period of 5 hours—which has been alleged I think. That was what was available to us in our first opportunity to hear submitters to hear evidence. 
I also point out to some of those who have criticised the process—knowing that the timetable for the bill was always tight knowing that November 16 was always the report-back date—that something that tightened the process was that some members wanted to spend some time away from these precincts. It is fair enough for members to want to spend time with their families and I encourage that at all times. I do not disregard it at all; I think it is quite fair. But we have to acknowledge that all the decisions are decisions of the committee. Perhaps some wanted to go on holiday. To criticise me for an allegedly fast process or an abuse of process when members were choosing not to be in the precincts in order to go on holiday is somewhat cute. I think it is very curious that some of those members have chosen to criticise me. 
To those who wanted to hear absolutely every submitter I say that I find it somewhat curious that during the proceedings some members complained about the committee hearing so many submitters when earlier they had asked to hear every single submitter. As was noted earlier all submitters have a right to be heard but many wrote submissions. Some submissions in fact had party crests on the bottom of them. 
Members will note from the commentary that the committee came out 6 all; it was not able to reach a majority. It is disappointing that the committee could not get to the stage where technical amendments to the existing scheme were able to be passed or issues that I think the whole committee generally agreed on. I acknowledge that there is a Supplementary Order Paper covering tree weeds such as wilding pines etc. 
I have two points. I have a quick note for my friends in the ACT Party. They believe in the market they believe in market instruments they believe in supply meeting demand and I know and acknowledge that some of them do not think that climate change is going on do not believe in the science etc. That is absolutely fine but the point I raise is that if that is correct if that turns out to be true then the price of carbon units will actually be zip—zero. If it turns out not to be correct that human-induced climate change is going on the price of carbon—which everyone talks about right now at being $25 or $50 a tonne—would fall to zero and the scheme would fall apart. 
I will touch on the mythical figure of $110 billion which I am sure members will speak to over the next wee while. It was an interesting time in the committee to be fair when that misunderstanding shall we say came about. The bottom line is that there is no such amount as $110 billion; the amount is actually $50 billion to $55 billion. But let us turn it on its head and take the number that members on the other side are talking about. What they are saying is that they are very disappointed that their original scheme would have taken $110 billion out of the economy; that is what they are saying. This scheme is not taking out $110 billion. It is simple compounding up. It is simple maths. I think those members actually acknowledge that although I think they need to sit down with their leader and discuss it because he raised the point again today. It is fair enough to have a discussion of the $50 billion to $55 billion amount even though it is full of variables for Africa but the figure of $110 billion is a mythical number. It is used just because it sounds big. For anyone in this debate to use that figure dilutes and undermines his or her integrity. 
This bill set outs and follows the principles that National laid out before the electorate before the election last year. The electorate endorsed those policies and principles. Most of this bill concerns technical amendments and small fix-ups which I think the other side generally acknowledges to the existing legislation. The substantive issues are emissions intensity without a cap and an open or closed economy. I look forward to further debate on this bill. 
Hon DAVID PARKER (Labour) 
: 
 “Sometimes a picture paints a thousand words” is the saying and this Climate Change Response (Moderated Emissions Trading) Amendment Bill is no exception to that. There have been some wonderful cartoons in the paper in the last few weeks on this issue. My particular favourite is one of Tom Scott’s a few weeks ago. In it there is a great big very overweight industrialist sitting in very plush surroundings in his gentlemen’s club. He is saying to himself in the little bubble of his speech: “Oh New Zealand is a great country—all those punters paying for my greenhouse gas emissions.” Then he looks around at the waiter who is over in the corner and is drawn like Manuel out of  
Fawlty Towers  
and he says “Waiter another gin and tonic please and make sure it is an organic lemon. We all have to do our bit for the environment.” 
Well that is it exactly is it not? What has happened here is that the punters out there the taxpayers the mums and dads and their children are to pay for the emissions of the big emitters. They are to pay $50 billion more for emissions under this new scheme than under the current one. The effect of that by 2050 is that Government debt will go up by $110 billion. That is what Treasury says and it is correct: $50 billion excluding interest; $110 billion including interest. 
These numbers are so astronomically large that people find them hard to comprehend but there is a very good comparison to be made between the long-term effects of this policy and those of some of the mistakes that have been made by earlier National Governments that have populated this place. One of those mistake was introducing supplementary minimum prices. There was a fiction in New Zealand that supplementary minimum prices were affordable that the subsidy to the agriculture sector could be sustained and that New Zealand would be wealthier as a consequence of that subsidy to agriculture. Of course we all know how that ended. It ended in tears because the country could not afford it. Government debt got too high and as a consequence the subsidy was withdrawn. That is what will eventually happen under this new scheme in agriculture; it has to because this is unsustainable with $50 billion of emission allocation rights and $110 billion of debt. Farm prices will go down by a large amount and a lot of people who have invested their money in the intervening period will lose money because they have been given the wrong signal by the economy. 
Climate change is a very very serious problem but at its heart the way to cure it is obvious. There is only one solution: we have to reduce our greenhouse gas emissions. We sometimes lose sight of that. We know that the pricing of emissions is absolutely fundamental to causing businesses to have a financial interest in reducing emissions. Otherwise it is in their financial interest to make as much money as they can by increasing emissions. So the objective of an emissions trading scheme or of a carbon tax if one goes down that route is to reduce emissions by giving a financial incentive to do so to those that produce the emissions. 
We have heard the Government try to justify its changes by saying it is aligning the scheme with Australia’s. Well the first reality is that it is not in our interest to do so. Australia’s economy is fundamentally different from New Zealand’s when it comes to emissions. More than half of Australia’s emissions come from coal; half of our emissions come from agriculture. Would it make sense for the Australian emissions trading scheme which is called the Carbon Pollution Reduction Scheme to exclude coal? Of course it would not. Has it excluded coal? No it has not. Should New Zealand exclude agriculture because we would be aligning ourselves with Australia? That is a ridiculous suggestion. It is as stupid for New Zealand to exclude agriculture as it would be stupid for Australia to exclude coal. The suggestion that we should align our scheme with Australia’s makes no sense. And anyway we are not doing that because eventually we are including agriculture. We are just not doing it properly and we are doing it too late. So we are not having a real alignment with Australia but the alignment that we are having is not in our interests. 
I am not the only one who says that. The Parliamentary Commissioner for the Environment has said it. The specialist adviser to the Finance and Expenditure Committee said it. I want to mention her—Dr Suzi Kerr. Where is Dr Suzi Kerr at the moment? She is a world expert. She is currently a visiting professor of economics at Stanford University in the United States one of the United States’ leading universities and indeed one of the leading universities in the world. Dr Suzi Kerr from New Zealand is currently lecturing there in emissions pricing. We had the benefit of one of the world’s leading experts on emissions pricing giving advice to the select committee. Could we take into account her advice properly? No because the process was so fast that we got her advice only on the last day. Notwithstanding the fact that on the last day it turned out that the cost in terms of Government debt had gone up to $110 billion the National Government would still not slow down the process to enable us to properly consider the implications of that. So we could not consider Dr Kerr’s advice properly. 
Dr Kerr said the phase-out under the existing scheme which phases out the free allocation to major industries at 8 percent per annum was if anything too slow and would lead to economically inefficient outcomes for our economy. So what do members think she thought of a 1.3 percent abatement of free allocations which is so slow as to virtually not happen? She thought that it was nonsense. She thought that it would make New Zealand poorer not wealthier. She thought that we were setting up a system that will encourage an increase in emissions in New Zealand rather than a decrease—a scheme that will do the opposite of what it is meant to do. 
I want to mention also that the media are on to it. Editorials from Auckland to the bottom of New Zealand are now saying that the proposed changes to the scheme are wrong. So are the commentators. We have heard the borax being poked at some of New Zealand’s leading commentators. We have had criticisms of Brian Fallow today; we have had people writing off Rod Oram as a sycophant or non-entity. In addition to those people we have had Richard Long former chief of staff for National being highly critical of the changes. He has been written off. We have had Fran O’Sullivan being very critical of what is being done and no doubt National will write off her criticisms as well. That is on top of Treasury criticising the changes the Parliamentary Commissioner for the Environment criticising them and the Ministry of Economic Development another arm of the Government saying the phase-out of the free allocation is far too slow and not warranted. 
Still the Government proceeds remorselessly on. As a consequence our country will get poorer. Our economy will not adjust. We will not take advantage of the opportunities that will arise for those who move into this new world with appropriate speed. 
I also want to touch on the deal that has been done with the Maori Party. Only a matter of months ago the Maori Party said the existing emissions trading scheme was too weak and if anything it should be strengthened and it would prefer to go down a carbon tax route rather than an emissions trading route. The Maori Party is here today to vote for the opposite of that. It is voting for an emissions trading scheme that no longer works that will increase emissions and that does the opposite of what Rahui Katene in her minority report said at the Emissions Trading Scheme Review Committee some months ago should not be done. 
Further than that a fundamental principle is being breached by the deal that is being done. The Maori Party and the National Government might like to characterise some of the criticisms that are coming from lots of people as coming from a race agenda. It is not. Once people receive a Treaty settlement so long as there has been no withholding of information and no misrepresentation by the Crown then those assets are in the same position as any other assets owned by any other group in New Zealand. The owners must be bound by the same laws whether it is the Resource Management Act the Income Tax Act or the emissions trading scheme legislation. There is no basis for having separate rules. The  
New Zealand Herald  
put it very well in its editorial saying there are things that we do not know when we enter into a Treaty settlement; there is an upside and there is a downside. It pointed out that at the time of the Treaty settlement with Ngai Tahu the boom in prices that would be occasioned by the free-trade agreement with China had not been thought of. Should the Crown go back and take value off Ngai Tahu as a consequence of not predicting that or not disclosing that? Of course it should not. Conversely Ngai Tahu should not expect to receive some additional compensation over and above what is being paid to other owners in society for emissions pricing. There is no justification for that. It actually undermines the principle of full and final settlement and it creates different asset classes in New Zealand according to the ethnicity of their owners which is wrong. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak on the second reading of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. This bill is fundamentally about climate change and it seems that not a day goes past when the evidence around climate change does not get more alarming. In fact we would think that if we read the evidence and followed the debate around the science of climate change then if that was what drove us we would become increasingly concerned and would want to make our response to climate change stronger and stronger over time. 
Just today for example when I was scanning the papers I saw that the Antarctic ice sheet is melting faster than previously thought—for example the West Antarctic ice sheet is currently dumping about 132 billion tonnes of ice per year. One hundred and thirty-two billion tonnes of ice per year is being dumped by the West Antarctic ice sheet into the sea which is more than we had previously thought. The East Antarctic ice sheet which we thought might be accumulating ice because of the increased precipitation of snow on the surface actually appears to be dumping about 57 billion tonnes of ice per year. We are losing that ice from the East Antarctic ice sheet. The reason why this is so significant is that these ice sheets have a dramatic impact on global sea levels. The West Antarctic ice sheet by itself would result in a 5-metre sea-level rise if it were to disintegrate. 
It is against this background that we are considering a bill that will weaken New Zealand’s response to climate change. It is really quite hard to fathom that in a world where the evidence that we are changing the planet itself is increasing and strengthening and in which the science is becoming more and more compelling the New Zealand Parliament looks as if it is passing a bill today that weakens the New Zealand Government’s response to climate change. It is hard to fathom. People in future years will look back on this debate scratch their heads and wonder that at the very time when the evidence around the acceleration of human-caused climate change is gathering and when we are in the run-up to perhaps the most important conference in the history of humankind—the UN Climate Change Conference in Copenhagen—the New Zealand Parliament should choose to weaken the response of the New Zealand Government and the New Zealand people. 
This is a time when we should be more concerned because of course the Intergovernmental Panel on Climate Change had a very modest prediction about sea-level rise—18 to 59 centimetres by 2100—but that was premised on the basis that we could not predict what would happen with the big ice sheets in Greenland and Antarctica. But we know now that those ice sheets appear to be losing a lot more ice than we thought previously and they appear to be warming more quickly. We would think that in the face of science and evidence the New Zealand Parliament would look at the science strengthen its response and aim to have a more considered and stronger response on climate change. Instead the bill in front of us today is a bill to weaken our response to climate change. It is a shameful day to be a member of the New Zealand Parliament and to watch the New Zealand Parliament passing this legislation. 
It is important to remember that during the last Eemian period—128000 years ago—greenhouse gas concentrations were at about the same level as they are today but sea levels were from 5 to 7 metres higher because there is a lag in our system. There is a lag between the time we increase levels of greenhouse gases and the time we see sea levels rise. What we are looking at right now is an increase in greenhouse gases in the atmosphere but we are yet to see the full impact of that increase in terms of melting in Antarctica sea-level rise and more extreme weather events—although already we have seen very significant extreme weather events. 
In the face of the fact that we know we have yet to see the full impact of climate change the New Zealand Parliament’s response—and it would appear to be the New Zealand Government’s response—is to weaken the ability of the New Zealand economy to reduce its greenhouse emissions. In fact we are introducing a system today where we take the “cap” out of “cap and trade”. Someone one day came up with the idea of “cap and trade” as a way to cap emissions and then allow for the most economically efficient way to reduce those emissions under that cap. But the Government has decided today to take away the cap so that we do not have a “cap and trade” system any more and to take away the fundamental driver of the price. Of course the result is that the New Zealand economy will respond by increasing greenhouse emissions. 
In New Zealand we have already increased greenhouse emissions very very significantly. Our increases are in the order of 22 percent or more since 1990 and over the course of the previous Government greenhouse emissions increased by about 14 percent. In spite of the Green Party’s efforts to constantly call on that Government to address climate change only towards the end of its term was that Government willing to address climate change to some degree. The emissions trading scheme that was brought in by Labour and the Greens in the last Parliament which was not a perfect scheme but which made some progress towards introducing a “cap and trade” system is the very scheme that we are dismantling today by taking away the cap in the “cap and trade”. 
It is hard to get our heads around the idea that this is what human beings who have spent many millions of years developing a consciousness and an ability to understand the world would do. It is hard to comprehend that the majority of members in this House today are going to vote for a system that will increase New Zealand’s greenhouse gas emissions at a time when the science and the evidence around the impact of climate change is building all the time. It is in fact a suicide note. What this Parliament and Parliaments in a similar situation all around the world are doing is writing a collective suicide note to future generations. We all talk about what might happen in 2100 but there are children born today who will be alive in 2100 and they will look back and curse us. They will curse the members of this Parliament and they will curse this Government for weakening our ability to reduce our greenhouse emissions. 
This is a Government that will walk into negotiations in Copenhagen with the objective of weakening the global agreement there. That is what this is all about. That is why the Government wants to get this bill in place—so it can walk into Copenhagen and try to undermine the agreement to reduce global greenhouse emissions. It is hard to get our heads around the idea that at a time when the evidence that we need to reduce our greenhouse emissions is becoming more compelling a Government would bring a bill into the House that will increase our greenhouse emissions. It is hard to understand that human beings who so value their intelligence their consciousness their science and the evidence would bring a bill into the New Zealand House of Representatives that will increase our greenhouse emissions—which is what this bill does. It is a very hard thing to understand. 
There are ethical issues associated with what we are doing today. It is the wrong thing to do to future generations. It is the wrong thing to do to children and to the people who will come after us. It is also an incredibly stupid thing to do from an economic point of view. If New Zealand wishes to be prosperous it must make the transition to a low-carbon economy. There is no other form of prosperity for New Zealand in the future. To anyone who sits here and thinks that this will all go away—which is of course what this bill hopes—and who thinks that New Zealand can somehow have a prosperous future with a high-carbon or carbon-intensive economy I say that there is no such thing. Either we have a low-carbon economy which gives us the opportunity to have a prosperous economy or we have a high-carbon economy which means we will not be prosperous. This bill will lock in investments that lock in a high-carbon economy; there is no way that we can have a prosperous economy if we lock New Zealand into a carbon-intensive economy. But this bill locks in that high-carbon economy. 
We can only hope that it is not too long before we get rid of this stupid bill. We can only hope that it is not too long before we have a carbon trading system that plays a part in putting a price on greenhouse emissions so that we can reduce our greenhouse emissions. That is the only way we can send a price signal through our economy in order to move it toward a low-carbon economy. We also need the complementary measures of State regulation and State incentives to reduce emissions. We also need all the education and individual action. But if we undermine the price signal which is what this bill does we undermine our ability to reduce our greenhouse emissions and we lumber future generations with a huge debt and a huge increase in greenhouse emissions. It is a shameful bill. 
Hon RODNEY HIDE (Leader—ACT) 
: 
 Let me be clear about a number of things. First up we have a very very good Government. Certainly we have an excellent Government compared with the Government we had for the previous 9 years. But even a very good Government can make bad policy. Even a good Government can make bad policy and with this Climate Change Response (Moderated Emissions Trading) Amendment Bill we have a very good Government making atrocious policy. Not only do we have a very good Government making atrocious policy but we also have a good Government following an atrocious process. The Ministers of this Government who are voting for this bill and for this process have to accept that responsibility and so does every member of Parliament who is voting for this legislation today and confirming the process that has been followed. 
Let me also make it plain that the ACT Party totally opposes having an emissions trading scheme for New Zealand. An emissions trading scheme for New Zealand will hike the costs to business to farmers and to hard-working New Zealanders right at the time when we can least afford it. There is no doubt about it: an emissions trading scheme will put up the cost of basic goods and services for ordinary New Zealand families. That is what this bill will do to New Zealanders that is what an emissions trading scheme will do and that is why the ACT Party is the only party prepared to stand up in this House to oppose having an emissions trading scheme. 
Following the election we had a difficult situation with regard to the emissions trading scheme because we had National committed to the emissions trading scheme and the ACT Party implacably opposed to it. We agreed to have a comprehensive review through a select committee. What we wanted—in fact what the select committee was supposed to do—was to do the rational thing for the country: to look at the options and to provide the costs and the benefits. It never happened. To this day this Parliament and the public of New Zealand still have no idea of the cost of this scheme. They have no idea of the cost of an alternative such as a low-level carbon tax or indeed of the cost of having a simple delay for a couple of years. They know nothing. 
Then we discovered that the Government had done a deal with the Maori Party in order to put the changes through the select committee that National wanted to make to Labour’s emissions trading scheme. 
Charles Chauvel 
: Disgraceful. 
Hon RODNEY HIDE 
: Well that was not disgraceful; what was disgraceful was what happened next. That was the true disgrace. At that point on behalf of the ACT Party I said to the Prime Minister and National that we understood they did not have the Maori Party’s vote on taking the legislation all the way through and that if there was any difficulty with the vote they should come and talk to the ACT Party. I said that yes we opposed the emissions trading scheme but that we were prepared to help the National Government for the good of the country and indeed we were even prepared to swallow a dead rat. We were prepared to swallow a dead rat in order to get a better result for New Zealand. 
But National never ever came to the ACT Party in order to discuss the options for the reform or the delay of the emissions trading scheme. National made a decision to commit to the Maori Party and so to lose any negotiating power that it might have had. I accept that it is the prerogative of Nick Smith and the Prime Minister to do that. They are the ones with the votes. They are the leaders of this Parliament and this Government but I say that the result was bad policy. It was atrocious policy and an atrocious process and New Zealanders were sold out. 
What have we discovered? We have discovered that all of this had to be done in a great rush ahead of the rest of the world in order to be done before the talks in Copenhagen. We had to be ahead of every other country. We discovered today at question time that this deal with the Treaty clause in it was concluded according to the Minister only after 1 o’clock yesterday which was a couple of hours before it was announced. We know from the Minister of Maori Affairs that the deal was concluded only at 12 minutes past 3—presumably that was when he was told that it had been accepted at Cabinet—which was 18 minutes ahead of the time the deal was made public. The deal with these five iwi and with the Treaty clause will now be passed under urgency with no proper parliamentary scrutiny and no public input. The deal was agreed to only yesterday and it will be passed into law today. 
Hon Dr Nick Smith 
: Tomorrow. 
Hon RODNEY HIDE 
: Oh well it will be passed into law tomorrow but I say to Dr Smith that we are in urgency thanks to him. 
I will read that Treaty clause to members: “In order to recognise and respect the Crown’s responsibility to give effect to the principles of the Treaty of Waitangi”. I challenge the Minister for Climate Change Issues and the Maori Party to stand up in this House and put on record in Parliament what the principles of the Treaty of Waitangi are. If we are to have Parliament giving effect to something then I think it is quite reasonable to ask what we are giving effect to in this Parliament. We are not giving effect to the Treaty—actually if we were giving effect to the Treaty then we would not be having an emissions trading scheme—but we are giving effect to the principles of the Treaty. 
I remind the great National Party our support party of National’s position in 2005. It is our job to remind National of its principles its position its philosophy and its policy. Its policy in 2005 was that the principles of the Treaty of Waitangi were to be expunged from all legislation. Why? According to Dr Don Brash who was the National leader at the time the principles of the Treaty were undefined and unnecessary. This is what Don Brash said in 2005 an election year: “This process”—that is the process of inserting the principles of the Treaty every which way—“is becoming deeply corrupt with some requirements for consultation resulting in substantial payments in a system that looks like nothing other than stand-over tactics.” 
I am sorry to say this but the National Government the Prime Minister and the Minister for Climate Change Issues have allowed themselves to sell out their voters and their supporters by inserting in legislation the principles of the Treaty that they were opposed to and by cobbling together this deal in the last few minutes before going public. They are ramming through under urgency with no parliamentary scrutiny or public input a deal for consultation in order that the principles be given effect to and for regulations down the track to be passed. I say that Don Brash was right when he said that this process is becoming deeply corrupt with some requirements for consultation resulting in substantial payments in a system that looks like nothing other than stand-over tactics. I say “Shame on National and shame on the Maori Party.” 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 May I say it is a joy to work with a party that is not tied down in “Hide-bound” ideas. 
