Smith StuartSTUART SMITH (National—Kaikōura): Thank you Mr Chair. I want to actually talk a little bit about the Climate Change Response Act and how that is going to be impacted by this bill. Section 5X(2) inserted by clause 2 will replace 31 December 2021 with 31 May 2022. So this is around the response and the emissions reduction plan and of course what I want to know is: this is going to have a material impact on our emissions reduction plan. So we start reducing our emissions as of 1 January 2022 for our first period. Now we have a capped emissions trading scheme. [Member gestures at Chamber clock] Mr Chair I note my time seems to have flown by very quickly. I'm enjoying it a