In speaking to the announcement made yesterday of the proposals to reduce emissions in order to meet the Kyoto Protocol Ngai Tahu kaiwhakahaere Mark Solomon made a key statement. He said: “It is a day where the ledger is made even.” Mr Solomon was referring to the fact that relevant information was withheld from Ngai Tahu when they bought forestry land for conversion to farming. Ngai Tahu’s case was that the Crown did not meet its information disclosure requirements of their Treaty settlement in respect of the likely impact of an emissions trading scheme on pre-1990 forest land. Similar issues were raised by Waikato-Tainui Te Uri o Hau Ngati Awa and Ngati Tuwharetoa. Yesterday’s announcement made the ledger even in that it covers the cost of the loss the iwi will experience under the scheme. It was an announcement that recognised the constructive engagement that has taken place between the iwi and the Crown to try to address a situation in which they had been unknowingly disadvantaged. It was an announcement that reflected the generosity of spirit entered into between the Crown and the Treaty partner. 
The question of balance is an appropriate one to be considering as we debate the Climate Change Response (Moderated Emissions Trading) Amendment Bill today. The Maori Party has worked relentlessly to try to achieve outcomes that can work in the best interests of the nation. As a nation dependent on a favourable climate for our heavy involvement in primary production climate change represents a significant risk to the quality of our everyday life. Climate change will have profound implications for Aotearoa over the long term and potentially significant levels of costs. So there is no dispute: collective responsibility for environmental and social outcomes is the only way to respond to climate change. The way in which we have been able to mobilise this collective effort is through compliance with the targets of the Kyoto Protocol. We know that there is no single piece of legislation that can be the catch-all comprehensive answer to climate change. The real answers can only come from people as whanau communities and enterprises deciding to change how we live and interact with the environment. 
This bill is only a small part of the change that is needed. But what is so important about this bill is that it aims to reduce the total greenhouse gas emissions by encouraging all New Zealanders to take responsibility. We have all known that New Zealand’s emissions are increasing with greenhouse gas emissions in 2007 about 22 percent higher than they were in 1990. In fact if we did nothing at all to reduce our emissions our total emissions could total well over 30 percent higher by 2012. The Maori Party believes that it is high time that we as a nation stopped the years of lobbying Parliament on how the emissions trading scheme should be structured and focused on the real challenge of addressing our collective responsibilities for carbon emissions. The Maori Party is standing up for four outcomes that we believe are in the best interests of our people and the nation: our whanau our whenua the Treaty of Waitangi and the Maori economy. 
I want to raise a concern about the criticism suggested by the Leader of the Opposition that the so-called special treatment of some tribes will do little to help Maori households. At the risk of pointing out the obvious hapu and iwi are built upon the very foundations of whanau; there can be no iwi without whanau. The key stakeholders for Te Runanga o Ngati Porou for example are the descendants of Porourangi. As a descendant of Kai Tahu I remind the House that the broad mission of Te Runanga o Ngai Tahu is to promote and enhance the social cultural and economic well-being of Ngai Tahu whanui. So when Mr Goff talks about preferential treatment or special deals for iwi he needs to be very careful that he knows what he is talking about. 
It has been very clear to us that paramount in the concerns of the iwi leadership has been the need to support Maori households. I read this morning the views of Rawiri Te Whare the General Manager of Te Pumautanga o Te Arawa. In referring to the attempts of some politicians to polarise the issue as a race-based one Rawiri Te Whare said: “The criticism is unhelpful and simplifies what is actually a complex issue. Iwi leaders do not seek special treatment for Maori we are seeking fairness on a proposal that will have a disproportionate impact on our businesses—and therefore our ability to assist to lift the social cultural and economic aspirations of our people.” The question of fairness of balance has been uppermost on our minds as we tried to negotiate concessions that would support our more vulnerable families along with our fledgling iwi enterprises in fishing farming and forestry. 
A key win for all of our whanau and all lower-income households is that they will be better supported to insulate their homes to decrease the cost of electricity. We also know that warmer homes mean better health outcomes and a better quality of life. Insulation leads to lower power costs and better health. Our priority was to ensure that the funding available gets to those homes most in need. So we are really thrilled that the new money the additional $24 million we were able to negotiate will mean that an extra 2000 houses of community services card holders will be insulated every year from now up to 2013. We pushed hard for this as well as halving petrol and power prices in order to cushion the blow on low-income families. A major emphasis for the Maori Party was on doing all that we could to ensure our whenua will be sustainable and healthy for our mokopuna. 
The package includes a range of environmental outcomes from working with iwi to invest in indigenous forestry to recognising the importance of biodiversity to all people so that future generations inherit a country that is a better version of the clean green Aotearoa we inhabit today. Our negotiations have been critical in recognising that iwi are the key drivers behind the Maori economy which contributes some $16 billion to the economy of this nation. It is our view that any legislation passed in this country must support the Maori economy to reach its full potential. Our people are heavily involved in fishing farming and forestry all of which are affected by the scheme. We worked hard to make sure that our people’s businesses are not the hardest hit by the scheme so that the outcomes are fair and our economy can grow. 
And finally I want to bring to the House the significance of the Treaty of Waitangi to this debate. We entered negotiations understanding that the Treaty must be provided for in the scheme so that it is fair for our people no matter what future changes are made along the way and so that Treaty settlements are respected. The Treaty is about joint responsibility and working together. This bill reflects our role in responding to the shared challenge of climate change. The agreement allows for more Crown-iwi partnerships in tree planting on conservation and Maori land. It makes a commitment to the Treaty relationship through the highest level of input on agricultural forestry and fishing issues. To this end I will be tabling a very important amendment during the Committee stage to ensure that the emissions trading scheme gives effect to Treaty principles. 
The scheme is not perfect by any means. But we believe that it balances the concerns of whanau and businesses with the need to ensure we protect our environment for future generations. Ultimately it is those mokopuna whom we must think of as we make our vote today. Kia ora. 
AMY ADAMS (National—Selwyn) 
: 
 I rise to take a call in this debate. A little more than 10 years ago New Zealand entered into the Kyoto Protocol. New Zealand committed itself to Kyoto and this Government is committed to follow through on those obligations. Living in a carbon-constrained world is a legal economic and environmental reality. It is something that all New Zealanders have to grasp as part of this debate. As well as that it is a trade imperative to now be seen to be doing our part around our carbon obligations as set out in Kyoto. New Zealanders need to understand that whatever they may think of the debate from a matter of trade we need to do our bit under Kyoto. We need to be seen to be playing our part. Under the Climate Change Response (Moderated Emissions Trading) Amendment Bill we are. 
There is one other starting point that New Zealanders need to grasp if they are listening to this debate and when they think about this debate. They need to understand that on 1 January without this bill masses of cost will come into play. The power bills of households will go up by 10 percent and it is Kiwi mums and dads who will bear that cost. As well as that if we do not change the legislation the jobs of thousands of New Zealanders will be put at risk. The Labour Opposition talks about jobs but if its scheme comes into force on 1 January of next year which it will do if we do not pass this legislation not only will the costs of households go up dramatically but New Zealand jobs will be at risk. This bill is about getting that balance right between those two things. It is about getting the balance right between what we must do to play our part in terms of the environmental economic and legal realities as set out in the Kyoto Protocol and ensuring that in doing so we do not sacrifice the New Zealand economy the jobs of New Zealanders and the wealth of every citizen in this country as well as future generations as Rahui Katene referred to in her speech. This bill does that well. Politics aside we have a workable solution that balances our international obligations our environmental obligations and the fiscal realities. 
When this Government was elected we talked in regard to emissions trading about a couple of things. We talked about the need to be aligned with Australia as much as we could. We talked about the fact that Australia is our major trading partner so it would make sense to put our industry on a similar footing to that in Australia. We talked about the fact that to National an emissions trading scheme should not be a tax-generating mechanism. That is what it was going to be under the Labour scheme. It was setting itself up to suck another $2 billion a year out of the economy to put into its war chest. We do not see the emissions trading scheme as revenue gathering for the Crown. We see the emissions trading scheme as about protecting the environment and protecting jobs. We set out to design a scheme that was fiscally neutral and that is what we have done in this bill. We do it without risking our key industries. 
Let us be really clear that under this bill the cost on New Zealand households will halve—it will halve. That is what we are talking about. We are not talking about big business. We are talking about cutting in half the cost that the Labour Opposition wanted to put on Kiwi households. This bill will not impose that cost. 
I shall spend a moment talking about agriculture because that is an area of great importance to my Selwyn electorate. Agriculture is a crucial industry to this country. It always has been and it always will be. We are not prepared to see agriculture sacrificed but we must deal with it within the emissions trading scheme. The reason we must deal with it is that it is almost half of our emissions profile. I know that other countries have decided to exclude agriculture and if it were possible that would be great. But when in New Zealand half of our emissions profile is agriculture we must include it in an emissions trading scheme and it has stayed in our system. But—and it is a big but—we will ensure that we will do it in a way that does not see farmers go into bankruptcy in their thousands as would previously have been the case. We have deferred the introduction of agriculture for a further 2 years to enable time to look into better ways for farmers to adapt and to reduce their emissions so they are not just fed to the wolves. 
We are not here to put people out of business. We are not here to kill off industry. We are not here to see New Zealand continue to sink further and further down the OECD rankings and that is what would happen if we did not stand up for agriculture. So we must include it. But the Minister has worked very hard as have officials to ensure that it can be included in a way that enables our farmers and our agriculture industries to survive. That is through a deferral of 2 years. That is through the reduced phase-out rate. Instead of losing their allocations at 8 percent a year our farmers will see a phase-out rate of 1.3 percent a year starting in 2016. 
Hon David Cunliffe 
: We’ve been saving 1.5 percent since 1990. 
AMY ADAMS 
: As Mr Cunliffe said—for once in his life managing to say something that is remotely accurate—they are getting phased out a lesser rate now than they have already been working to reduce their emissions. So we are saying to them that that is great. It is fantastic. That is the point. The point is if they are already reducing their emissions we support them. This is a carrot and a stick. 
Hon David Cunliffe 
: Yeah with no stick. 
AMY ADAMS 
: If they reduce their emissions they will not have a bill. If they do not reduce their emissions they will have a bill I say to Mr Cunliffe. I do not know why he finds that so hard to grasp. But we cannot in this country simply ignore it. The way Kyoto works is that we have to account for our entire domestic emissions profile. In this country if we were to leave agriculture out all of that burden would fall on the rest of the economy. In Australia the emissions profile of agriculture is 13 percent. They may find that workable although I suspect we will find that there will be considerable cost there in agriculture albeit that may be achieved through other mechanisms apart from those directly in the scheme. 
The bill we have before us does in my view strike the right balance with our environmental obligations with the trade realities of needing to show the rest of the world that New Zealand is doing its bit between meeting our Kyoto legal obligations and the need to ensure that we do not walk away from Kiwi jobs and do not put the income of more Kiwi households at risk. We do not want to see big cost increases on Kiwi households that do not need to be there. This bill will halve those increases. It will protect those jobs and it will do our bit for the environment. I am very pleased to support it. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I thank Amy Adams the member who has just resumed her seat for clarifying several things. The Climate Change Response (Moderated Emissions Trading) Amendment Bill is putting on New Zealand households—on hard-working New Zealanders and their children—a debit equivalent to $92000 a household. By the Government’s own numbers even if we take the most favourable assumptions and leave out the compounding cost it will be $50 billion a year by 2050. This is based on a carbon price of $25 a tonne in 2013 going up to $50 a tonne thereafter. The Government’s own number is $50 billion by 2050. If we put in the cost of capital we see that it will be $110 billion yet those members have the gall to say that Labour wants to impose costs on New Zealand households. 
The member who just resumed her seat is from an agricultural constituency and she did agree with the point that agriculture has been reducing its emissions by 1.5 percent per year on average since 1990. But the obligation this Government is bringing on the sector is for 1.3 percent—less than that—going forward. Analysis presented to the Finance and Expenditure Committee said that the first 5 million tonnes of agricultural carbon emissions reduction will be at a profit but the Government will write the sector a cheque as well anyway. 
But the saddest thing was not Miss Adams’ speech; it was the previous one by Rahui Katene. She is a member I do respect but I ask her whether unlike Ngai Tahu other iwi like Tainui got Department of Conservation lands in their settlement or whether those other iwi who participated in the Crown Forestry Rental Trust will have access to the last-minute deal that the Maori Party has brokered for its benefactors. Members should make no mistake: this is not a deal for the average Maori up and down the motu. This is a deal for a very small number of people—wealthy interests at the “Browntable”—and that is not kaitiakitanga and it is not whanaungatanga in any understanding that we possess. 
But let us put ourselves in the shoes of our children. No member of this House whatever party they come from can honestly look their children in the eye and say to them that they will be better off in the future as a result of this bill and that their future will be brighter than ours. Let us cast our minds back a little and think about the place that this baby-boom generation has occupied in our history—the children of the Second World War who vowed to build a better world. Here we stand today at the cusp between their era and the era that our children and our grandchildren will inherit but what do the latter have to look forward to? 
The thing that worries young people today is not the global financial crisis—that is just a blip—it is not the end of the American empire or the rise of East Asia but it is the threat of a changing climate. That is why we go to see movies like  
The Day After Tomorrow 
  
2012 
 and even  
Twilight 
. We go to them because this civilisation our young people feel is entering its twilight. Our young people are no longer optimistic that their future will be better than this generation’s past but what is the National Government doing about it? 
This Government is imposing on the young people of New Zealand and on our grandchildren a bill that will put liabilities on the credit card for generations to come in order to subsidise the big polluters of today: the powerful interests that support the National Party. It is as cheap and as dirty as that. If smirking members opposite doubt me I say let us cast our minds back to when the man who is now Prime Minister said climate change was a hoax. Then just before the election when he worked out that young people vote he said that no he had always believed in it. Now he has returned to type because this bill is hype; it is a hoax and it is a nonsense. 
Why should we be surprised? The process that has been used by the “Minister for Shambles” was exactly that. It was a travesty. There is a telephone book of amendments laid on the Table that this Parliament has not seen before today. I appreciate the Minister inviting some of us in this morning but those Supplementary Order Papers have not had the benefit of a select committee process. Even those parts of the bill that did go to a select committee had to be considered in the absence of material that that Minister withheld under the Official Information Act. Although 379 submitters said they wanted to be heard the chairman of the committee felt there was time for only 30. We finally insisted on 127 but most of them got called the same day and were told “Pony up or lose the chance. This is it.” Yet that National Party had the gall to say of last year’s bill that Labour’s emissions trading scheme was rushed. Labour spent a whole year on a select committee process; National has allowed 1 day for submissions and tabled those amendments in the House. There is a word for it—I cannot use it—it starts with “h”. Members opposite know which word I mean. National has one set of standards in Opposition but runs right over them when it gets into Government. I say to those guys opposite that the issue with that is that a party like that does not stay on the Treasury benches for long because New Zealanders know the difference. 
I ask what our young people want. Our young people want responsible leadership. They want leadership that can see into the future and help to bring the present to that better place. Our young people know that they are being cheated today and that they are being presented with a huge bill for a scheme that is badly designed and that has not been properly considered. It is a scheme according to Treasury’s regulatory impact assessment unit that could not stand scrutiny because the analysis it was built on was flawed—or words to that effect. It is a bill that did not have even a departmental clause-by-clause report. Officials could not produce one because there was not time. It is a bill for which the Parliamentary Counsel Office could not produce a revision-tracked set of amendments for the committee to consider in the normal way because there was not time. 
What is the rush? Is it to allow a Minister and his leader to grandstand in Copenhagen? I pity them because Charles Chauvel will be there telling people the truth about the sham that is being driven through this Parliament today and the world will know that the Government is “100% Pure”—“100% Pure Nonsense”. [ 
Interruption 
] I have two minutes left before the next member’s call I say to Ms Wagner and I hope she will enjoy my speech because I am so far from finished with this bill! 
We have a long few days ahead of us on this bill. I am looking forward to the Committee stage—to counting every subsidy to unmasking every dirty deal and to showing out every craven emitter who has come to the door of the Minister where God knows what has been exchanged for a $110 billion cheque. How ludicrous is this: a “cap and trade” system with no cap? It would be like a carbon tax with no tax— 
Charles Chauvel 
: And no carbon. 
Hon DAVID CUNLIFFE 
: —and no carbon. The idea of emissions trading for the general public is that New Zealand gets to adapt to a low-carbon future at the lowest economic cost but it only works if we actually have to trade and that only happens if we actually have a cap. Treasury and the Parliamentary Commissioner for the Environment agree that this bill will reduce emissions by up to less than 1 percent only. So what do we get—and hey let us be generous—for our $50 billion? What do we get for that? According to the independent authorities we get less than 1 percent of emissions reduction for at least $50 billion on the Government’s debt by 2050. 
Is that anybody’s idea of a good deal? Is it anybody’s idea of a good design? Is it anybody’s idea of a good process or a good future for our children? If I feel upset about this bill it is because I have kids and I cannot look them in the eye and say that today we as a House are making their future brighter. 
NICKY WAGNER (National) 
: 
 I support the Climate Change Response (Moderated Emissions Trading) Amendment Bill. I support it because it is a moderate common-sense response to an enormously difficult problem. It has been really interesting to listen to David Cunliffe today. He spent a heap of time in the Finance and Expenditure Committee bleating that he did not understand the bill in order to make political points but his speech today proves the point: he truly does not understand it at all. His speech was full of emotive rhetoric and there was no intelligent comment. 
Everywhere around the world Governments and people are struggling with the concept of climate change. It is a fiendishly difficult problem. As the Australian professor Ross Garnaut said: “It is harder than any other issue of high importance that has come before our polity in living memory.” But around the world there is general agreement that this is a truly global issue and it has to be tackled. Every country has to deal with the problem every country needs to be involved and Governments around the world have accepted that fact. Indeed I cannot think of any country that has declared it will do nothing. It is a fiendishly difficult problem and it comes at the worst possible time: a time when the world is also struggling with a hugely challenging financial situation a time of great economic turmoil and international uncertainty. This bill is a first step a sensible pragmatic responsible response to both environmental and economic conditions. It includes a series of reviews starting in 2011 which will allow us to tweak the legislation as the global situation clarifies. 
The process of getting to this point has been agonising. There is general agreement that New Zealand needs to have an emissions trading scheme but little agreement about how it should be formulated. The devil is always in the detail. Way back in the late 1990s National began advocating for an emissions trading scheme but between then and now—and a Labour Government—we have had a failed tax proposal an unsuccessful industrial scheme and an unrealistic Act. Now finally we have a reasonable and rational scheme that allows New Zealand to do its fair share for global climate change without destroying our economy or the quality of life that it delivers. 
Over the last decade we have seen lots of energy angst and good intentions to tackle the issue of climate change but it has all come to nothing. It is very very unfortunate that politicians have not been able to work in concert to deal with an unprecedented important and difficult issue. National highlighted in its Bluegreens discussion document coming up to the last election that long-term environmental issues should be treated in a far more bipartisan way. We believe that the environment is too important to be squabbled over. Environmental decisions have long-term consequences and therefore need more than a 3-year a 6-year or even a 9-year focus. We will still be dealing with the issue of climate change in 2020 and 2050. If ever there was an issue on which parliamentarians should have worked well together to get the best possible outcome for this country this is it. I agree with Charles Chauvel who said Parliament has a golden opportunity to reach a broad consensus and take New Zealand’s emissions trading scheme design off the political battlefield once and for all. 
After two previous select committee processes to consider the issue including an in-depth and pretty intelligent review of the present emissions trading scheme and related matters we should have been able to deal with this new legislation efficiently and effectively. An enormous amount of research and information has been available in the public domain and the people of New Zealand want us to sort this issue out once and for all. It is therefore absolutely disappointing that although Opposition members continue to state how important this legislation is they were not prepared to knuckle down and get the best possible result for the country. Their uncooperative squabbling and childish behaviour reflects badly on them and it undermines any professed commitment to a better environmental future for New Zealand. Political grandstanding stupid party politicking and half-truths were the order of the day. The fact that we could get no agreement was an enormous waste of time and money and a waste of the best intentions of submitters who will be affected by this bill. On principle the Opposition would not even agree with uncontested technical amendments. So much for Labour’s claim that we cannot afford to delay our emissions trading scheme! 
After listening to Labour speakers I remind everyone that despite Labour’s rhetoric until 2018 there is very little difference between the allocations under this bill and those under the existing legislation. I also reflect that this is high-profile legislation that affects all of us. But it is a hugely complex process and most New Zealanders do not understand all the issues. Everyone is affected differently. Therefore many people are partly informed some are uninformed and some are misinformed. Opinion is polarised. Labour can quote plenty of criticism that suits its purposes; ACT can do the same—although I must say they make strange bedfellows. The Government’s job is to walk the knife-edge between conflicting opinions and produce rational sensible legislation. This bill is about implementing a workable and affordable emissions trading scheme. The legislation includes provision for regular reviews in order to give us enough flexibility to manage our responsibilities intelligently as the world grapples with the ongoing issue of climate change. I support this bill. 
MOANA MACKEY (Labour) 
: 
 I am very happy to follow the “Let them eat cake.” speech made by Nicky Wagner which bore absolutely no resemblance to the bill before us the Climate Change Response (Moderated Emissions Trading) Amendment Bill or the process it went through. The gall of that member to stand up and chastise other countries for not doing enough to deal with climate change when we are sitting here under urgency considering legislation that had only 6 weeks at the Finance and Expenditure Committee—only 6 weeks at the select committee. Submitters were rung and told that they had to come in and give their submissions 4 hours later that night after we had heard that the National Government wanted to limit the number of people coming in to only 20 of the hundreds who had submitted. The officials made mistakes in the process because they did not have enough time to prepare the papers. Our deadline did not give us enough time to even do the departmental report properly. We could not get a clause by clause analysis. We could not get a revision-tracked version of the bill. And that member has the gall to stand up in this House and say that Labour was being difficult! 
Labour members were being difficult because all we wanted—and we put a motion before the select committee—was an extension of time so that we could have time to consider the technical amendments that that member just accused us of not being prepared to consider. Well how did that member vote on the motion that Labour put forward asking for another week to properly consider the bill? [ 
Interruption 
] She voted against it. I tell Nicky Wagner not to stand in this House and chastise members of the Labour Party for being difficult. Why could we not have had another week in which to consider at least the technical amendments? 
Nicky Wagner 
: You could have done it if you’d just got on with it. 
MOANA MACKEY 
: I do not know whether Nicky Wagner has discovered the power of time travel but it was simply not possible to do it in the time that we had. This bill is an incredibly important bill and it had 6 weeks— 
Nicky Wagner 
: For God’s sake Moana. 
MOANA MACKEY 
: Oh my God! Seriously? It had 6 weeks at the select committee I say to Nicky Wagner. It should have had 6 months at the least. When Labour’s scheme took 8 months National members said it was being forced through. When Labour heard 60 hours of submissions on our emissions trading scheme they said it was not enough. But National allows only 20 submissions on this bill and that member sits there and chastises us for complaining that the process is being rushed. Unbelievable! And that was from a member who claims to have blue-green credentials. She should be standing up in this House and saying stop the madness slow this down and let us have some proper discussion about legislation that will shift $110 billion worth of liabilities away from polluters and on to the taxpayers of New Zealand. 
I heard earlier that the Hon Dr Nick Smith said that my colleague Charles Chauvel was just being ridiculous when he said that the Carbon Pollution Reduction Scheme legislation was not going to pass in Australia and that he was scaremongering. I am sure the Minister knows by now that Andrew Robb who is the climate change spokesperson for the Liberals spoke against the legislation in their caucus. They had 15 speakers for and 13 against and they have had to hold an emergency meeting. I think the Hon Dr Nick Smith ought to calm down his rhetoric a little. 
While we are talking about the Hon Dr Nick Smith I want to talk about the process that we went through. He has been chipping away at me across the House and to be fair I have been chipping back at him. But the fact is that Labour did not disengage from this process. We absolutely believe that it is critical that we get bipartisan agreement on an emissions trading scheme; we absolutely believe that. 
Hon Dr Nick Smith 
: Where were you this morning? 
MOANA MACKEY 
: I was at a tangi this morning I say to Dr Smith and I have only just got back so I am sorry about that. I would like to pay my respects to the family of Hawea Vercoe who tragically died over the weekend. I was at a tangi and that was why I could not come to Dr Smith’s meeting. 
The fact is we had a very very good meeting. We had a great meeting with the Minister for Climate Change. We laid out what we thought the areas of agreement were where we thought we could go from here and the things we were not going to agree on that we thought could be put aside because they were not critical to getting agreement on an emissions trading scheme. Then we went away. Over the weekend Labour had its annual conference so we were busy. My colleague Charles Chauvel emailed—I was copied into the email—a copy of Labour’s response with a “Where to from here?” a draft memorandum of understanding. I then got off a plane in Wellington to hear that National had done a deal with the Maori Party. So when the Hon Dr Nick Smith says that Labour walked away that is absolutely not true. He then invented a conversation that he had had with my colleague David Parker saying that he had said to David Parker: “Oh you need to get back to me by Friday.” and David Parker had said that he would. That conversation never happened. The only conversation David Parker had with the Hon Dr Nick Smith was about the Resource Management Act amendment bill that was going through that week. That is not true and the Minister knows it. Does he have to start inventing conversations that never happened? There were three Labour members in the room and none of us told the Minister that we would get back to him by Friday. None of us were under the— 
Hon Dr Nick Smith 
: Ask George. 
MOANA MACKEY 
: The member says to ask George ask his adviser. I guess the public will have to go by that member’s record. We did not give that undertaking; if we had why would my colleague have spent all weekend drafting a very comprehensive response which he emailed to the Minister before he went to Cabinet on that Monday before the decision was announced? Then the Minister could not even pick up the phone to ring Charles Chauvel our spokesperson to say to him: “Look we’ve done a deal with the Maori Party.” We heard about it on the news along with everyone else. So when the Minister accuses Labour members of disengaging from the process I say that that is absolutely unbelievable. We did not walk away; there was nothing to walk away from. By the time we had heard on the news that a deal had been done and that we had been excluded— 
Hon Dr Nick Smith 
: Why not more deals? Why can’t we include the Maori Party? 
MOANA MACKEY 
: Because Labour will not support an intensity of emissions approach without a cap I say to Dr Smith and we will not support 200 years of subsidies as we were told to the biggest polluters. 
Hon Member 
: 200 now. 
MOANA MACKEY 
: That is what we were told by some of the submitters. To be fair David Carter said only 90 years so I will go with what the Minister of Agriculture said; he is promising subsidies for only 90 years. But the fact remains that Nicky Wagner who got up to say how shameful it was that we were not able to get bipartisan agreement needs to walk down to the front bench of her own party and tell her Minister who walked away from Labour in negotiations who then made up stories about— 
Hon Dr Nick Smith 
: No I didn’t. The door’s still open. 
MOANA MACKEY 
: We are in urgency this bill is being forced through the House and the Minister says the door is still open. That is what negotiation means to National—it is take it or leave it. I want to tell members what happened here. When we had meetings with the Hon Dr Nick Smith earlier in the process he was very reasonable on a whole number of things. He said that agriculture was not a bottom line for him and that if we thought it had to come into the scheme in 2013 then that was fine and he would not have an issue with it. I remember thinking that that seemed very strange because I had been meeting Federated Farmers groups who had told me that the Hon David Carter had promised them that agriculture would never come into the emissions trading scheme and have to face the full cost of its emissions. 
Hon Dr Nick Smith 
: Not true! 
MOANA MACKEY 
: You know in this instance I think I believe Federated Farmers I say to Dr Smith. 
Hon Member 
: Everybody’s lying except Nick Smith! 
MOANA MACKEY 
: That is right. Here we are in a situation where everyone is lying except the Hon Dr Nick Smith. 
Mr DEPUTY SPEAKER 
: You cannot use the word “lie”. 
MOANA MACKEY 
: I apologise. I withdraw that comment. Everyone else is wrong and only the Hon Dr Nick Smith is right; that is the situation we are in at the moment. Well Federated Farmers members said before the election that agriculture would not come under the emissions trading scheme because David Carter had told them that it would never come under it and that farmers would never have to face the full cost of their emissions. 
Hon Dr Nick Smith 
: He never said that. David Carter never said that. 
MOANA MACKEY 
: I say to Dr Smith that all I am saying is what Federated Farmers told me and if we look at this legislation we see that they are absolutely right: National has delayed agriculture coming in for another 2 years farmers are not going to have to face the full cost of their emissions for God knows how long after that and there will be review periods and review periods so that the time frame can be pushed out even further and even further—and I firmly believe that it will be pushed out even further and even further. 
To be fair to the Hon Dr Nick Smith I actually think he does believe we need to do something about agriculture but he was rolled by his caucus. I think he went back to his caucus and told it what the deal was and his caucus said that no the bottom line for it was that agriculture should not have to face the full cost of its emissions. He had made promises—well they were not promises; they were indications—to Labour members that he would be prepared to move on some things and all of a sudden they were off the table. All of a sudden we came back and found out that there would be an intensity of emissions approach without a cap which basically means that we are going to pay polluters to pollute more. 
In fact polluters would do better to lift their greenhouse gas emissions because then they would get more free allocation. That is what this approach means. I do not know why the Minister thinks that is a good policy for reducing greenhouse gas emissions. One would think that the point of having an emissions trading scheme would be to reduce our emissions; otherwise what is the point? This emissions trading scheme amendment bill does not do that. What it does is provide incentives for some of our biggest polluters to pollute more because they get more free allocation for doing that. 
What it does most and the worst thing about is is that it turns the existing emissions trading scheme which is a polluter-pays model into a pay-the-polluter model. Who is going to pay the polluter? The New Zealand taxpayer. 
Hon Dr Nick Smith 
: You don’t believe that. 
MOANA MACKEY 
: Well where is the $110 billion going to come from? 
Hon Dr Nick Smith 
: You don’t even believe what you are saying! 
MOANA MACKEY 
: I do believe it because that $110 billion has to come from somewhere. It ain’t going to come from private schools; we have already seen that National is happy to take money off adult and community education to give it to private schools. It will come from health it will come from education it will come from social services and it will come from the public sector. It has to come from somewhere. 
Hon Dr Jonathan Coleman 
: Tell the truth! 
Mr DEPUTY SPEAKER 
: You cannot use that phrase. 
MOANA MACKEY 
: Jonathan Coleman can scream out that I am not telling the truth but I look forward to his telling me where the $110 billion will come from. Where will it come from I ask Dr Coleman. It will come from the taxpayers of New Zealand. This is a disgrace. 
AARON GILMORE (National) 
: 
 It is my pleasure to speak last in the second reading of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. The previous speaker Moana Mackey was talking—apparently—about this bill but members would not know that from the rhetoric that came from her. They would know that nothing that came out of her mouth made any sense whatsoever—either she cannot count or cannot read or both. But we will find out about that. 
This bill provides a step along the path towards meeting our climate change needs a future for my children and my future grandchildren and the ability whether members believe in climate change or not—like some of our friends over there in the ACT Party—for New Zealand producers to get their goods into overseas markets while we are doing our fair share. Some will say the bill does not do enough; some will say it does far too much. But this bill will provide some comfort to mums and dads out there who may be listening to this debate today in that the cost of this scheme will be half what the Labour scheme would have cost. 
Moana Mackey 
: What a load of rubbish! 
AARON GILMORE 
: I ask the member to read the bill. That member is proving that she has not even read the bill. 
This bill went to the Finance and Expenditure Committee and I must say that sitting through that committee while it considered this bill was an experience. We have heard about all the sorts of behaviour that occurred on that committee. I do not want to go into that but I must say that I will recall that behaviour for years to come. 
I want to talk a little about the so-called cost to New Zealand of this emissions trading scheme—Mr Cunliffe’s $110 billion; the so-called huge cost for taxpayers. There is no $110 billion cost to New Zealand. We have heard that New Zealand will have to pay a large amount of money and that there will be $110 billion of debt for this emissions trading scheme. Climate change is complex but if those members who are making that claim about $110 billion had read the bill or knew how to count or both we would not have this misunderstanding. What is that mythical figure—the supposed $110 billion debt that will occur? What it is is that instead of taxing the good people of New Zealand by $2 billion per annum the Government is giving back $2 billion to people to allow them to have a transition to a sustainable climate change position. 
We campaigned on providing a fiscally neutral emissions trading scheme and this bill helps to deliver that. We believe in jobs and in our communities. So we believe that the best thing to do is not to have the Government gain $2 billion from taxing people but to use that money to mitigate the transition path to a better position for our communities out there. This scheme has been designed so that over the next decade there is only a small net gain for the Government rather than it raising billions of dollars from communities out there. Jobs that would have gone from thousands of factories and businesses up and down the country under the Labour scheme will be kept. We care about jobs and we care about communities. 
Finally contemporaneously with this bill we have announced a suite of measures which other people have not spoken about to add to the transitional part of the legislation. There is $323 million for home insulation and a further $24 million for low-income households. In my maiden speech I spoke about living in a State house that was uninsulated and that my family could not afford to heat. I am proud to be part of a Government that has introduced a housing scheme that gives people in State housing the ability to have their homes heated and insulated properly so that other little kids out there listening to this debate today can grow up in a warm and healthy home. What else have we done? We have introduced $36 million for bio-diesel we have introduced funding for a centre of research excellence for agriculture we have introduced some changes to the Resource Management Act to streamline renewable energy projects and there are many more measures. We have also resolved the legal dilemma that existed with regard to iwi who had been so easily brushed aside by the previous Labour Government. That is something that we inherited. 
We will hear plenty more over the next day or two on this bill and I look forward to contributing to the debate. I support this bill. 
A party vote  was called for on the question  
That the Climate Change Response (Moderated Emissions Trading) Amendment Bill be now read a second time. 
Ayes 63 
New Zealand National 58; Maori Party 4; United Future 1. 
Noes 58 
New Zealand Labour 43; Green Party 9; ACT New Zealand 5; Progressive 1. 
Bill read a second time. 
In Committee 
Part 1 Amendments to Climate Change Response Act 2002  
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 I am in no doubt that we are about to start a pretty important debate for New Zealand about how it responds to the challenge of climate change. 
The first point I make having been a member of Parliament now for 19 years is that the debate about a pricing instrument to constrain emissions has gone round and round in circles. I will just recite the history. Back in the time of the previous National Government we originally proposed a low-level carbon tax. A Cabinet decision was made in 1999 that we should get officials to work on an emissions trading scheme. The last Labour Government came to office in 1999 and said that it did not want to do an emissions trading scheme; it wanted to do a carbon tax. We had officials beavering away for 5 or 6 years on a carbon tax and then they came back to a conclusion of an emissions trading scheme. So my first point is that this debate has gone on for a very long time. There have been over eight different public consultation documents. There have been three rounds of select committee hearings. There have been over 2000 submissions. I say to the Committee that there comes a point on an issue as big as climate change where we need to make progress. 
At the last general election National had a very comprehensive policy around emissions trading. I will go through what we said to the electorate. First we said to the electorate that we wanted to align New Zealand’s emissions trading scheme more closely with Australia’s scheme. Every member of this Committee would know that New Zealand and Australia have very closely integrated economies and that it makes good sense on a global issue like climate change for us to work closely with Australia. I challenge those members who have been quite strong with their rhetoric around the weaknesses that they see in this modified emissions trading scheme. Every single criticism they make they can make also of their Australian Labor Party colleagues who are putting a bill through their Parliament that is actually slightly softer than this one. 
So if members want to make criticisms of this bill—for instance to argue that it does nothing for climate change—they need to argue that the Australian scheme also does nothing for climate change. If they want to argue that it costs billions of dollars they need equally to say that that cost would apply to Australia. I think that point just exposes the extreme rhetoric that we have heard from Labour members over this bill. We said to the electorate that we would align the scheme more closely with Australia’s and we are doing just that. 
Moana Mackey 
: Jesus! 
Hon Dr NICK SMITH 
: Oh excuse me! I raise a point of order Mr Chairperson. I am more than happy to tolerate interjections but I think swear words of that sort are quite inappropriate and I ask you to take some action. 
The CHAIRPERSON (Eric Roy) 
: I have to say that I did not hear what the member said but— 
Moana Mackey 
: I withdraw and apologise. 
Hon Dr NICK SMITH 
: First we said we would align the scheme more closely with Australia’s and we are doing that. 
The second thing we said in respect of our changes to the scheme is that we did not see an emissions trading scheme as some means for the Government to grab great wealth from the private sector and from families and homes. We said we wanted a scheme that would provide a financial incentive for fewer emissions but would not simply export industry offshore. So in aligning this bill with Australia’s scheme we are saying we want to do our fair share on climate change. It is true that the changes we are making do not result in the Government’s making billions of dollars. That is true. Does it involve a cost to the taxpayer? No it does not. 
Hon Pete Hodgson 
: Yes it does. 
Hon Dr NICK SMITH 
: Mr Hodgson claims that it does. Let us be clear about Treasury’s projections. I know that members opposite have become very excited about the $110 billion figure. Let us be clear though and honest with the public about what Labour is saying. First up Treasury is saying that $50 billion more revenue would come to the Government under the previous Labour Government’s emissions trading scheme to 2050 than under National’s scheme. Well that is true but it relies on a faster abatement rate than that of our proposal to align with Australia’s scheme. So if members opposite want to get up and say that our scheme would take $50 billion more from New Zealanders than Labour’s scheme would have done they are right and they should be upfront about that. But that is quite different to describing a cost. 
How do they get to that $110 billion? They say that every year— 
Hon Pete Hodgson 
: We looked at Treasury’s projections. 
Hon Dr NICK SMITH 
: I say to Mr Hodgson that it is about being honest about what Treasury is saying not misinterpreting it. 
The second point members opposite make is that if we invest the money from the emissions trading scheme—those super-profits—and compound the interest we can add that up to $110 billion. Well hang on a moment! When the previous Labour Government announced its emissions trading scheme it said that the Government would not bank the super-profits of the scheme but would reinvest them in climate change policy. So my response to members opposite is that they cannot say on the one hand that Labour would spend that money on climate change and on the other hand that it would claim the interest at the same time. That is not consistent. 
The members opposite are misleading on a third point. With their rhetoric they say that this is a big subsidy for those big ugly international corporates. Do members opposite know that the advice is that 80 percent of the allocation that we are debating is those big ugly corporates—those 32000 New Zealand farmers? Why not call them what they are? Members opposite are really saying that they want to incur on New Zealand farmers $40 billion more in costs. That is what they are really saying and they should be honest with the electorate and say that that was the advice. But this Government is saying that we do not want to make those super-profits from an emissions trading scheme. 
We said a third thing to the electorate and we were quite upfront about it in our policy. We said that we wanted to take an intensity-based approach. This is very interesting. The Emissions Trading Scheme Review Committee sought advice from two of New Zealand’s most important economic analysts—that is Infometrics and the New Zealand Institute of Economic Research. How many times have I heard those two firms and their advice quoted in this Parliament? In my career here I would say I have heard it hundreds if not thousands of times. I have heard the Opposition quote both those firms over and over again. What did the New Zealand Institute of Economic Research and Infometrics advise the special select committee? The first thing they said is that in the short term it was actually a pretty even argument between a carbon tax and an emissions trading scheme but on balance they thought we were best to progress with an emissions trading scheme. The second thing they said was that the best way to avoid the problems of carbon leakage—that is just exporting industries offshore—was to take an intensity-based approach. The intensity-based approach is what is in the Carbon Pollution Reduction Scheme in Australia and that is another strong reason for that approach. 
These amendments are a sensible way forward for New Zealand on one of the most complex areas of public policy. 
Moana Mackey 
: Then why is it so rushed? 
Hon Dr NICK SMITH 
: The member interjects about the process. First I point out that a year ago when Labour had its climate change legislation before the House it introduced not just one Supplementary Order Paper—I have introduced one—but four Supplementary Order Papers. No briefing was provided as I provided to members on mine and they were passed into law on the same day. 
Moana Mackey 
: So long as it’s been at the select committee. 
Hon Dr NICK SMITH 
: I put an issue to the member who is interjecting. I invite her to remember that when I was having discussions with the Labour Opposition about an agreement that we might be able to reach I said to them that I was running into a real deadline. I needed to get an amendment bill through the House before 1 January because there were problems with the legislation that would come into effect. I said to them that we really needed to conclude those discussions quickly because I was running out of legislative time and the bill had to go to the select committee. Do members of the Committee know what Labour members said to me? They said that if I agreed with them they would support the bill not needing to go to the select committee. 
Hon Members 
: Shame! 
Hon Dr NICK SMITH 
: Let us be clear. If we get an agreement with the Labour Party the bill does not have to go to the select committee but if we get an agreement with the Maori Party the Labour Party has a completely different standard! That is why I say to Labour members that I will test them on their rhetoric every way in this debate because in this bill we have a sensible way forward on climate change. 
The last point I make is that we accepted an agreement reached in good faith with the Maori Party and the moment that agreement was announced I said that I remained as committed as I was the day before I reached agreement with the Maori Party to continuing discussions with Labour because it is my view that for all the rhetoric that will occur in the Chamber over the next couple of days there is actually a very high level of agreement about the sensible way forward. There is a very high level of agreement. We agree that an emissions trading scheme is the best way forward. We agree that we need to have allocations. We agree that we need to have transitional measures. We agree that the science is such that we need to take action. So it is my view that this bill is the responsible and right thing to do on this complex issue. 
I am really looking forward to a detailed debate in this Chamber. We might get away with sound bites rhetoric and spinning outside but in this Chamber we will scrutinise every single one of the false claims that are being made by Labour on this scheme. The scheme is the sensible way forward and I am looking forward to that debate. 
CHARLES CHAUVEL (Labour) 
: 
 It falls to me to begin the debate on behalf of Labour in the Committee stage on this legislation. I want to speak to one of the Supplementary Order Papers that has been lodged in my name Supplementary Order Paper 94. If the Minister for Climate Change Issues truly wants the debate that he has called for—and I have to say that history belies that intention but let us give him the benefit of the doubt for the moment—then we will have a proper consideration of the Supplementary Order Papers that lie on the table. The Supplementary Order Papers that have been tabled by the Greens and Labour reflect by and large the recommendations from independent authorities such as the Parliamentary Commissioner for the Environment and other independent experts who appeared before the Finance and Expenditure Committee and who gave us the benefit of their advice about how we could improve what is a bill that is lacking in general analytical integrity. 
Supplementary Order Paper 94 does two things: it deals with national targets and it deals with the advisory committee on climate change that we are keen to see. In relation to national targets it is clear that we are obliged under our Kyoto obligations to make a nationally appropriate contribution to international efforts to reduce greenhouse gas concentrations in the atmosphere. That is a treaty obligation to avoid the worst consequence of human-induced climate change. In the current round of negotiations as members of the House will know New Zealand under the National Government has made a conditional offer of what is called a responsibility target. The greenhouse gas emissions reductions that that target calls for are between 10 and 20 percent below 1990 levels by 2020 if there is a comprehensive global agreement at Copenhagen. New Zealand has also made a unilateral unconditional offer of a 50 percent reduction in emissions to below 1990 levels by 2050. 
Labour has reflected on those targets. It does not think that they are bold enough. They should be considerably stronger. But having said that I say that Labour does not want the targets to simply be statements of good intention. So the first thing that this Supplementary Order Paper does is enshrine the targets in the law and it requires the Minister to take steps to ensure that those targets are met. 
The second key substantive thing this Supplementary Order Paper would do if the Committee supported it would be to try to avoid some of the controversy in the development of climate change policy that the Minister alluded to in his speech just now. It is true that there is not a cross-party consensus as there is in Europe on some of the key issues at stake. We have all experienced hearing from the many stakeholders in the debate about the insufficient level of independent analysis of the costs and benefits of climate change policy initiatives. I found myself in the rare position in the second reading debate of agreeing with everything that Rodney Hide said on that topic in his speech which was a good one. 
Jo Goodhew 
: You want an emissions trading scheme and he doesn’t. How does that stack up? 
CHARLES CHAUVEL 
: But the select committee process—which Jo Goodhew did not appear in at all I think but other members opposite did—that we have just been through shows how important it is that we should have this proper independent level of analysis. It shows that complaints about its absence are quite justified. 
The other part of this Supplementary Order Paper would establish an advisory committee on climate change. It would be an independent Crown entity it would provide advice to Ministers and it would promote an informed public debate on the public policy response to climate change. The committee would be required to consult all affected parties before it tendered its advice to the Minister. If the Minister is serious about the pious words that he uttered while on his feet earlier he will have his party consider this Supplementary Order Paper with great care and determine the position that National ought to take on it. It is my submission that this is the sort of legislation that we ought to see in this area if we are serious about wanting a consensus in this country. 
I will now talk to the structure of the Supplementary Order Paper. It would make two changes to the existing administrative provisions of the principal Act the Climate Change Response Act to increase transparency in policy making. First of all there would be a requirement on the chief executive of the Ministry for the Environment which is the inventory agency under the legislation to produce an annual long-term forecast of emissions and removals of greenhouse gases. The suggestion in the Supplementary Order Paper is for a 50-year range of projections. The Supplementary Order Paper would provide that in preparing that forecast the chief executive would have to act independently from the Minister and apply his or her best professional judgment to the task. 
Just to make sure that the process was transparent the chief executive would be required to consult with the advisory committee which would be set up under the second part of the Supplementary Order Paper on the methodology that he or she proposed to use and then publish the committee’s views as a result of that consultative process. Then the Supplementary Order Paper would require the Minister and the chief executive to seek and consider the advice of the advisory committee before any regulations or Orders in Council were made under the legislation. Again for the sake of transparency all that advice would be laid on the table of the House of Representatives; all members would be able to see it. If regulations or orders were made that contained provisions different from the advice the Minister would be required to present a statement to the House setting out the Minister’s reasons for not agreeing with the advice. Those are the two things that I am hoping to see. 
As far as targets are concerned the Supplementary Order Paper would insert a new part 6 into the principal Act. It would set national greenhouse gas emissions reductions targets. The proposal is that we would aim in the legislation for a 50 percent reduction in net emissions from 1990 levels by 2050. I have deliberately put the National Government’s target in there because I want to test whether National is serious about this sort of legislation. If Labour were in office it would be bolder. But in the hope that the Government might support the amendment if it actually puts in place its own target I have left that one there. Let us see whether the Government is willing to stand by that target by agreeing to legislate it. 
To provide greater certainty for the pathway toward the target the Supplementary Order Paper would also require the Governor-General in Council to set a series of intermediate targets which would apply for 5-yearly periods commencing in 2013. Although the amendment would allow for some flexibility around the intermediate targets the suggestion is that the intermediate target for one period must not be higher than the target in the immediately preceding period. Net emissions in 2020 must be at least 10 percent lower than the 1990 baseline. Net emissions in 2050 would have to be 50 percent lower than the 1990 baseline. To increase the possibility of political consensus the Supplementary Order Paper would require any order setting a target to be confirmed by an Act of Parliament by 1 July in the year after it was made. 
We are trying to set in place a transparent process of consultation. Under the Supplementary Order Paper the Minister would have to publish a draft target together with a statement explaining why that particular target had been chosen. Public submissions would be made to the expert advisory committee. It would have to consider the Minister’s reasons in any submissions received and report back to the Minister before the target was set. The committee’s advice would then be presented to the House. If the target that was finally set contained provisions that were different from the advice in the committee the Minister—again in a mirror provision to the provision on expert advice—would have to explain to the House in a statement why it was that that difference occurred. 
As well as setting national targets the Supplementary Order Paper would require the Minister to develop proposals and policies that the Minister considered would enable the targets to be met. We would not just have those figures plucked out of the air; we would have genuine open transparent processes by which we would see what policies would achieve the emissions reduction targets that the Government adopted. Whenever a new target was set on an intermediate basis the Minister for Climate Change would have to present a report to the House on the proposals about how to reach those intermediate targets and also how they would contribute to the ultimate reaching of the final 2050 target. 
I mentioned earlier that the Supplementary Order Paper also aims to establish an advisory committee on climate change. It would be an independent Crown entity. Its principal objectives would be to provide independent advice to the Minister on matters relating to the public policy response to climate change and to increase the effectiveness of public participation in the making of policies and laws in this area. One of the problems we have in this whole policy area is that it is all too hard. People’s eyes glaze over when we talk about emissions trading. We would try to have an open expert body proceeding in a way that contributed—[ 
Interruption 
] I will finish the call shortly— 
The CHAIRPERSON (Eric Roy) 
: I know that I have given the member the call but I think the House has taken an instruction that no member will take more than two consecutive calls. 
CHARLES CHAUVEL 
: I thought that under the leave provided that requirement had been waived for this debate. Am I wrong in that? 
Hon Dr Nick Smith 
: The Government would be happy for the member to seek leave just for this individual call. 
The CHAIRPERSON (Eric Roy) 
: My mistake. We had better do this properly. Will you seek leave? 
CHARLES CHAUVEL 
: Yes. 
The CHAIRPERSON (Eric Roy) 
: Leave is sought. Is there anyone opposed to that course of action? There is not. Leave has been granted just for this one call. 
CHARLES CHAUVEL 
: I appreciate the indulgence. I will try to conclude in relatively short order. I was just making the point that the committee would help to increase public involvement in the debate which is something that I think we all agree is needed if we are going to have enduring climate change policy. 
In relation to its advice the committee would have to report to the Minister by 1 December 2011 on whether the national emissions reduction target of 50 percent in net emissions below 1990 baselines needed to be altered. This report would be timed to allow the committee to have regard to the outcome of the current round of international negotiations on climate change. The committee would be required to provide advice to the Minister on the intermediate target to apply in every 5-year period commencing in 2013. Before providing advice the committee would have to consult with affected parties in an open and transparent manner. There would be annual reporting by the committee on the progress being made in meeting New Zealand’s emissions reduction targets. 
In conclusion as it is currently worded the principal Act requires the Minister to establish a panel anyway to review the emissions trading scheme established by the Act. The Minister has to do that every 5 years. My Supplementary Order Paper would amend those provisions to require that review to be conducted by this expert standing committee. The committee would be given more independence than the panel in setting its terms of reference in respect of any review although the Minister would be empowered to require that the committee would have to consider specified matters as they arose in the international negotiations or otherwise. The bill would require the committee to consult with the public during its review. Once the review was completed the Minister would be required to present the committee’s report and the Minister’s response to the House. 
This Supplementary Order Paper is an attempt to set up a transparent process for reaching targets enshrine the Government’s own 2050 target into law and put in place structures designed to facilitate a national consensus around climate change policy that is badly needed. I hope it receives the support of the Committee. 
Hon DAVID PARKER (Labour) 
: 
 I will talk about the ridiculous rate and length of time that free allocation is given to major emitters under this Climate Change Response (Moderated Emissions Trading) Amendment Bill. The legislation that we currently have in New Zealand is already generous in its allocation to major emitters. There is good reason for that. If major emitters are exposed to competition in countries that are not pricing emissions and we were to force upon them the cost of all of their emissions overnight then that would break some of those businesses. They would move offshore in the short term and probably never come back yet in the medium term when other countries were properly pricing emissions they would be able to compete. So that is why we have free allocation. That is why we say to a company like Rio Tinto which produces aluminium in Bluff that we will pay for a lot of its carbon emissions for a transitional period. 
But that does not come cheaply. In the case of Rio Tinto the calculation that was relied upon by the Parliamentary Commissioner for the Environment showed that the cost per employee per annum of that free allocation is $100000. The cost of its free allocation of carbon emission rights is $100000 per worker per year. Another submitter said that that amount is an under-estimate and that it is closer to $200000 per annum; in my speech I will accept for the purposes of this argument that $100000 per annum is the right figure. It is notable that we had no advice to the select committee that disproved those figures. The only advice we had in terms of cost in the case of Rio Tinto was that of about $100000 per annum which came from the Parliamentary Commissioner for the Environment and which was relying on a study that had been done for the Climate Change Leadership Forum last year in consultation with Government officials including officials from Treasury. So $100000 is a good estimate. 
But a $100000 cost per annum per worker is something that we cannot continue forever because it comes at enormous cost to other things that we could do with that money. We could pay for an Inland Revenue Department tax credit. We could retire debt. We could actually reduce New Zealand’s Government debt very significantly—by $100000 per Rio Tinto worker per annum—if we did not have that free allocation. 
The Government has changed that free allocation from being phased out completely by 2030 to phasing out at 1.3 percent per annum. Under the current legislation—and we do have a good emissions trading scheme already in law in New Zealand—[ 
Interruption 
] We do and indeed the free allocation under that existing legislation has already been criticised by Dr Suzi Kerr as being too generous. She says that it is already too generous at an 8 percent per annum phase-out after 2018. We gave people 10 years from the start of the scheme when they would have a free allocation of 90 percent of 2005 emissions and that rate would not abate at all until after 2018—10 years later—which is when we said it would abate at 8 percent per annum. An economist like Dr Suzi Kerr says that if anything that is too generous to emitters because it comes at too high a cost to the economy: other taxpayers effectively are paying that cost. If anything the existing framework is too generous. 
In respect of the National Government’s changes here I say that the Government is phasing the free allocations out on the never-never. They will virtually never be phased out. In 2050 major emitters will still get more than one half of that figure—that is $50000 per employee per annum subsidy. That rate of $50000 per annum by 2050 is plainly unsustainable for our economy. That is why Treasury warned us that by 2050 Government debt will go up by $110 billion compared with the status quo under the existing legislation. Government members might decry those figures now because they do not suit them but that is the forecast from Treasury. The reality is that if those free emission charges were being auctioned to emitters that money would come back to the Crown and the Crown would have $50 billion extra plus interest which would make $110 billion by 2050. 
We heard Dr Smith say that what the Labour Party had proposed was ridiculous. Well I tell Dr Smith to look at the minority report and look at the graph there which is reproduced from the United States legislation the Waxman-Markey Bill. I have a copy of it here which I will seek leave to table at the end of this contribution. It shows a rate of phase-out of free allocation. It is very close to what is in the current Labour legislation which is already good law in New Zealand. It is very very similar. It has most free allocation being phased out by 2030. By then free allocation will be down by about 66 percent according to that graph whereas in New Zealand we will get out to 2050 and major emitters will still get free allocation of more than half of their emission rights. It will be free to them but it is not free to the country; it is paid by other taxpayers. Other businesses that are not getting free allocation will pick up the bill. 
Dr Smith said in the House today that most of the free allocation will be going to agriculture as if that is a sufficient answer. Why? The theory that underlies free allocation is that without it we would lose production which would go overseas. 
Sitting suspended from 6 p.m. to 7.30 p.m. 
Hon DAVID PARKER 
: Before the dinner adjournment I was describing how the level of free permit allocation is so excessive and lasts too long. I explained that under the existing Labour Party scheme which is already in law major emitters get a very generous rate of free allocation which is capped at 90 percent of the rate of their 2005 emissions. They get that free for 10 years then after that 10-year period their free allocation abates at the rate of 8 percent per annum so that by 2030 they have to pay for their emission rights just as all other members of the public have to pay for their emission rights their electricity and their petrol. At least by 2030 then we would have equality across the economy and by that time companies would have had 18 years to adjust to emission pricing which seems a pretty fair transitional period. 
In contrast the National Party scheme has an uncapped allocation so that emissions can grow. Indeed I challenge the Minister to answer the questions that Brian Fallow posed in the  
New Zealand Herald 
 which the Minister refused to answer at question time. The questions are: because there is so much more generous free allocation how much do emissions go up? How much later do they peak? How much extra is the bill as a consequence? Anyway we came down from the general proposition to an example in respect of Rio Tinto of the annual cost of a subsidy estimated by the Parliamentary Commissioner for the Environment—in the only study that has had the involvement of Treasury; I think it was involved in a study for the Climate Change Leadership Forum—to be $100000 per employee per annum. 
The other example I will use is one that we referred to in our minority report; it is Methanex. Methanex uses gas to convert it into methanol. The company has come to New Zealand because New Zealand’s gas price even now is lower than the average gas price around the world. Before Methanex came to reopen its factory in New Zealand it came to the then Minister responsible for Climate Change Issues and Minister of Energy and asked what the effect would be on emissions pricing. I happen to know very well what happened at that meeting because at the time I held those portfolios. I told Methanex that under our emissions trading scheme it would face the cost for its increasing emissions. Methanex understood that and it invested on that basis. Its free allocation under the model we had which is currently the law gave it $9.5 million worth of free allocation under the existing scheme. As of tonight that will increase to a minimum of $15.1 million per annum and possibly go as high as $80 million which is an increase of over $70 million per annum. 
The question I have for the Minister is why New Zealand has not seen one bit of analysis as to why that increase is justified. We have not seen how much that will cost per employee. If it goes to $80.9 million per annum the cost may well be close to $1 million per employee per annum and it is just not wise. We have not seen one bit of analysis from the Government on the part of Treasury or anyone else that analyses why that is necessary. In reality if that were not given to Methanex it would do as it would otherwise have done: it would pay for gas and it would probably share the cost of emissions with the gas producer. It would continue in business but the taxpayer would not be poorer to the tune of up to $80 million per annum which could well be a subsidy per job of close to $1 million per employee per annum. That is just absolute nonsense. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 For those who are listening from outside this Chamber I say that tonight we are debating the Government’s proposed changes to the emissions trading scheme. The Government’s proposed changes to the emissions trading scheme are fundamentally about weakening the emissions trading scheme and reducing the price signal that the emissions trading scheme sends through to the economy. I think it is an extraordinary night to be discussing the Climate Change Response (Moderated Emissions Trading) Amendment Bill given the news that has come through tonight that the Liberal Party in Australia is currently tucked away in a caucus meeting of all of its MPs who are looking at some proposals from the Australian Labor Party to give $8 billion to greenhouse gas polluters in Australia. The Australian Labor Party Government—the Federal Government—has put a proposal to the Australian Liberal Party that would dramatically weaken its scheme. Tonight we are also looking at a proposal from the Government to weaken the price signal and emissions trading scheme dramatically in New Zealand. 
It is an amazing night for another reason. Only today we were looking at a study in  
Nature Geoscience 
 that looked at what is happening in Antarctica at the moment. One of the issues around climate change is sea level rise. Sea level rise is driven in part by the melting of ice sheets particularly in Greenland and Antarctica. For quite some time there has been concern about the West Antarctic ice sheet. At the moment it looks like the West Antarctic ice sheet is dumping about 132 billion tonnes of ice per year on average into the ocean as a result of human-induced climate change and global warming which is warming the ocean around Antarctica and resulting in a warming in Antarctica. At the same time as we are looking at a significant shift in our knowledge about what is happening with the Antarctic ice sheet in this bill tonight we are looking at a proposal to weaken the price signal around greenhouse gases so that greenhouse emissions coming out of New Zealand will increase. It is extraordinary that on the very night that we discover that the evidence around human-induced climate change is building we have a Government proposal to weaken the emissions trading scheme even further. 
I will also talk about a few Supplementary Order Papers. The Green Party is putting up a number of different Supplementary Order Papers or amendments to this bill tonight. A series of those amendments are in relation to increased transparency. Those amendments are important because under the Government’s proposed changes there will be a dramatic increase in the free allocations given away to big polluters. There will be a very significant increase in the allocations given to big polluters so that they can produce greenhouse gases for free and the taxpayer picks up the bill. Within the Kyoto framework New Zealand is responsible for the increase in emissions and will have to buy carbon credits internationally so any increase in emissions coming out of New Zealand will result in the New Zealand taxpayer being liable to buy those carbon credits. 
It will be a very significant increase. Of the Treasury estimates that were given to the select committee—there were various Treasury estimates; they changed rapidly because Treasury did not have enough time to prepare properly—one estimate was that Government debt would increase by $110 billion by 2050 as a result of the changes in this emissions trading scheme. That is the increase in emissions would be so significant and hence also would be the increase in carbon credits allocated to big polluters that the taxpayer would have to cover the difference and the difference by 2050 including interest would be around $110 billion. Obviously that would add a significant amount of money to Government debt. Of course this was from a Government that tells us day and night that there is not enough money to spend on the different kinds of social and environmental programmes that are essential to our country but at the same time was willing to take on a massive increase in debt according to Treasury in order to weaken the emissions trading scheme increase our greenhouse emissions and increase our total debt on the Government. 
The problem is that as part of the allocation of these free emissions nobody really knows exactly whom these credits are going to. One of the changes the Government is making is decreasing the transparency around the allocation of all these free carbon credits. So it is giving away our money—around $110 billion of it by mid-century—to its mates who are the big polluters in the form of free carbon allocations but it wants to decrease the transparency around the allocation of this taxpayer money. That is what the bill does. It makes those changes so the Green Party is putting forward a series of amendments in order to increase transparency. 
When we think about it we see that it is interesting that at the same time as we are proposing in this bill to decrease transparency around the allocation of taxpayers’ money to big polluters we have a system of donations to political parties that is fundamentally not transparent. Basically it is very difficult to know who is funding political parties. On the one hand big polluters will be making large donations to political parties that will at some point or another occupy Government benches. At the same time we are pulling the cloak over the allocation of free carbon credits from the Government to big polluters. There is clearly a transparency risk in these two things combined. It is unacceptable in our country that we do not know which big polluters will be making donations to governing parties at the same time as those governing parties have control over the allocation of free carbon credits to big polluters. We are setting up a strategic risk of corruption. 
The Green Party thinks that there is no reason to set up this fundamental risk of corruption. Why should we? New Zealand currently rates as the No. 1 least corrupt country in the world and that is a great thing and something that we should be proud of. Why would we put in legislation a set of rules that opens us up to the risk of corruption when there is no need to? In fact why do we not have a set of rules so that there is transparency in donations to political parties and in this bill make sure that there is transparency of allocation to polluters? If one is receiving support from the Government in the form of free allocations—and this legislation allows it as did the previous legislation—then one should be transparent about it. What is wrong with having transparency around allocations? For that reason the Green Party is moving a series of amendments in order to increase transparency around the allocation to big polluters of what is effectively taxpayer money. We think that if we are to have this terrible scheme of subsidising pollution which this bill exaggerates even more than the last one did then the public has a right to know who is being subsidised. To us that seems a fundamental principle and for that reason we will be moving a series of amendments around transparency. 
Finally I touch on the process around all of this legislation coming together. The Minister in the chair the Hon Dr Nick Smith has made the comment that that $110 billion should not be relied on and there is some contest as to what the $110 billion really means. I point out that in the select committee Treasury officials were so confused about the real impacts of this bill that we had to take a 20-minute break in proceedings so that they could go away and try to figure out whether they were wrong by $50 billion. We had to face a $50 billion mistake in the select committee. The bill had been so rushed through and had had so little proper consideration that Treasury officials had to request a 20-minute break from the select committee so that they could go and figure out whether they were out by $50 billion. My question is whether this is an acceptable way to make Government policy. I ask whether this could possibly be an acceptable way to make Government policy and the answer of course is no. That is why the Government should take this bill away and get the work done properly rather than rely on 20-minute consultations between Treasury officials and others to figure out whether they have made a $50 billion mistake increasing liability on the taxpayer. 
I ask the Government to support our amendments to increase transparency in order to protect the reputation of the New Zealand Government as a non-corrupt Government. I ask the Government to consider the true fiscal and environmental implications of this bill. 
CRAIG FOSS (National—Tukituki) 
: 
 Firstly I am quite offended by the implication and insinuation from the previous speaker Dr Russel Norman who said that this House may be opening itself up for corruption if this Climate Change Response (Moderated Emissions Trading) Amendment Bill is passed. I think that all members should take offence at that. I note that he was trying to word it carefully but the implication was quite obvious. It might make good headlines but I for one was quite offended by it. However I let the member speak. 
There is another point to note while we are talking about independent analysis which a member opposite recently questioned in his speech. The Finance and Expenditure Committee—and any member of this Parliament actually—has access to all the analysis studies submissions and whatever one likes from the two select committees that looked at this issue previously. In 2007 the Finance and Expenditure Committee examined the emissions trading scheme bill and a special committee reviewed the legislation earlier this year. In terms of the latter committee the New Zealand Institute of Economic Research and Infometrics did some substantial in-depth work on most of the issues that are before us right now. If members want to take a static snapshot of where we are now then I guess they are technically correct—at least the previous speaker was—but actually all the information is available. As we said constantly during the select committee process this bill rests on the work of the members of those other committees and their advisers. 
I shall now touch base on the allocation. The words “free allocation” were used by Dr Norman and he talked about people’s money being given away as part of it. We have to remind ourselves that there is a whole lot of free allocation under the existing legislation. That message is getting a bit lost with some members trying to put the word out there that some vast cheques are going to be written. It was interesting that during the select committee process some Labour members were getting up to speed on their own existing legislation although they must have seen the Cabinet papers when they were in the previous administration. 
We have to ask why the previous administration even considered and brought in free allocation and why the current administration is continuing it. The arguments were about the execution of it its timing and some other points that other members have raised to be fair. It is quite simply because as an exporting nation New Zealand is very exposed. We are trade-exposed job-exposed credit-exposed or whatever one likes. Yes the previous administration had ambitions to be carbon neutral and all sorts of things and other members have canvassed those issues but the point was to put in a framework to get New Zealand out of the starting blocks. We wanted to have in place a framework and a scheme to have in place a price for carbon emissions—be it the marginal price the full price or whatever it is. Yes we will be arguing for a wee while about the speed of it but that is actually it. But the risks were also acknowledged. The risks were quite simply that if New Zealand was to do it without having some kind of compensation or if the Crown was to keep all the units allocated to New Zealand then if our major industries our major employers our major processing industries did not pack up and leave by the dozen they would at least drive down or kill off their production lines. That is simple economics. Quite simply—and the previous administration also acknowledged this—we compete with Australia mostly with regard to most of what we produce and if our competitors are not facing the same cost inputs that we are they will be able to penetrate and sell to our markets at a lower price or to take larger profits than we can. At the end of the day who would be the loser? It would be “New Zealand Inc.” What is “New Zealand Inc.”? It is the Crown and the private sector and therefore jobs would be lost. 
The whole argument that we have heard today and I am sure we will hear it again tonight we will be quite— 
Hon Maryan Street 
: This is too simplistic for words. 
CRAIG FOSS 
: Quite simplistic? It will not be as simplistic as that member’s history as a Minister but we will not go there at the moment. I cannot recall seeing that member at the select committee; maybe she was there. 
Why is the free allocation there? We have got the 1.3 percent per annum phase-out rate in this bill. We must remember that agriculture alone has had an efficiency gain of about 1.5 percent per annum for the last 10 to 15 years or maybe for even longer. People in the sector are doing it anyway. 
My point is quite simply that we should acknowledge what is in place already. Yes there are these crazy headlines that other members are talking about but the free allocation is about saving New Zealand jobs holding on to what we have and growing our economy. It is as simple as that. I cannot quite see why other members get up to try to argue that point. I am yet to be convinced. Let us have a debate about what this particular bill is putting in place without as some members are doing ignoring what is in place now. Thank you. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I want to use this call to look more closely at some of the fiscal assumptions in the Climate Change Response (Moderated Emissions Trading) Amendment Bill. They are both huge and very much open to debate. Already in this debate tonight we have touched on some numbers that would boggle the minds of most New Zealanders and cause a great deal of concern and anxiety because for every New Zealand man woman and child we are looking at thousands and thousands of dollars of potential tax liability arising from the change between the scheme proposed by the previous Government and the current scheme. 
In respect of this part of the bill I will take a couple of minutes to examine some of the assumptions behind that argument. To some degree I want to take the Government at its word and run some “even if” arguments—even if one accepts some of its presumptions where does one get to? 
The Government contends that the value of the carbon subsidies in this bill is only $50 billion. 
Hon David Parker 
: Only? 
Hon DAVID CUNLIFFE 
: My colleague remarks: “Only” because that is a 50 with a lot of zeroes after it—$50 thousand million by 2050. The Government has as recently as this morning reconfirmed one of the two great assumptions upon which that mid-range Treasury estimate stands and there is now consensus in this House on the price path for carbon that the Government is using as the basis for its estimates. There is now a shared understanding that that price is $25 a tonne until 2013 and $50 a tonne thereafter which is fairly parallel to the estimates made by the Australian Government. Of course this Government is giving in addition to the $25 short-term price a two-for-one 50 percent “buy now get one free” discount which is kind of like Noel Leeming on steroids but I leave that aside. 
The key difference between the $50 billion or 6 to 8 percent of GDP debt that was in the Cabinet paper of 21 September—which was the basis for the Government’s decision to proceed with this bill—and the $110 billion or 14 to 17 percent of GDP that Treasury and the climate change working group officials briefed the Finance and Expenditure Committee on is not in respect of the price path but in respect of whether it is fair to include the compounding effects of the charge. That is something akin to the time value of money allowing a cost of capital and of course there is a broad precedent for doing so in the Government accounts. 
Every Government entity that has a capital asset pays a capital charge on that asset. It varies by premium on the Government’s cost of capital. It is in the range of 8 to 11 percent depending on the entity. It is charged every year. It is an expense on that entity’s income statement and it can be capitalised as a debt on the entity’s capital account. So that is part of Government accounting. I see no reason why we should depart from the process of including in the forward cost estimates some reasonable assumption around the cost of capital. Treasury’s version of that as disclosed to the select committee was that it gets the figure to around $110 billion cumulatively including those capital charges or interest charges by 2050. 
We are happy to have a reasonable debate about whether the result is $120 billion $80 billion or $90 billion depending on what interest rate is used. Of course there will be variability and that is why we asked the officials when they were before the select committee to show us the bell curve—the distribution of those costs depending on the various modelling assumptions that they had put into their analytics—but they could not. Both Treasury and the climate change working group could not explain what sensitivity testing if any they had done around those humungous estimates. That was of great concern around the committee table although some were too polite to say. There is to this day as far as we can tell no bell curve of simulated probability distribution for those costs. We know that there are different variables that can be assumed. As Treasury’s regulatory impact assessment unit said the bottom line is that the quality of the analysis here is just not appropriate for a bill of this magnitude. I mean no offence to officials who have had an extremely difficult job and have been working under extreme time pressure to get this bill through. 
So we are left with taking a most generous position. Let us assume away any need for sensitivity testing. Let us take the Government at its word that it will be only $50 thousand million by 2050 to ordinary Kiwis on their net tax position not $110 thousand million by 2050. Let us give that one for now for the sake of argument to the Government. What next? It is now common ground that the Cabinet paper of 21 September the crucial Cabinet paper was wrong. There was a typographical error in the text. It was not 6 to 8 percent of GDP but 14 to 17 percent of GDP equivalent. I hear people in TV-land or radioland asking themselves: “Does this matter?”. Let me put it in context. When the Government changed at the last election the total amount of net Crown debt was a couple of percent. The total amount of gross Crown debt—that is all the debt the Government owed around the world—was equal to about 18 percent of GDP. It had been down to 17 percent but it came up to around 18 percent before the election. 
So what the Government is essentially buying into here is a doubling of the current level of gross Crown debt in terms of relative impact on the Government balance sheet. That is a big number. It gives the lie to the Government’s protestations that it cannot afford adult and community education because that cost $13 million not $50 thousand million. It puts the lie to the supposed blow-out on accident compensation a supposed deficit of around $2 billion that is actually running at a cash surplus of around $1 billion positive. But either way that cannot matter so much because the Government has just spent $50 thousand million of taxpayer money subsidising big polluters. 
But even then for the sake of argument let us give the Government the benefit of the doubt. The next stage of the Government’s argument is this: it is not really real money. It is just play money—think Monopoly. There is a problem with that argument because New Zealand the Crown has ratified an internationally binding treaty obligation under the Kyoto Protocol. We all collectively owe it to the United Nations if we run short of net carbon credits—period. Therefore we will have a liability— 
Hon Dr Nick Smith 
: You don’t understand it. 
Hon DAVID CUNLIFFE 
: I said “net” I say to the Minister in the chair. The Minister is welcome to explain that; I hope he will take two or three calls. 
But even if it were Monopoly money then the final stage of the Government’s argument is this: because this will not necessarily be negative from a zero-tax position we do not necessarily “owe” it but it might instead mean we are not spending it on something else and there are two problems with that. Firstly one cannot say in public accounting that this tax dollar goes to that expenditure. It all goes into one central pot and it is incontrovertible whether the number is $50 billion or $110 billion that it goes out of that pot and our net position will be that much worse off relative to where we would have been under the existing scheme. 
It is then a second order discussion in terms of where we start from with our other fiscal assumptions. Any Government by 2050 will face hard choices. It will have a lot of retired people to support. It will have a huge need to invest in environmental technology and climate remediation and adaptation. All of that will have to be paid for and that is part of the reason that we need fiscal flexibility at that point. That is very very important. 
So this is real money. It is a real trade-off. It is at least $50 thousand million by 2050 which is tens of thousands of dollars at least per man woman and child. It really matters and it buys us—what? It buys us less than a 1 percent reduction in net emissions from agriculture and heavy industry—less than 1 percent. 
The Parliamentary Commissioner for the Environment said that based on the analysis and the numbers there is no way these provisions will achieve even the Government’s own paltry target. Even on the Government’s own analysis even on the Government’s own design even on the Government’s own target by several independent authorities it cannot and does not work. So why are we here on the eve of Copenhagen with great uncertainty still about Australia? Why are we passing this bill in urgency when it is a complete fiscal shambles? I will talk again later. The process has been a shambles. 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 I want to expose for the Committee some of the double standards in the contributions that have been made by members. I start with Mr Cunliffe who said that the allocations to industry are a subsidy. Did I hear him correctly? 
Hon David Cunliffe 
: Oh indeed they are. 
Hon Dr NICK SMITH 
: Well that is very interesting. Let us go back a year. Just 12 months ago the Green Party was criticising the previous Labour Government for the amount of allocation it was making to industry. Do members know what the then Minister Mr Parker said? He said that these allocations are not a subsidy. Well that is interesting. I have the numbers here of just how many units are allocated under the existing law so when Labour allocates 654 million units of carbon—that is what its law does—that is not a subsidy. But when a change of Government occurs and we do an allocation then it is a subsidy. I want a member to explain why it was that when Labour’s legislation provided for an allocation Mr Parker very specifically said to the Greens that it was not a subsidy but now it is. I think Labour members have to explain that. 
The second point is that members have said there has been no analysis. Those were the specific words that Mr Cunliffe used. Well I have a report from 20 May 2009 by the New Zealand Institute of Economic Research and Infometrics. This joint report very specifically recommends that the most economically efficient way to deal with the issue of leakage is a production or intensity basis. In all the debates around the economy that I have heard in my 20 years I have heard those two firms quoted more often than any. In fact we said that there was some contrary advice. Last year we had one report from the New Zealand Institute of Economic Research saying one thing and we had Infometrics saying another. We said that this was an important call and a really big decision. We wanted to get the best advice possible so we sought a joint report. So when members say that there has been no analysis I say that they have to look at the detail of that report which recommends exactly the approach that is being taken in this bill. 
The third point is around the issue of allocation. The first point to understand is this: the costs no matter what way we cut them for the first 10 years of the emissions trading scheme under the existing scheme and the new scheme are no different. Let me go through this very specifically. We have a softer transition regime. The Government said that there is a recession and the last thing we want to do is for an emissions trading scheme to snuff out the fragile recovery. We said that in those first few years we do want to take a softer approach. That means that New Zealander’s petrol bills will go up by half the amount rather than a bit over 7c a litre. It will be a bit over 3c or 3.5c a litre. In respect of power prices rather than the price going up by 10 percent it goes up by 5 percent. There is a cost involved; that is quite true. The analysis shows that the cost of the change is $400 million. 
For the next period from 2013 to 2018 this revised scheme costs less. Let me explain why. The members were very keen to quote Comalco earlier. When they talk about the phase-out rate we should remember that in the current scheme there is zero percent phase-out of industry support from 2013 to 2018. So why is zero percent OK but suddenly then it is 8 percent? This scheme starts the phase-out at 1.3 percent per year and that does result in some savings. So over the first 10 years of the scheme there is absolutely no difference in terms of the balance. 
The thing I find most interesting is this: I am pretty confident that this John Key - led Government will be in office for 10 years. 
Hon Members 
: What? 
Hon Dr NICK SMITH 
: I am quite confident of that. 
Hon David Carter 
: It will be more than that. 
Hon Dr NICK SMITH 
: My colleague Mr Carter says it will be more than that. But it is interesting that the most controversial point in this bill is not about what the rules are for the next 10 years but what they are after that period. There is not much controversy about the next 10 years. Where are all the members’ debates about what we are doing incorrect in that first 10 years? [ 
Interruption 
] Mr Chairman? 
The CHAIRPERSON (Eric Roy) 
: No. The Minister has had two consecutive calls. You get only one opportunity for that. 
CHRIS TREMAIN (Senior Whip—National) 
: 
 I raise a point of order Mr Chairperson. Speaking to your decision my understanding about the ruling on consecutive calls was that it was about consecutive calls in a row. So any member in the House may take two calls in a row and may have a number of two consecutive calls following that down the track. 
The CHAIRPERSON (Eric Roy) 
: No. Let me read to you the leave that was sought. Well the salient point is that members have an unlimited number of speeches of 5 minutes each but not more than two consecutive speeches on each part or provision. 
Hon David Cunliffe 
: Consecutive. 
The CHAIRPERSON (Eric Roy) 
: Yes on each part. So on the next part the slate is clean for members. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I raise a point of order Mr Chairperson. I seek your clarification. It is the understanding of the Labour Opposition that members may take more than two calls per part but may not take more than two consecutive calls per part. Is that correct? 
The CHAIRPERSON (Eric Roy) 
: That is what the leave that was granted states. 
Hon DAVID CUNLIFFE 
: So for example you correctly ignored my plea for a third consecutive call during my last intervention but that does not preclude me from taking a subsequent call during this part. 
The CHAIRPERSON (Eric Roy) 
: That is correct. I just make another point here. The Minister in the chair Dr Nick Smith has raised the point that normally these rules do not apply to Ministers in the chair because they are able to take an unlimited number of calls to provide explanations. But I am bound by the leave granted which is in front of me— 
Hon Dr Nick Smith 
: But that was never intended to do that. 
The CHAIRPERSON (Eric Roy) 
: What I need then to clarify this issue is for some member to seek leave that the Minister have more calls—if that is the understanding. 
CHRIS TREMAIN (Senior Whip—National) 
: 
 I raise a point of order Mr Chairperson. There is a clear ruling which we need to abide by because the Leader of the House put it in place. I want to be clear about the Minister in the chair: by your ruling has he had two lots of two consecutive calls? 
The CHAIRPERSON (Eric Roy) 
: No he has had one. I am abiding my interpretation of the leave which is in front me. I had no part in passing it or even in its construction so I am trying to interpret it. He had two calls initially and because I do not have any other instruction I have applied a blanket interpretation. 
CHRIS TREMAIN (Senior Whip—National) 
: 
 I raise a point of order Mr Chairperson. Taking up what the Hon David Cunliffe said I think it is the understanding of both sides of the House—[ 
Interruption 
] Well Mr Cunliffe just said that speakers are allowed two consecutive calls and after that additional calls but only one call at a time. 
The CHAIRPERSON (Eric Roy) 
: That is correct. Members can take unlimited calls but they can have two consecutive calls only once per part. 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 I raise a point of order Mr Chairperson. I am one who likes to engage in the debate in order to answer members’ questions. It has always been the convention that the Minister in the chair can take more than one call. When leave was sought by the Leader of the House it was to allow other members to be able to have more calls in the debate. We want to have a really good open debate about the bill. I find it a quite extraordinary ruling that when the House has granted leave to broaden the scope of members’ participation in the debate you interpret it as overruling and constraining the convention about Ministers taking more than one call. When leave is sought it is to extend the general rules that are there. I think it is a quite unusual ruling for you to imply that the attempt by the Government to extend the debating opportunities for members of the House also meant that the Minister’s speaking time was going to be constrained. If that was going to be the unusual interpretation quite clearly the Government would have not have agreed to leave on such a measure. 
CHARLES CHAUVEL (Labour) 
: 
 I just want to make it clear that following a discussion internally amongst Labour members we with respect think you have got the ruling right. I am not saying that because I am trying to make any sort of petty point against the Minister; I am saying it because I think the Minister in his explanation of why you ought to take a different course has misunderstood the reason for which leave was sought and granted. Leave was sought and granted for a relaxation of the rules in this case because there was recognition that there had not been proper scrutiny at the select committee of a big bill that a big Supplementary Order Paper had been tabled on the day that— 
The CHAIRPERSON (Eric Roy) 
: I do not need to go into that stuff. 
Charles Chauvel 
: I am just saying we support your ruling. 
The CHAIRPERSON (Eric Roy) 
: Thank you for that but I do not actually need it. I have in front of me some words and I am making my best possible attempt to interpret them. Can I just say to the Committee that leave was sought to depart from the convention. All I can operate from is what is in front of me. I am simply interpreting verbatim what is in front of me. Members may need to consider that on future occasions but I have an instruction from the House. 
JOHN BOSCAWEN (ACT) 
: 
 I raise a point of order Mr Chairperson. 
The CHAIRPERSON (Eric Roy) 
: I do not know that I need any further assistance. I have made a ruling based on my interpretation of the leave. Does the member have new material? 
JOHN BOSCAWEN 
: I do have new material. I was interested in that leave as well so I took the trouble of visiting the Clerk Mary Harris in her office late this afternoon. She advised me that the leave meant that members had unlimited calls but subject to the ruling of the Chair the Chair would allow no more than two calls taken together. In essence she was saying that we could give as many 10-minute speeches as we wanted and as the Chair would allow. We were not restricted to one double call or two double calls. As long as we had new material and it was a useful debate and the Chair allowed the debate to continue we could take as many double calls as we wanted and the Minister could take as many double calls as he chose. That was from Mary Harris the Clerk of the House this afternoon. 
The CHAIRPERSON (Eric Roy) 
: With respect that is not what the leave says and I have interpreted it as clearly as I can. I am doing my best. I will take a further call from some other member. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I raise a point of order Mr Chairperson. I understand that you want to advance the debate and I wonder whether you might to clarify what is clearly a range of understandings of your ruling be kind enough to read out the words again and repeat your interpretation so that we can all be of common mind. 
The CHAIRPERSON (Eric Roy) 
: That is fine. I am happy to do that. The Leader of the House sought leave: “I seek leave that for the Committee stage of the Climate Change Response (Moderated Emissions Trading) Amendment Bill members have unlimited number of speeches of 5 minutes each but not more than two consecutive speeches on each part or provision in the provision.” Members may be aware that I have a little system here in which I record down the side of this paper when members have taken two calls because I am trying to obey the leave that was granted. I am doing my best. 
John Boscawen 
: I raise a point of order Mr Chairperson. 
The CHAIRPERSON (Eric Roy) 
: No I have ruled on this. I will take a call. 
MOANA MACKEY (Labour) 
: 
 I am happy to take my first of what I hope will be many calls in this very important Committee stage. I endorse the question that was put to the Minister in the chair the Hon Nick Smith by my colleague and I also look forward to the Minister engaging in this debate. We appreciate the engagement that the Minister shows the Committee in this debate. 
I will raise one issue first because it is an issue about which we had a number of questions at the select committee. It might be seen to concern one of the less high-profile matters within this emissions trading scheme amendment bill but it is about the changes for allocations to the fisheries sector. Members who were involved during the last Parliament in the emissions trading scheme that the previous Labour Government put through will remember—[ 
Interruption 
] That is right; for some of us this is the third iteration of this debate. At the select committee we were swayed by arguments from the fisheries sector that despite the fact that no other sector would be compensated for liquid fossil fuel use and because of the trade-exposed nature of the industry and the situation it was in the industry was looking for the kind of assistance that other industries were receiving. The select committee listened to that argument; when the bill was eventually passed there was provision for the fisheries sector. 
Under the existing emissions trading scheme legislation which the Labour Government passed that allocation was given to vessel operators. That is to say the allocation was given to the people who ran the fishing vessels the fishermen and fisherwomen who were facing up front the costs of liquid fossil fuels and any increases that an emissions trading scheme might be imposing upon them. That seemed to be sensible. Indeed from my recollection—and I could stand to be corrected—that is what most of the sector were arguing for. It seemed to be the easiest and most sensible way to arrange it. No one came to us or lobbied us after the fact to say that they believed that to be a bad way or the wrong way to do things. So we went ahead and did that. 
Under the deal with the Maori Party we note that the allocation to the fisheries sector has increased. But the big change—and this is the matter on which I would really appreciate some response from the Minister—is that the allocation now no longer goes to the vessel operators; it goes to the quota holders. That is a significant change for a number of reasons. I know there are pros and cons on both sides but I am concerned about this change for a number of reasons. Firstly not every person who fishes in New Zealand waters is under the quota management system. That means that if someone is fishing a stock that exists outside the quota management system that fisher now gets nothing. 
Hon David Carter 
: What’s this got to do with the emissions trading scheme? 
MOANA MACKEY 
: David Carter has just asked what this has to do with the emissions trading scheme. That is unbelievable. The Minister of Agriculture does not know that we are changing under this legislation the way we provide free allocation to the fishing sector. 
Hon David Carter 
: That’s not what you’re talking about. 
MOANA MACKEY 
: That is what I am talking about. I ask Mr Carter please to listen. 
Hon David Carter 
: Well make it plain and clear. 
MOANA MACKEY 
: Oh dear Lord! Someone who did not even realise that this provision is part of the emissions trading scheme might do well to listen rather than yell at me across the Chamber. 
The fact is that under the legislation there is a change by which the free allocation goes from the vessel operator to the quota holder. If fishers fish a stock that is not in the quota management system they now get nothing. Under the previous legislation they did get compensation. I ask Mr Carter whether that is fair. That is fair? So if someone fishes a stock— 
Hon David Parker 
: It’s fairer for the big end of town. 
MOANA MACKEY 
: That is right. For the big end of town it is fair I say to Mr Carter. Fishers who are fishing something that is not in the quota management system face the same emissions trading scheme cost on their liquid fossil fuels as someone who fishes inside the quota management system but they get nothing. Yet the person working inside the quota management system gets free allocation. 
It is not only that but aquaculture gets nothing. I ask Mr Carter whether that is fair. There we go—Mr Carter thinks that is fair. Not only that— 
Hon David Carter 
: Aquaculture got nothing out of that Government. You did nothing about it. Nine years of nothing. 
MOANA MACKEY 
: I ask Mr Carter to listen because this is an important fact. Quota holders do not have even to fish their quotas to get the free allocation. So here is a free allocation that has been given to compensate those operators for an upfront cost of liquid fossil fuels but if that quota is not fished and that cost is not even incurred they still get the money. Oh members opposite have gone very quiet now—Mr Carter is now reading a very important document that he has in front of him—because that is indefensible. If we believe that the fisheries sector needs free allocation is trade-exposed and deserves that free allocation why would we not give it to the vessel operator the person who is facing the upfront costs? 
The argument we heard was that it damages the quota value. That was the reason to give it to the quota holder. But we can also address that by giving that subsidy for the liquid fossil fuel up front and thereby protecting the quota value. We can do that either way and the officials told us that—that it was one way or the other. But the way the Government has chosen excludes people who fish outside the quota management system including those in aquaculture. I do not understand why the Government is giving it to people regardless of whether they fish their quota. They are not facing a cost yet they get the money. I really want an explanation from the Minister on this matter. I believe it is much fairer to give that money to the person who is facing that cost because that it is what it is for. It is there to compensate for any increase in liquid fossil fuels that the vessel operator may face so why is it not given to them? It can be said that it will be passed on but there is no guarantee that it will be passed on. I know a whole lot of people in the fishing industry who would say: “You’re dreaming if you think this is going to be passed on to us.” 
In some cases the quota holder and the fishing vessel operator are the same person so that will not be such a big issue. But if this is a deal that the Minister had to do just to get support then he should just tell us that and I will sit down and never mention it again because I know that this is not about defending one argument or another. I do give that promise; I say to Mr Carter that I will not mention it again. But if that is what it was he should just tell me. 
Hon Dr Nick Smith 
: Yeah right! 
MOANA MACKEY 
: Yeah right—that is probably true. I cannot understand why the free allocation would not be given to the people facing the upfront costs which also protects that quota value. We do everything that the officials told us they were trying to achieve in giving it to the quota holder but it seems to me that this protects the big end of town; this does not protect the little single-operator fisherman who is trying to keep afloat and who was facing a cost with the emissions trading scheme under the previous bill— 
Hon David Cunliffe 
: Leasing of quota. 
MOANA MACKEY 
: Yes that is right—leasing of quota. He thought he was going to get some help under the previous bill. To be fair that was put in late in the piece and we acknowledge that. We were very much swayed by the very good submissions we heard at the Finance and Expenditure Committee—and the Minister responded. 
Hon Dr Nick Smith 
: Yeah right! 
MOANA MACKEY 
: No we were. Why would it not be given to them? We heard some very impassioned submissions at the select committee from people who could just not understand. Everything the Minister wants to achieve could be achieved by giving the free allocation to vessel operators and then everyone would be included. Then we would not shut out aquaculture and we would not shut out people fishing non - quota management system stocks. More than that it would be given to people who are facing the upfront costs. We are actually paying for a cost as opposed to just handing over a cheque for millions of dollars with absolutely no requirement for quota holders even to fish those quotas. This is a genuine question and I would appreciate the Minister’s response. 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 In the spirit of the debate I want to respond to the points raised by Moana Mackey. The first thing that is amusing is the sudden love Labour has for the fishing industry. Let us just remember when Labour introduced its emissions trading scheme bill how much support it provided for the fishing industry. It was absolutely zip; absolutely zero—not for the quota holders not for the vessel operators. 
Hon David Cunliffe 
: Where did the 50 percent come from? 
Hon Dr NICK SMITH 
: That is a very good question. The news release from New Zealand First said that in its negotiations with Labour it secured 50 percent allocation for the fishing industry. Is not that interesting? When Labour does agreements with other parties as it did with New Zealand First to provide the 50 percent for the fishing industry that is just what one does in Government! But now Labour is in Opposition there have been all sorts of quite appalling accusations and that illustrates the double standards. 
We now come to the second question. My colleagues and I campaigned on a policy of increasing the allocation to 90 percent. The debate is whether it should go to quota holders or to vessel operators. The advice we had is that it is a relatively balanced call. Let me tell members the strong view of the Maori Party. The Maori Party did contribute to the debate. They said that in New Zealand about 50 percent of the fish are caught by foreign fishing vessels. The Maori Party had a strong nationalistic view—I think that would be a fair way to express it I say to Mr Te Ururoa Flavell—that to give half of this allocation to fishers who come and catch that fish mainly annual catch entitlement coming in was not the support that the Maori Party wanted to provide and it did make that strong submission. 
There is also quite a strong and more principled argument beyond just that issue. The compensation for fishers is around a loss of asset value. I will tell members why. There is no choice about whether the fish is caught in New Zealand’s exclusive economic zone. It is not like an issue like aluminium which might be manufactured offshore. It is not like the issue of New Zealand Steel where it might be offshore and there are competitive at-risk issues. What we have here is an issue where the fish can be caught only in New Zealand areas. It is a loss of that property right so in my view that is quite a sensible provision in this bill. But I just say again that it is a bit rich of Labour to be arguing about the level of support to the fishing industry— 
Hon David Cunliffe 
: You can’t argue it both ways. 
Hon Dr NICK SMITH 
: —when the record I say to Mr Cunliffe is that Labour was proposing in its bill to provide absolutely zip zero for the fishing industry. 
JOHN BOSCAWEN (ACT) 
: 
 It is a pleasure to take ACT’s first call in the Committee stage debate. I suspect that this debate will continue for many many hours. This is a very sad day for New Zealand. The Climate Change Response (Moderated Emissions Trading) Amendment Bill has implications for all New Zealanders and it imposes a tax on all New Zealanders. The previous Labour Government passed its own emissions trading scheme last year just before the general election and that imposed massive new taxes on everyone in New Zealand. The National Government has an opportunity to amend that to reverse the damage that it did. Although it has moved partially in that direction it has lost a huge opportunity. The ACT Party strongly opposes this bill and will be voting against it. 
I said that I expect this to be a long debate and I hope to take many calls subject to the Chair’s indulgence. I hope to talk about the fishing industry and the impact on that industry. I wish to talk about agriculture and farmers and the impact on that industry. I want to talk about the impact on small and medium sized enterprises which are the backbone of employers in this country. They get absolutely zilch zero nothing. There is no free allocation whatsoever for them. I wish to talk about the impact on heavy industry. I want to talk about the impact on families. 
The ACT Party spoke widely earlier this year on New Zealand being a place of no second-class citizens—the haves and the have-nots. This bill will impose a cost of 10 percent extra on the electricity bill of every New Zealander. [ 
Interruption 
] That is right. We are hearing 5 percent absolutely. Labour was 10 percent. On 1 January 2013 the price of electricity will rise by 10 percent. Under this bill National is putting up electricity by 10 percent. People have the audacity to come into this Chamber and talk about subsidies. Who are we subsidising? We are subsidising the owner of Genesis we are subsidising the owner of Meridian Energy we are subsidising the shareholders in TrustPower and we are subsidising the shareholders in Contact Energy. From 1 January 2013 every single New Zealander will be paying 10 percent more for his or her electricity. If we want to talk about subsidies we should talk about the cost to ordinary New Zealanders. We should talk about the people who are underprivileged; we should talk about the have-nots. 
It is interesting that there has been discussion about Hone Harawira and whether he will rejoin the Maori Party. If Hone Harawira did not have an excuse to part company from the Maori Party previously he has it with this bill. What do the people of Tai Tokerau get out of the Maori Party’s support? They get absolutely nothing. Ngai Tahu walk away with 30000 hectares of conservation land to plant trees on and good on them. They are obviously very smart negotiators. But the people of Tai Tokerau with the deepest respect get absolutely nothing. 
In subsequent speeches I want to talk about industry-based allocation. I want to talk about New Zealand’s potential emissions reduction target of 50 percent by 2050 and how flawed that is with our unique emissions profile. We have heard a lot from Mr Cunliffe this evening about the submission of the Parliamentary Commissioner for the Environment and I want to talk about her submission. I want to talk about the science on which this bill is supposedly based. I want to talk about the level of inept regulatory investigation—the fact that there was no proper study. There are many issues that the ACT Party wishes to talk about and I hope we are still talking about those issues this time tomorrow. 
But before I proceed further I feel I need to remark on two comments made by the Minister. Mr Smith asked a rhetorical question of the Greens 15 minutes ago. He asked when was a subsidy not a subsidy—when Mr Parker can stand up and say what the Labour Government was doing was not a subsidy but the Labour Party has the audacity to say it is a subsidy now. I say to Mr Smith that there is actually a difference. There is a difference between the Labour scheme and the National scheme and he knows it well. Under the Labour scheme the free allocation reduced to 2030 and from 2030 the emissions trading scheme became a massive tax grab. There was no free allocation beyond 2030. National talks about its scheme being fiscally neutral and it talks about the value given to big emitters. We will talk about emitting pollution and carbon dioxide—and how I am polluting right now it would seem with carbon dioxide. Under the National scheme the big emitters essentially we have been told are fiscally neutral. So it is good enough for the fishers to go out with allocations from 2030 it is good enough for every single New Zealander to pay more for electricity and the scheme is fiscally neutral. If we are taking from ordinary working families and we are fiscally neutral I ask Mr Smith who we are we giving it to. 
Hon Dr Nick Smith 
: Forestry. 
JOHN BOSCAWEN 
: Mr Smith says that we are giving it to forestry. Is that not interesting because the Federation of Maori Authorities came to the select committee and said that the emissions trading scheme represents the biggest confiscation of Maori wealth since the 1800s. [ 
Interruption 
] Shame—exactly. 
Let us talk about the fishing industry; Mr Smith took a query on the fishing industry. He talked about the fact that Labour members were johnny-come-latelys to the fishing industry and that the industry was not going to have any subsidy whatsoever and that is absolutely true. I understand that at the select committee for the last bill the decision to put in a 50 percent allocation was a last-minute decision and the fishing industry was to get a 50 percent allocation for the 3 years up to 1 January 2013. National has trumped that with a 90 percent allocation. What happens on 1 January 2013? It goes to zero. 
Let us have a look at what the National minority report said on Labour’s emissions trading scheme last year—and I am told it was written by the current Minister. If that is so the Minister wrote on page 6: “New Zealand’s fishing industry exports 92 percent of its output earning $1.3 billion per annum.” It is an energy-intensive sector I say to Mr Smith with fuel making around 40 percent of the operating costs of vehicles. The bill provides an allocation of units to sectors such as meat dairy cement steel forest and aluminium but excludes the fishing industry. This arbitrary exclusion does not seem well justified. 
I wonder what Mr Smith says to his constituents in Nelson. I was in Nelson last Friday as he very well knows and I saw the Sealord factory. I saw that it employs 400 people. I was told that the processing that the factory does could just as easily be shipped off to China as has happened at so many other processing factories that have been closed down and he has the audacity to stand up here and say that this is an issue of property values. It is actually an issue of keeping the people employed at that Sealord factory. 
But I move on because I have allowed myself to be distracted in responding to Mr Smith’s comments. I would like to pay a special tribute to two people on the select committee and I hope they hear my comments. The first person is the committee chair Mr Craig Foss because Mr Foss was given a hospital pass. He was given the job of doing the Minister’s bidding and I feel very sorry for Mr Foss because I suspect I caused him a few problems. But Mr Foss was given his riding instructions and he was told to have this bill back in the House on 16 November come what may and that it did not matter if the committee report was not ready or if the revision-tracked bill had turned up. I know that Mr Foss will hear my comments so I pay tribute to him because he was given a hospital pass. 
The other person I pay tribute to is Rahui Katene because I would suggest that probably the overwhelming amount of what I know about this emissions trading scheme I have learnt in the last 6 weeks. It was interesting that the Hon David Cunliffe and Amy Adams both acknowledged that they had not previously sat on select committees. The reason I acknowledge Rahui Katene is that she had the courage and the wisdom to vote with the Labour Party the Green Party and me to allow submissions to be heard. Jeanette Fitzsimons is nodding her head. Jeanette Fitzsimons stood in on that select committee. 
The CHAIRPERSON (Eric Roy) 
: Before I call the next speaker I say that although I did not break up the member’s speech while he was speaking we pay attention to try to get titles as correct as we can. It is Dr Smith not Mr Smith. I did not break up the member’s speech. The next speaker will be Dr Hutchison. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 That is a great choice Mr Chairperson. I too like Mr John Boscawen take great pleasure in speaking on this Climate Change Response (Moderated Emissions Trading) Amendment Bill— 
Chris Hipkins 
: Why? 
Dr PAUL HUTCHISON 
: —and he asks why. It is because indeed it is exactly that. It is a very very practical response to the previous Labour Government’s legislation which was totally impractical and out of this world. 
It was a little rich to hear the Hon David Cunliffe going on about Treasury’s prediction of $100 billion. He was trying to verify that figure in as many ways as he could twisting and turning and thinking that people would believe him. That is a bit rich because it was the previous Labour Government that back in 2005 and 2006 campaigned and said a billion dollars would come New Zealand’s way if we took on its emissions trading system. What happened? We were a billion dollars in deficit. Labour’s track record is one of that sort of predictability. 
Hon David Cunliffe 
: Weren’t you out by just 60 times? 
Dr PAUL HUTCHISON 
: Mr Cunliffe knows very very well that this scheme will be reviewed at 5-yearly intervals and will be constantly monitored. He knows very well that there will be changes internationally that we cannot predict right now. 
In this excellent Part 1 which we are debating today we are introducing the absolutely practical and appropriate amendments that have come on Supplementary Order Paper 98 in the name of the Hon Nick Smith and the amendments introduced by Rahui Katene of the Maori Party. I say to Mr John Boscawen that he was right; Craig Foss made an excellent job of chairing the Finance and Expenditure Committee under very very difficult conditions. Indeed he was right to say Rahui Katene and the Maori Party have been quite appropriate in their response to ensure that New Zealand ends up with a practical and realistic emissions trading system. 
Earlier on this afternoon I recall that the Hon David Cunliffe made a comment that was a bit appalling. He said something about this generation of New Zealand’s children entering its twilight phase. That epitomises the pessimism of the Labour Party under this scenario; it absolutely epitomises the conspiracy theories that Labour members are manufacturing and say might occur. Those theories are similar to the $110 billion figure which is just absolutely unrealistic. The other thing that he said which worried me greatly when he was talking about Copenhagen is that Mr Charles Chauvel will be there as well undermining the extraordinary leadership we have from the Hon Tim Groser in putting New Zealand’s position. He will be there undermining and sabotaging it and that is totally totally unpatriotic to New Zealand. 
There is no doubt that Part 1 implements exactly what the Hon Nick Smith mentioned earlier this afternoon: a workable affordable emissions trading system. It will align New Zealand’s scheme with the Australian scheme. I challenge Charles Chauvel the Hon David Cunliffe and the Hon Pete Hodgson to come into my electorate of Hunua which I very proudly represent to speak to my farmers my growers the people who work in glasshouses the people in New Zealand Steel who employ a thousand workers and to tell them how the previous Labour Government’s emissions trading scheme would affect them. Those people are the backbone of the New Zealand economy. I challenge those members to come into the electorate that I very proudly represent and find out for themselves how unrealistic the Labour emissions trading scheme is. Those members would be thrown out on their ears. Those people in my electorate work for New Zealand and are the backbone of our economy yet the Labour scheme would cut them off at the knees. Those Labour members do not go out of their urban safety and security to find out what it is really like for those people and to find out how small medium and large businesses would be affected by Labour’s emissions trading scheme. 
There is no doubt that we can be very very proud of National’s emissions trading scheme which we will progress in the next few hours because it does indeed balance New Zealand’s environmental responsibilities with the economic realities of the day. I see a snide smile on the face of David Cunliffe and again I say to him that he should come into my electorate and tell my constituents that Labour would double the expenses for their businesses. That is totally unacceptable. A little while ago I was over in Canada and we see the situation there where that country is just not prepared to introduce an emissions trading system yet here in New Zealand under a National Government and its coalition partner the Maori Party we are bringing in a highly realistic scheme. It is excellent that Part 1 balances things that will be acceptable to the majority of New Zealanders and will keep viable the majority of New Zealanders’ businesses. Indeed our scheme will be a leader over in Copenhagen as New Zealand becomes only the second country that has actually implemented an emissions trading system—second to Europe. 
JACINDA ARDERN (Labour) 
: 
 I am quite happy and pleased to follow on from the previous Government speaker Paul Hutchison and point out that he used two quite contradictory statements in his message to the Committee. On the one hand he had the audacity to refer to the Climate Change Response (Moderated Emissions Trading) Amendment Bill and the idea of environmental responsibility in the same breath. On the other hand he said that the presence of Charles Chauvel at the talks in Copenhagen would undermine the Government’s position on its emissions trading scheme. That suggestion is ludicrous. If anything would undermine the Government’s position it is the bill itself and the attempt it makes to address our environmental responsibilities as set out under the Kyoto Protocol. 
In the same way Craig Foss tried to say that we would potentially expose New Zealand industry if we did not get this scheme right. To a certain extent I accept that that is true but I do not think that the Government in pulling together this legislation has taken seriously enough the other requirements that were put upon the Government to address our environmental obligations. In fact this shambles has left New Zealand exposed as a whole—in particular our reputation is exposed. That has been a cumulative process. I do not lay responsibility for our reputation solely at the feet of the Government or of the Minister for Climate Change Issues and I do not say that our reputation has been undermined solely by this legislation. In fact it began as soon as the Government was elected. In its first 100 days we saw not only its about-face on Labour’s emissions trading scheme but also the lifting of the moratorium on the production of any new coal-fired power stations and the removal of renewable preferences that the previous Labour Government had put in place. We saw the scrapping of Labour’s Biofuel Bill. That caused a loss of jobs that would have been generated in Waharoa yet this Government claims to be all about generating jobs. Finally we saw the removal of Labour’s emissions trading scheme. I hear Government members claiming their emissions trading scheme was the mandate that National was elected on. I would like to hear how many young people the National Party told that this bill was the one National would be presenting and that it would be the landmark legislation on New Zealand’s response to climate change. I suggest that the Government has no mandate for this legislation from the next generation of voters. 
But it does not stop there; it is not just about legislation. The next battle to come is the Government’s review of the Crown Minerals Act and its complete opening up of schedule 4. But that is a debate for another day. 
Hon David Cunliffe 
: And the petroleum strategy. 
JACINDA ARDERN 
: And there is the petroleum strategy as my colleague rightly points out. 
All of that would be fine and good if the impact was isolated to the Government alone and if this shambles reflected just on Cabinet but it is not. The impact of this bill which is primarily set out in Part 1 will affect two key areas. The first is New Zealand households and Kiwi families whom this Government claims to protect via this legislation. The second is ultimately the environment. In every point that I have looked at the legislation comes out on the negative on those two key areas. 
Let me break it down for members. We have heard a lot of debate about whether we trust the figure of $110 billion that we estimate this bill will cost. If we translate that into a percentage of GDP we are looking at 15 to 17 percent of GDP by 2050. This is a crucial point of differentiation between Labour’s scheme and National’s scheme. Ultimately Kiwis will pay. Kiwi households will pay and Kiwi families will pay and they will be subsidising heavy polluters because of a lack of a cap and because of the ongoing subsidisation of those heavy polluters. Those are key points of differentiation between the two schemes. Does any of that matter? If we are ticking the boxes that were apparently set out for us as part of our obligations does any of that matter? I think it is a very cynical view that says that the idea of our overall emissions and our overall contribution to climate change does not matter. Well it does. This is not just about ticking boxes. 
We have had clear indications not only from the New Zealand Labour Party but also from the Greens that this scheme creates no incentive for polluters to reduce their emissions. In fact the New Zealand Business Council for Sustainable Development stated: “Overall this proposed policy appears to greatly reduce incentives to heavy emitters to reduce emissions increase costs of subsidies to them slows down the timetable for reducing emissions and allows them to be increased in the meantime by allowing production to rise (at a set carbon content per unit) without any clear cap on this.” Again that is a key point of difference. “The more production rises the more the taxpayer must step in to pay for the additional emissions.” Where is the incentive? Not only that but where is the signal that New Zealand is taking its obligations seriously and not merely ticking the boxes? Those boxes are expensive and ultimately they will come back to haunt us. 
Who exactly will they come back to haunt? This point has been mentioned briefly. Who exactly will the 15 to 17 percent of GDP that we are talking about by 2050 fall on? In 2050 who exactly will pay the 55 percent of emissions from high-emissions-intensive industries that the Government will be subsiding and the 37 percent from medium-emissions-intensive industries that the Government will be subsiding? Ultimately it will not be Mr Foss and it will not be Dr Nick Smith. In fact it will not be any of us in this House. I am the youngest member of this Parliament and in 2050 I will be 70 years of age. I most certainly will not be here. I will not be here but our country will still be paying the bill. The tab will be picked up not by us but by our children and our grandchildren. 
Amy Adams 
: You’ve got children have you? How old are your children? 
JACINDA ARDERN 
: I am quite willing to make a hypothetical point because to me the fact that I am not a parent does not mean that I will neglect the responsibility that this House has to the generations who are not here yet. Members on the other side of the Chamber may trivialise that point but I challenge them to go out and talk to the younger people who will come through and who will one day be their constituents. They will surpass them one day but they will ultimately pick up the tab that those members are leaving. This system is not a user-pays system; it is a vote now pay later system. It is cynical. The fact that I am willing to take into account those who are not voting yet does not mean that the argument is any less valid. 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 The member who has just spoken Jacinda Ardern ended her speech by saying the word “cynical”. Let me tell her what cynical is and talk about the sorts of double standards that she exhibited in her speech. The first thing she said was that this scheme is awful because it has no cap. Well that is very interesting. I have searched all the way through Labour’s emissions trading scheme and did it have a cap? 
Hon David Parker 
: Yes it did. 
Hon Dr NICK SMITH 
: No it did not. It did not. I can quote Jeanette Fitzsimons’ repeated criticisms of the previous Government’s scheme for not having a cap. 
The second double standard is really interesting. It again illustrates the double standards and cynicism of Labour. Labour members say that this scheme provides big subsidies for industry right? In this bill they are termed allocations and all the way through the debate Labour has been calling them a subsidy. I am pleased that Mr Parker is to contribute to the debate because when Jeanette Fitzsimons challenged him on the amount of allocations in his bill she referred to them as a subsidy. She said that Mr Parker’s bill—the previous Government’s bill—which provided 654 million tonnes of allocations had a subsidy. The Minister Responsible for Climate Change Issues at the time Mr David Parker said that it was not a subsidy; it was an allocation. My question for Mr Parker is why when he is in Government and he makes an allocation it is not a subsidy but when National makes an allocation it is a subsidy? That sounds a tad cynical to me to quote Jacinda Ardern. 
Then Jacinda Ardern said that this Government had done nothing practical about climate change. Let me give her a couple of examples. Over the course of the previous Labour Government which was 9 long years let us look at how many homes it managed to insulate during that period. Do members know that in one brief year we have insulated more homes—10 times as many homes in 1 year—as did Labour in 9 years? Is that not an extraordinary positive practical achievement by this Government? 
I can give another example of a practical area in respect of solar water heating. I think that it is a good thing; I have a solar water heater in my home. Do members know how many solar water heaters have been installed during the first 12 months of this Government compared with the number installed during the 9 years of the previous Government? It is eight times the number. Hang on eight times the number of solar water heaters have been installed in 12 months under National compared with what Labour achieved in 9 years yet Labour members come down to the Chamber and say that the Government is not making any practical effort on climate change. I challenge Jacinda Ardern to a debate anywhere in New Zealand to talk about the positive things that this Government has done. 
Let me take another area of cynicism. She said that the National Government as per its commitments removed the thermal ban and that that would put up emissions. 
Chris Hipkins 
: That’s right. 
Hon Dr NICK SMITH 
: That is right. So I went to the officials and asked them for an estimate of the consequences of removing the thermal ban and I asked how much that would change New Zealand’s emissions profile. Do members know what the officials said? 
Aaron Gilmore 
: What did they say? 
Hon Dr NICK SMITH 
: They said that it would not make any difference at all because it was so ineffective so conditionalised. Again we see that sort of cynicism from members opposite. 
The last point I will make is about biofuels. Again it shows the cynicism of Jacinda Ardern because on most things Labour members tell only half the truth. They tell only half the truth. The bit she got right is that this Government removed the compulsion for fuel companies to provide biofuels. However we replaced it with an excise advantage so that we could encourage biofuels. But Jacinda Ardern refused to pick that up and right at this very moment a new biofuel plant is being built in Auckland because of that scheme. 
Chris Hipkins 
: How much is being paid out? 
Hon Dr NICK SMITH 
: The member asked how much. Well let us ask this question: how many litres of biofuel were provided for in Labour’s 9 years? 
JEANETTE FITZSIMONS (Green) 
: 
 In my first contribution on this bill the Climate Change Response (Moderated Emissions Trading) Amendment Bill which will weaken—in fact largely destroy—New Zealand’s existing emissions trading scheme I begin by running through a little bit of the fundamental logic. 
The science tells us that climate change is accelerating at a rate so frightening that we need to take urgent action. The only thing that will prevent accelerated climate change is a reduction in emissions. The whole purpose of a price on carbon is to provide an economic incentive to reduce emissions; otherwise we would not do it. Therefore it follows surely without contest that if we reduce that price we will produce more emissions and that if we increase that price we will produce fewer emissions. 
This bill significantly reduces the price initially for 2½ years with the two-for-one and the price cap. For agriculture it removes it completely for a further 2 years and in the long term it abates free allocation so slowly that no one will face the full marginal cost of emissions within the lifetime of anybody who lives today. I am therefore very puzzled and deeply disappointed that the Maori Party which would not support last year’s emissions trading scheme because it was too weak—and that was a defensible position; we just about went there ourselves but in the end we did not—is now prepared to support a scheme that will raise New Zealand’s emissions. 
I am struggling to understand how that could come about. I will quote from some of the reports to this House and some of the statements made in this House by my colleagues in the Maori Party. First of all I will quote from their minority report on the review of the emissions trading scheme and related matters which was reported a short time ago: “At a fundamental level there was opposition to an ETS which allows sectors to pollute and trade up to the Kyoto target but which does not include incremental emissions reduction targets in its design.”. Well that is a description of this bill. 
The Maori Party’s minority view mentions “the subsidisation of the nation’s largest polluters at the cost of households and small-medium businesses.” But that describes this bill. The view goes on to state: “The Maori Party continues to oppose the introduction of an ETS on these grounds and would do so more strongly if a replacement scheme were to be less effective”. Well that describes this bill. It goes on: “We remain deeply concerned about protections in the form of intensity-based allocations and subsidies which again distort the market model by allowing protected businesses to increase their emissions without penalty and to be rewarded for it.” Well that is the distinguishing feature of this bill. It continues: “the nation urgently needs to grapple with the notion of sustainability and the increasing challenge posed by a changing climate system and pending peak oil to think and live differently; to live sustainably.” Kia ora. It states: “The resources of Papatuanuku are finite.” Kia ora. It also states: “we need to be focused on decreasing domestic emissions.” 
I now move on a few weeks to the first reading of this bill and to a speech made by a member of the Maori Party. It states: “The Maori Party has consistently raised our call for an emissions trading scheme to be effective fair and transparent.” and “no sectors will receive more free units than necessary”. It goes on: “We do not support subsidisation of the nation’s largest polluters at the cost of householders and small to medium businesses.” and “its purpose must be to transform the economy”. It also states: “The nation urgently needs to grapple with the notion of sustainability and the increasing challenge made by a changing climate system and pending peak oil to think and live differently.” The Green Party strongly endorses all those statements by the Maori Party and that is why we are puzzled and deeply saddened—we cannot figure out what changed their minds. 
There is not a single measure in this bill that improves environmental outcomes compared with the existing law or that leads to lower emissions. There are a number of ways—three principal ways—in which this bill will lead to higher emissions. The first and most serious way is the intensity-based allocations which means that no industry with any amount of free allocation will ever face the full marginal cost of carbon as it grows its business. The second reason is that the price cap for 2½ years and the two-for-one deal significantly reduces the cost and therefore will lead to higher emissions. The third reason is the much slower phase-out. We accept that it starts earlier which is a good thing but over the long term it is a very slow phase-out. We could argue a fourth reason—that agriculture is protected 100 percent for a further 2 years before it faces anything at all. 
There is nothing in the bill that compensates for this environmental harm. So I looked at the agreement between the parties to see whether there was anything there to compensate for this environmental harm. There are four matters but they are trivial compared with the harm that this bill does. There is another $24 million for the insulation of low-income houses and that is great but the existing insulation scheme has seen 75 percent of the money so far go into low-income community service - card houses and there is plenty more in the ring-fenced fund. So that $24 million will not make any difference to the number of the low-income houses insulated until year 4. In year 4 it will add to the total of $323 million but in year 4 there will be another Budget appropriation anyway. So I think the Maori Party got a bit duped over that one. 
The second thing is the partnership to plant forests. That is a great idea. The Green Party is working on a slightly expanded version of that idea which will be announced shortly. It is an excellent idea to plant more native forests on conservation land but we do not have to destroy the emissions trading scheme to do it surely—it is a good idea anyway. 
Thirdly there is a national policy statement on biodiversity. What was it that the Green Party negotiated—and it was gazetted—last year with Labour as part of the emissions trading scheme agreement? It was a finite date for a national policy statement on biodiversity to be in place by—I ask Mr Parker whether it was February 2010 or February 2011. Anyway I say to National that it is already gazetted. 
The current Minister has said that he does not intend to do that. Now he does; now he has a new agreement that he will do it. That is good but it is not progress. That is going back to the status quo—it is anti. Finally there is a 6-month delay in the abolition of the funding for environmental education. Well I do not think that will employ many teachers or train very many kids for very long. 
For some years Green Party members have believed that we have common ground with the Maori Party in our commitment to Papatuanuku. So I am deeply sad that all these goals all these fine words in the House and all these fine words in the reports of select committees have been traded away for 30 pieces of silver and many promises of consultation. 
HEKIA PARATA (National) 
: 
 Tena koe e te Heamana tena tatou huri noa i to tatou Whare e hui komiti nei i tenei wa. Good evening. I am delighted to take a call to speak on Part 1 of the Climate Change Response (Moderated Emissions Trading) Amendment Bill and in particular in contrast to the previous speaker Jeannette Fitzsimons I would like to commend the Maori Party. I would like to congratulate and thank the Maori Party for being prepared to see that it needed to negotiate an outcome that was in the best long-term interests of Aotearoa New Zealand; that it was able to see that a balance needed to be struck between the environment and the economy and that it understands that being in Government is a hard and difficult task and that we do have to negotiate the best possible outcomes out of a range of many difficult and complicated choices. So I congratulate the Maori Party because it has been prepared to engage with the hard issues. It has been prepared to be open to a wider constituency to listen to those people who voted it into Parliament to hear what they have to say and to represent those issues in its negotiations with the Government which is what its responsibility as a coalition partner is. 
The Maori Party has been far from race based. It has been concerned with the implications for all New Zealanders while taking particular account of concerns raised with them by iwi and Maori organisations. It is committed to the growth of the independent wealth of iwi and hapu and far from being interested in seeing the tax burden grow the Maori Party wants to see iwi grow their own wealth so that they can contribute to the well-being of their own whanau and hapu. It is not prepared as perhaps those on the other side of this Chamber are to condemn Maori to perpetual dependency on the State. So yes the Maori Party has been prepared to step up. It has been prepared to see the long-term possibilities for iwi and Maori organisations to be engaged with the Government in making— 
Iain Lees-Galloway 
: It’s a sell-out and you know it! 
HEKIA PARATA 
: No actually. I do not know it I say to Mr Lees-Galloway. I do not stand up here and talk nonsense. I talk from having a thorough and deep background with the very people who have been in negotiation with this Government and I am proud of this Government’s willingness to do more than talk and patronise as the previous Labour Government did for 9 long years condemning Maori people to be dependent on the State for ever and a day. This Government is not prepared to do it and its coalition partner is not prepared to do it so you can sit there and make snide and smug remarks about a people in a community— 
H V Ross Robertson 
: I raise a point of order Mr Chairperson. I am sorry to interrupt the member in full flight because she was quite passionate in her speech but she brought you into the debate and as you well know that is not acceptable in the Chamber. She needs to refer to members on the other side by their full name or their title. 
The CHAIRPERSON (Lindsay Tisch) 
: I thank the member for those comments and he is correct. It was a free-flowing debate and I did not take exception but I ask the member to refrain from bringing the Chair into the debate. 
HEKIA PARATA 
: My apologies to the Committee and to yourself for doing that. 
I move on from congratulating the general courage of the Maori Party to the particular and specific contribution that the honourable member Rahui Katene has made in tabling an amendment that would add new clause 5B to Part 1. I congratulate her because the amendment reflects a very detailed and considered approach. It advances the development of Treaty clauses that we have hitherto seen in its specificity and in its application to particular parts of this legislation. It reflects the commitment moreover of iwi to work with the Government to ensure that the law can be fairly applied. So rather than talk about iwi involvement this Government together with its coalition partner has been prepared to legislate for iwi involvement to see the value that they have to contribute and to understand that they want to be included partners in the designing and negotiating of what is best for our country and not to be left as the previous Government often left them in litigious situations arguing to the Government that their case be heard. So I congratulate Rahui Katene on that amendment and on the other amendments she has tabled. 
The member’s amendments also provide for the involvement of iwi and Maori organisations where they are likely to have an interest. Those interests range from the developing of Orders in Council to consulting on the pre-1990 forest land allocation plan to the fishing allocation plan. The amendments describe how a review panel is constituted and provide for membership by someone who is knowledgable about and experienced in the application of tikanga and the Treaty of Waitangi. They talk about the need for the terms of reference for those reviews also to pay heed to the Treaty of Waitangi. They talk about regulation-making powers in relation to eligible agricultural activities. Iwi and Maori organisations have an interest in all of those issues. They are committed to developing their own wealth as I was saying previously before I was stopped in the full flow of my passion for this endeavour on behalf of iwi and Maori. 
The legislation generally and these amendments in particular pave the way for something new in New Zealand. They pave the way for the possibility of having an authentic Aotearoa New Zealand in that these provisions allow for iwi and Maori to be involved in the application of regulations and legislation to the particular activities that give iwi and Maori the potential of having a base that will in turn allow them to look after their own people. 
Finally I reiterate that this legislation and these amendments in particular reflect this Government’s willingness to work with its coalition partner. Nga mihi ki te Pati Maori ki a koutou katoa e tu tautoko ana e whai kaha ana nga tikanga e pa ana ki a tatou te iwi Maori ara nga iwi Maori. I thank the Maori Party for being prepared to support iwi and Maori in having their voice heard in being participants in the making of laws that seek to put the best process and advice in place that in turn we believe will lead to the best outcomes and that recognise that iwi and Maori have a part to play in the navigation of this country and are not simply passengers and victims. We are interested in navigation and we will continue to oppose the Opposition which does not see that as being a valuable and viable part for iwi and Maori to play. Hoi ano ra tena koutou kia ora tatou katoa. 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 Firstly I commend my colleague Hekia Parata as a new member of Parliament who has made a great contribution not just in this debate but in terms of getting her head around one of the most complex issues within Parliament. 
I have long had a deep respect for Jeanette Fitzsimons. She is a person who is well informed around this issue and I owe it to her to respond to some of the points that she raised in the debate. I say to Jeanette Fitzsimons that I have for many years enjoyed her input and debate around these issues. However I will challenge the member who prides herself on accuracy and understanding such issues on a number of claims that she made. The first thing to address is the comment that there is not a single measure in this bill that will improve environmental outcomes. Let me just quickly in the short 5 minutes I have take her through a number. First transport will be entering the sector 6 months earlier than the existing scheme—that is on 1 July next year. But I take the view that the benefits of the reduction in emissions are directly proportional to the price. So that is the first example of where there is a benefit. 
The second one and this is important is that under the modified emissions trading scheme a significant number of industries get fewer allocations or no allocations under the more principled in my view approach to the allocation. Let me explain why. Under the existing scheme it just says “90 percent of 2005” and then there is a threshold that was proposed. 
Hon David Parker 
: The cap. 
Hon Dr NICK SMITH 
: No let us be clear. To get an allocation one had to meet the competitiveness test that one is industry-exposed and one had an absolute to meet. A number of companies that were expecting to receive an allocation under the existing scheme whose intensity—that figure of 800 tonnes per $1 million and 1600 tonnes—meets neither of those and that under the existing scheme would get an allocation would not get one under this scheme. It is also true that a number of companies—a substantial number—that would have got a 90 percent allocation under the existing scheme will get 60 percent under this scheme. 
Jeanette Fitzsimons 
: They’ve been lobbying you. 
Hon Dr NICK SMITH 
: They have been lobbying me very very heavily to try to get in. In fact the actual number of allocations according to the estimates determined by our officials is actually the total allocations to industry and are less under this scheme than what they are in the existing scheme. 
The fourth point I would make is with regard to the issue of tree weeds. I think we have made in this bill an improvement for the environment by not discouraging the removal of tree weeds. 
Hon David Parker 
: We agree. 
Hon Dr NICK SMITH 
: Well the member said there is not a single provision in this bill that is good for the environment. That provision is good for the environment and that absolute statement is not true. 
I also make a point to the member on the issue of the national policy statement on biodiversity. It is an interesting history. Labour promised it in 1999 but did not deliver. It promised it in 2002 but did not deliver. It promised it again in 2005 but did not deliver. So for Ms Fitzsimons to be saying that Labour agreed in the dying days of its Government to a national policy statement on biodiversity is I am sorry to say a bit weak. We have been in Government for over 12 months. The very specific agreement we have with the Maori Party is that we will have a Cabinet paper to set up a formal process for establishing that national policy statement in March of next year. 
The last point I want to respond to Jeanette Fitzsimons on is the statement that Cabinet voting an additional $24 million for home insulation makes no difference. Well I really think that is unfair and untrue. Let me explain exactly what the Government has done in its agreement with the Maori Party. The problem that the Minister in charge of the Energy Efficiency and Conservation Authority Gerry Brownlee has at the moment is that the uptake of the scheme is far faster than anybody projected. That is a good thing. We are getting more homes insulated earlier. But the difficulty is that at the moment we have fixed-year appropriations—the $323 million is a fixed amount per year. So the decision we made in Cabinet was to change that so to have a fixed amount over 4 years—and with the agreement with the Maori Party—a further $24 million will be put into that fund over those 4 years. That is a commitment to an extra 8000 homes and I say that every member of this House should thank the Maori Party for that initiative. 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 Let me take the Minister for Climate Change Issues back to his remarks before the dinner break as we began the Committee stage of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. The Minister took us through the brief history of climate policy in New Zealand. I will not do that because it is a long history and it has already been done but he did say that we have had a very long debate and there comes a point in a country’s history where we need to make progress. I agree with him on that. We have had a long debate and there comes a point where we need to make progress; it is just that that point is not now. This is not progress as I will spell out in a few more minutes. 
The one thing that needs to come out of the very long debate is the fact that this Parliament has not yet reached anything resembling consensus on climate change. It took us 20 years to reach consensus on superannuation and it took us quite a long time on other issues that are difficult matters to resolve. We have not done it on climate change. So I say to the Minister in the chair the Hon Dr Nick Smith that it would be good style if he were to get up and give his response to the Supplementary Order Paper in the name of my colleague the honourable Charles Chauvel. It sets forward a process by which we might alter legislation and alter targets through an independent body as the years go by. That might be a way that we can move towards something resembling a collective agreement. While we are at it the Minister for Climate Change Issues ought to also respond to the Green Party Supplementary Order Paper that specifically asks for transparency around allocation. If there is not transparency around allocation and we do not end up with transparency around electoral donations then it is too easy to draw the conclusion that an allocation has been made as a consideration for a donation. That would be a really sad time. 
I thank the Minister for his introductory remarks. I suggest that if we are ever in the future to move towards a more bipartisan approach—and we certainly have not got there yet—to climate change than we have been able to achieve for whatever reason between 1997 and today then a response to the Supplementary Order Paper in the name of Charles Chauvel which he mentioned in his first speech— 
Craig Foss 
: He said you’d repeal this bill. 
Hon PETE HODGSON 
: Oh indeed—that is our position. The point I am trying to make is that we do not have agreement across the House. I will spend the rest of the debate explaining why that is but I am saying now that my colleague the honourable Charles Chauvel has put forward an idea that I think the Committee should look at. It is an idea that I think the Minister may want to respond to tonight tomorrow or whenever it might be and while he is at it he might also want to respond to the Supplementary Order Paper in the name of the Greens regarding transparency of allocations. 
The other comment that the Minister made in his introductory remarks and he has made a lot of play about this is that New Zealand is now a little closer to Australia on climate change issues than we used to be and that as we speak Australia is contemplating putting legislation through the Senate etc. that the Minister said is a little weaker than the New Zealand legislation that he has put in front of the House. The Minister challenged Labour members to say what they thought about that given that that legislation is in the name of the Australian Labor Party. He asked whether we would dare criticise it. Well we most certainly do and here is the history behind that. 
In the last decade Australia has been governed by a centre-right Government and New Zealand has been governed by a centre-left Government which has had the Greens at its flank right through that time. As a result of that after many many attempts to get the numbers in the House we finally got legislation through in the name of the Hon David Parker. It was an emissions trading scheme that was much stronger than the one we have now. I used to be involved in climate change negotiations internationally through the 1990s and without telling too many secrets or stories I can tell members that what happened in the 1990s was that New Zealand was way ahead of Australia—way ahead. Australia is catching up from a low position. The Rudd Government is progressive whereas this Government is moving back from a more advanced position and is therefore regressive. We are still ahead of Australia but only just. That is a shame. What is more because Australia negotiated a better deal at Kyoto in 1997 it is in fact not behind in its emissions record; we are. We have some things to do and the reason why the Parker emissions trading scheme should remain on the books is that it comes into play earlier. 
I acknowledge that the Minister has a problem and I will read it out. The problem is a quote in  
Hansard 
 from Rodney Hide about a year ago and it goes like this: “that is that the entire climate change and global warming hypothesis is a hoax that the data and the hypothesis do not hold together that Al Gore is a phoney and a fraud on this issue and that the emissions trading scheme is a worldwide scam and a swindle.” That is from National’s coalition partner that is why the Minister has been delayed by months because of the select committee process and that is what drove the Minister into the arms of the Maori Party. I am sorry that there was not room between National and Labour to get a deal. We assert afresh that we negotiated in good faith. We were certainly prepared to move but we were certainly not prepared to move as far as the legislation we have in front of us now. 
However I think there is agreement that the emissions trading scheme as a tool is the best way forward and that is a point of agreement. That comes from someone who introduced a carbon tax into the policy mix en route to an emissions trading scheme I would assert. That did not get the numbers finally in 2005 and I think that much of it might be something that is pretty much set in stone. From here on however things get bad. I will not have time to lay them out in the remainder of my 10-minute introductory remarks but I will say that the one thing that disappoints me perhaps more than anything else about this legislation is that this Government has no confidence in our economy. It has no confidence in New Zealand business it has no confidence in our renewable energy industries it has no confidence in the innovation of our agritech sector and it has no confidence in the high-tech end of the New Zealand economy. It is as if we must freeze our economy here and now in 2009 and tourism and dairying will do it for us. Well they will not be sufficient. 
The Kyoto Protocol is a significant driver for economic advantage. It is a significant driver for a phrase that the Government does not like but here it is: economic transformation. We have taken the driver off. Michael Porter would say: “Don’t do that.” and many other growth economists would ask whether we were nuts but we have done that. We have taken the driver off some of the smartest people in our country and they are aghast because they were ready to take advantage of a tougher bigger better emissions trading scheme. It is not a point of view that is shared by the ACT Party. I acknowledge that and I acknowledge those members’ consistency. I say and it is not a one-liner that I trot out too often that I think that ACT is consistently wrong. But I say to National which does understand economic development that it is making a very serious mistake because it is freeze-framing us. In my view it is freeze-framing us in a way that I just do not think is tolerable. 
In the case of agriculture if we are improving our intensity by 1.5 percent without any drivers why are we saying that just 1.3 percent from now on will do? I ask whether it is lost on National members that we have the finest agritech sector in the world. We know more about plant and animal breeding than any other country I know with the possible exception of Australia and we already had an ability to make those changes without any drivers. Yet somehow or another we are saying to people in the agriculture sector that they can forget about it. We are saying that it is fine and dandy and they can put the money in their pocket if they want to do it for productivity or food conversion efficiency reasons but they should not worry about the environmental stuff. 
That is not a tolerable position—1.3 percent is derisory. Making it 1.3 percent is saying to agriculture that it should just go backwards a little bit and that will be OK but it is not. It is not OK for productivity reasons it is not OK for environmental reasons and it is not OK for reputational reasons. The food miles debate is not going away. Other countries will catch up with us sooner or later and we will say that the emissions trading scheme that was passed in 2009 was part of the problem because it allowed us to take the pedal off the metal. That should never be allowed to happen. This country depends on primary production good downstream processing and selling into international markets. 
CHRIS TREMAIN (Senior Whip—National) 
: 
 I move  
That the question be now put 
. 
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
 Kia ora tatou katoa e te Whare. I rise to take a call on behalf of the Maori Party basically to address our Supplementary Order Paper to amend Supplementary Order Paper 98. I do so on behalf of my colleague Rahui Katene who did much of the work. 
I also acknowledge the passing of Hawea Vercoe in my electorate over the weekend. I am sure that in the spirit of this particular amendment he was a very strong advocate for the Treaty. As we hold this particular discussion today I think about his family and his people and I think about him lying at his marae at Tuteao i tenei po. No reira kai taku rangatira moe mai. 
[ 
So rest there my chiefly one 
.] 
It is with a huge amount of pride that I stand before the Committee knowing that through the efforts of the Maori Party we will recognise Te Tiriti o Waitangi and specifically set out the ongoing decisions on the Crown which has an obligation to consult as we move forward in this particular debate. In recognising Te Tiriti o Waitangi I do so in the knowledge that the Treaty was effectively absent from 
New Zealand legislation for over 135 years. 
Chris Hipkins 
: Did he write his own speech? 
TE URUROA FLAVELL 
: You will find out shortly as long as you listen. Koina te mate o te kore whakarongo. 
[ 
That is the problem with not listening 
.] 
In 1975 the Treaty of Waitangi Act effectively incorporated Te Tiriti— 
Hon David Parker 
: I raise a point of order Mr Chairperson. I would like an interpretation of that comment please. 
[An interpretation in English was given to the House.] 
TE URUROA FLAVELL 
: In 1975 the Treaty of Waitangi Act effectively incorporated the Treaty— 
Hon David Parker 
: I raise a point of order Mr Chairperson. It is absolutely inappropriate for that member to say to you Mr Chairman: “That is the point. You do not listen.” 
The CHAIRPERSON (Lindsay Tisch) 
: No. The member asked for an interpretation. We have received the interpretation. I was comfortable with that and I have asked the member to continue. 
Hon David Parker 
: I raise a point of order Mr Chairperson. Is the Chairman saying that it is appropriate to include the Chairman in the debate if it is done in Maori but not in English? That is the effect of your ruling. 
The CHAIRPERSON (Lindsay Tisch) 
: I have made a ruling. I want this debate to continue and to flow. I am allowing Te Ururoa Flavell to continue. 
TE URUROA FLAVELL 
: In 1975 the Treaty of Waitangi Act effectively incorporated the Treaty into legislation and delegated a role to the tribunal to determine the meaning of the Treaty and Treaty principles. Since that time Parliament has included legislative references to the Treaty and provided some legislative guidance on the Treaty’s meaning. Our Supplementary Order Paper provides a key statement and this is important which states: “In order to recognise and respect the Crown’s responsibility to give effect to the principles of the Treaty of Waitangi.” I say again that our Supplementary Order Paper states: “In order to recognise and respect the Crown’s responsibility to give effect to the principles of the Treaty of Waitangi.” In doing so it falls into the category classified by Matthew Palmer as the “recognise and respect category” reflecting provisions that are often used in statute to ensure the Treaty is treated with the highest level of attention. 
There is another element to our Supplementary Order Paper that leads us on to further discussion and that is to do with the wording “to give effect”. Those in the House with a good knowledge of statute would be aware that this is found in section 4 of the Conservation Act which states: “this Act shall be interpreted and administered as to give effect to the principles of the Treaty of Waitangi.” If members were to wander through legislation they would see a huge colourful menu of clauses that effectively incorporate the Treaty. One objective of the Royal New Zealand Foundation of the Blind Act is the need “to give particular recognition to the Treaty principles”. The Resource Management Act asks that we take account of the Treaty principles. The Environment Act requires us to ensure full and balanced account of the Treaty principles and the Crown Minerals Act recommends that we have regard for Treaty principles. Basically there is a huge archive of legislative activity in relation to the Treaty that has helped to guide the appropriate interpretation of Treaty clauses in legislation. 
Within this context it is somewhat bizarre to think that some parties still question the need for a Treaty clause or that they are overly concerned about the fact that we were working on the Treaty provisions right up until the hours leading up to the announcement yesterday. We understand there is a wide spectrum of knowledge around this Chamber about what the Treaty means in practice. That is clear from the many debates in this Chamber. 
For the National Party and the Maori Party the requirement to provide due cognisance of the Treaty analysis and interpretation is something that we both value to the extent that it is one of the first statements in our relationship agreement. Our agreement stipulates that “both the National Party and the Maori Party will act in accordance with Te Tiriti o Waitangi the Treaty of Waitangi.” It has to be said that it has been a little bit disappointing that the National Party had some difficulty prior to this bill to living up to the clear aspiration to act in accordance with the Treaty. If there is ever an issue to which the Treaty principles should have been applied it would be the Local Government (Tamaki Makaurau Reorganisation) Act. The reorganisation of Auckland governance would have been an entirely appropriate mechanism to enhance Treaty responsiveness. The Government did not use the opportunity and that certainly brassed us off. But that is another story. 
The Climate Change Response (Moderated Emissions Training) Amendment Bill is a chance to set the record straight to pursue an honourable course of Treaty jurisprudence. I want to make it clear that our intention in drafting the Treaty clause is to provide for the ongoing engagement of tangata whenua in the scheme and to ensure that the distinct situation of iwi Maori including rights and interest under the Treaty is fairly accommodated in the implementation of the scheme. 
I want to return to the notion of the Treaty principles and provide a lesson to all members across the Chamber including some who might want to listen to this. In case there is any doubt the Court of Appeal defines these principles as a relationship of fiduciary nature that reflects a partnership imposing a duty to act responsibly reasonably honourably and in good faith. Secondly the Government should make informed decisions. The Crown should remedy past grievances. There should be active protection of Maori interest by the Crown. The Crown has the right to govern. Maori retain rangatiratanga over their resources and taonga and all of the rights and privileges of citizenship. If members are still unsure they should consult the Waitangi Tribunal which gives further clarity to the principles as partnership fiduciary duties reciprocity the cession of Maori sovereignty in exchange for the protection of rangatiratanga and mutual benefit leading to the duty to act reasonably honourably and in good faith. There should be redress for past grievances and equal status for the Treaty parties. The Crown cannot evade its obligations by conferring authority to another body. There should be active protection of Maori interests by the Crown. There should be options and there is the principle of choice. 
I have gone on about some of these particular things but if they are still not enough there are always the principles proposed by the executive. They are the Government’s right to govern the right of iwi to the self-management of their resources redress for past grievances equality—all New Zealanders are equal before the law—and reasonable cooperation by both parties. 
I have gone to a bit of trouble to spell out these legislative references and descriptions of the Treaty principles because it appears that some members in this House are still not aware of the meaning. The truth is that we have come a long way from 1878 and the case of  
Wi Parata v The Bishop of Wellington 
 which suggested that the Treaty was a simple nullity because Maori tribes were incapable of performing the basic rights of citizenship. We are in a new enlightened time—times that reflect the strength and survival of iwi who have advanced so significantly the debate on Treaty rights. 
The Maori Party is extremely proud to have brought to this debate the crucial significance of the Treaty for emissions trading and in particular the Treaty clauses about recognising our founding document and recognising that the Treaty is about joint responsibility and working together. The scheme also relies on regulations for much of its implementation. The Treaty clause will ensure that iwi and Maori are able to participate in the development of those rules. The amendments we have put forward clarify how the rights and interests of iwi under Te Tiriti o Waitangi the Treaty of Waitangi are to be incorporated in this legislation. They provide for consultation with iwi on matters under the Act. In closing I point out that they breathe life into this legislation in terms of enacting the responsibilities of the Crown to incorporate the Treaty into legislation. 
I thank my colleague Hekia Parata for her comments earlier with regard to the part played by the Maori Party. I thank the Minister for working with the Maori Party and indeed my colleague Rahui Katene as we have attempted to forward our proposals specifically around the Treaty clause in the best interests of the nation. 
CHARLES CHAUVEL (Labour) 
: 
 I will speak on three more amendments that stand in my name. They are Supplementary Order Papers 95 and 96 and a typescript amendment that does not have a number. 
Supplementary Order Paper 95 would remove from the Climate Change Response (Moderated Emissions Trading) Amendment Bill the 50 percent discount during the 2010 to 2012 transitional period and raise the price gap from $25 to $100 a tonne turning it into a true safety valve rather than a day-to-day subsidy which is frankly what it is at the moment. On this side of the Chamber we think that price caps are undesirable because they distort the response to the emissions trading scheme. The Kyoto-compliant market is already large. Participants in the emissions trading scheme mainly companies worth billions of dollars can already hedge their risk against substantial rises in the cost of carbon until at least 2012 by buying units on that market. So the transitional measure proposed in the amendments from the Minister for Climate Change Issues requiring only one emissions unit to be remitted for every 2 tonnes of emissions in the electricity sector would not necessarily reduce the impact on electricity prices as the Minister says time and time again that it will. In fact the European experience demonstrates that the long-term marginal cost of new generation does not change. So electricity generators will charge consumers the same amount and effectively pocket the value of the emissions units they do not have to remit at cost to the taxpayer. In principle if the market is not trusted then the Government should have pursued a carbon tax rather than an emissions trading scheme. But a cap at less than the market price results in a further subsidy from taxpayers to emitters and reduces the incentives the emissions trading scheme is meant to create to reduce emissions. Supplementary Order Paper 95 would remedy that position. 
Supplementary Order Paper 96 would cap free allocation. As we said in our minority report we uphold the strong criticism that we heard of the approach in the bill of combining an intensity-based allocation that has no effective cap on either total or sectoral emissions with a very very slow phase-out of free allocations. The Parliamentary Commissioner for the Environment told us that this will lead to a significant increase in emissions thus increasing the number of carbon credits the Government and therefore taxpayers will have to purchase. An alternative favoured by many of the submitters we heard is an overall cap on emissions. The lack of that cap will be a problem. We want to do away with the problem which is what this Supplementary Order Paper will do. The absence of the cap weakens the incentive for emitters to move to being less carbon intensive. As my colleague Pete Hodgson said earlier it is a sign of a lack of ambition on the part of the Government. We do not want to see this highly distorted mechanism retained in the legislation. 
I am keen to hear the Minister speak on the Government’s attitude to the Supplementary Order Paper to put the cap in place on free allocation the Supplementary Order Paper to end the discount and finally the amendment to prohibit the banking of non-forest New Zealand units during the transitional period. Dr Suzi Kerr suggested this amendment would be a good idea. It would prevent any New Zealand units issued during the transition period from being surrendered converted or transferred after 31 December when the price cap comes off. This will prevent people from collecting credits while the price of carbon is low and then selling them at a higher price once the cap is removed. As I said Dr Kerr advised of the possibility that banking and trading free allocated credits taken with price caps could result in a positive incentive to increase emissions or else could increase windfall gains to polluters. Surely neither of those are goals that the Minister wants to see. 
These amendments taken as a package—removing the 50 percent discount putting a cap on free allocation and prohibiting the banking of the non-forest New Zealand units during the transitional period—are a neat solution to the problems that have been identified. I really hope that the amendments will be given due consideration because they will undoubtedly according to the expert independent advice that we received result in a much better scheme. 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 I am starting to enjoy this debate on the Climate Change Response (Moderated Emissions Trading) Amendment Bill because we are starting to get to the crux of the issue. We have just heard in Charles Chauvel’s contribution that Labour has moved a Supplementary Order Paper to basically increase the price of petrol and power for consumers. Let us be very clear: if we remove the two-for-one-option and the price cap the result is a higher power price. 
Chris Hipkins 
: As opposed to tax; he would rather tax them. 
Hon Dr NICK SMITH 
: I have just heard an interjection from Mr Chris Hipkins. Members will be interested in this. On Sunday Mr Chris Hipkins put out a press release saying that New Zealanders were paying too much for their power and that we needed to do things to reduce the power price. That is what he said on Sunday. Then Labour members come to the Chamber to debate this emissions trading legislation and move a Supplementary Order Paper that will put the price of power up even more. That is the problem with the Labour Party: it is all over the place. It is a shambles. We do not know what Labour members stand for. They cannot have Chris Hipkins say on Sunday that power prices are too high and must go down and on Tuesday introduce a Supplementary Order Paper that will actually put the power price up. At least Mr Chauvel is honest about that fact. That shows the sort of nonsense that we have heard in the Chamber. Mr Chauvel is more thoughtful than Mr Hipkins. I suggest that he is a bit cross about the press release that Mr Hipkins put out on Sunday which is an embarrassment for the Labour Party in the very week we are debating emissions trading legislation. 
Why has the Government said we need to soften the impact of the emissions trading scheme? It is very simple. In case members have not noticed we are part of the biggest economic downturn since the Great Depression. This Government has gone to a huge amount of work to try to get us back on to a growth path. The last thing we want to do is to snuff out that recovery with an overly ambitious emissions trading scheme so we have made quite a pragmatic decision not to introduce it in one hit and instead to stage it to soften the impact on households. I say to Mr Hipkins that the advice from officials is very clear. The advice is that to vote for Mr Chauvel’s Supplementary Order Paper is to vote for a higher petrol price and a higher power price. Every member on the Government side of the Chamber will be watching the way Mr Chris Hipkins votes because if he believes in his press statement of Sunday he will vote against his own colleague’s Supplementary Order Paper. 
KEVIN HAGUE (Green) 
: 
 It is a pleasure to take my first call on Part 1 of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. I begin by noting that the Leader of the House when he sought leave relating to the rules of this debate earlier today sought leave for members to be able to make an unlimited number of contributions. I give notice of my intention to take advantage of that and certainly to take a subsequent call to discuss specifically the Supplementary Order Papers that are before the Committee. 
I begin this first contribution however by quoting from this issue I am holding of the  
New Scientist 
 of 28 February which talks about the fact that the world is clearly failing to reduce emissions. It says in its editorial: “Despite the numerous warnings about extreme weather rising sea levels and mass extinctions one message seems to have got lost in the debate about the impact of climate change. A warmer world won’t just be inconvenient. Huge swathes of it including most of Europe the US and Australia as well as all of Africa and China will actually be uninhabitable—too hot dry or stormy to sustain a human population. This is no mirage. It could materialise if the world warms by an average of just 4°C which some scientists fear could happen as soon as 2050. This is the world our children and grandchildren are going to have to live in. So what are we going to do about it?”. This issue of  
New Scientist 
 goes on to describe a world in which glaciers have dried up a world that is desertified and a world with its human population of just 1 billion—because that is all that that kind of world would be able to support—concentrated in high-rise cities close to the North and South Poles and in countries like New Zealand. 
Since February there have been two main shifts in the evidence before us. One is that it is extremely apparent that change is happening faster than had been predicted. It is now very clear that the world is tracking close to the worst scenario contemplated by the Intergovernmental Panel on Climate Change. Antarctic ice shelves are melting at faster rates the world’s glaciers are in rapid retreat we have the hottest November on record in Australia and the list goes on. It is also clearer and clearer that the Copenhagen conference which has been described by one of my colleagues as possibly the most important gathering in human history seems less and less likely to achieve the necessary step change in carbon emissions that we need given the timidity of countries like New Zealand. In other words the 4 degrees Celsius of warming that the  
New Scientist 
 warns of is progressively becoming more and more likely. 
On Friday night of last week I attended the annual Cawthron Institute address by Dr David Wratt who is the principal climate scientist of the National Institute of Water and Atmospheric Research along with the Minister for Climate Change Issues Dr Smith. It was a masterful contribution from Dr Wratt. It was a great summary of science possibly the best I have ever heard and it was delivered in terms that any normal person would be able to understand. He stressed the importance of keeping warming below 2 degrees Celsius if it was at all possible. It is not a precise science to know exactly what concentration of carbon the atmosphere can tolerate in order to achieve that goal but he presented evidence to suggest that we are already at the lower end of the band of concentrations that are required to keep warming to 2 degrees Celsius. In other words 2 degrees Celsius of warming may already be locked in. It is clear that we cannot just turn off the tap. The advice is to stop emissions as quickly as possible and certainly no later than 2015. 
Throughout all the cautious scientific language of Dr Wratt there rang a clarion call. This is a massive and unprecedented challenge in human history but we can prevent or limit the worst effects if we act strongly and urgently enough and we need to do this. As all of the world’s developed economies involve high carbon use and emissions and are dependent on continued growth reducing emissions at all requires a fundamental change to the way that we do business. Sadly the years since 1990 have been characterised by dithering and wasted opportunities. While northern European countries for example simply got on with the job after 1990 and transformed their economies our Governments played pass the parcel. Our Governments have been desperate to find a formula to give the appearance of doing something about the problem without actually requiring businesses to change anything that they do. Ironic congratulations are due to this Government on finding its Holy Grail. This scandalous bill before us represents the zenith of this ambition. This bill not only will fail to reduce emissions but will actually increase them. 
The bill’s failings are many and manifest. The point of an emissions trading scheme is to have a cap and preferably one that sinks over time. There is none here. It is inevitable that the carbon price signal made by this bill will be incredibly weak and when that is coupled with the intensity-based targets in the bill the most likely result will be increased emissions. The time that this bill takes to phase out subsidies to the big polluters will take most of this century. We will still be subsidising the big polluters when the Ganges has run dry when our Pacific neighbours are inundated with sea-level rise and when the world’s population has collapsed. When Greenland and Antarctica are performing the role of the world’s breadbasket New Zealand will still be subsidising big polluters. 
There is also the sleight of hand which has been referred to by a number of others in this debate that sees the Government cynically pretending it has saved consumers money on their petrol and power bills. New Zealanders will pay for emissions one way or another: either through taxes and reduced Government services or through prices. One of these methods creates a disincentive for emissions and will force emitters to reduce them. Unfortunately the Government has chosen the other path. 
I refer to the fact that a number of Government speakers in this debate including the Minister have once again raised the false dichotomy of the economy and the environment. They say we cannot have both and must have one or the other. The Green Party has on numerous occasions in this House pointed to the fact that it is possible to achieve both. It is possible to achieve positive outcomes for our economy while also protecting the environment and reducing emissions. It is sad that this Government has chosen not to do so. 
There are some good parts in the bill. It is a good thing to be planting more indigenous forestry on conservation land. It is just a shame that it is so limited. The Green Party will be announcing our next package of Green New Deal measures next week including an extensive proposed forestry programme. 
I want to talk about the fact that both of the parties that will be voting for this bill—the National Party and the Maori Party— 
Hon Dr Nick Smith 
: United Future. 
KEVIN HAGUE 
: I am sorry; I forgot United Future. Those parties have effectively become hostage to the interests of big business hostage to the interests of those whose planning horizon is no further than the immediate future. It is a planning horizon that sells our children and our grandchildren down the river. I will refer to the speech of Tariana Turia from 28 August 2008 on the emissions trading scheme bill of that year. She said: “how this nation curbs greenhouse gas emissions will define this moment in our history. Meeting our obligations under the Kyoto Protocol to reduce greenhouse gases is vitally important but this issue is much more than one of compliance with the United Nations goals to cut emissions and to stabilise the climate system. It is far more simple than that. Reducing our emissions is about honouring our commitment to those who have passed on that we will leave this planet in a better state … for those who come after us.” In addition she said: “We are of the view that what is needed is a radical rethink of the whole approach. We are opposed to the concept of paying the polluters of rewarding the corporate lobbyists with huge exemptions and of the very nature of trading rather than reducing emissions.” She also said: “The last thing we want to suggest is that we are the authority on the emissions trading scheme”—I guess we would agree with that—“because clearly we are not. But we do care passionately about leaving this world in a better state”. 
NICKY WAGNER (National) 
: 
 This Climate Change Response (Moderated Emissions Trading) Amendment Bill leads the world in covering all sectors and all gases and New Zealand will be the first country internationally to include agriculture in its emissions trading scheme. This bill will ensure that New Zealand will do its fair share in the global fight against climate change. The Government has amended Labour’s climate change legislation to make it a more workable a more affordable and a more practical emissions trading scheme. 
Right now the Government does not want to add a bill for an extra $400 million on to the people of New Zealand. Our fragile economy cannot afford these extra costs; we are only just beginning to turn round our economy and only just beginning to see a drop in the rate of unemployment. We want to continue this trend. We want to make sure that we do not destroy our businesses and that we do not decimate jobs. 
Chris Hipkins 
: This is just embarrassing. 
NICKY WAGNER 
: It is interesting that Mr Hipkins over there scoffs about jobs but the key issue for New Zealanders right now is to make sure that they keep working. 
Although New Zealanders are very aware of and love their natural environment many of them have little capacity to financially contribute to managing climate change. Also unlike Labour we do not believe that the Government should profit at the expense of the people of New Zealand trying to do the right thing by the environment. 
The new legislation will be fiscally neutral and absolutely focused on dealing with climate change. We will not be screwing windfall profits out of the ordinary New Zealander. For the first 3 years the bill will halve the costs for businesses and households. Labour’s scheme put a price on households at approximately $6 per week; National’s scheme will cost householders about $3 per week. But of course the long-term motivation is to encourage all New Zealanders to embrace a low-carbon lifestyle and to modify their behaviour accordingly. 
Debate interrupted.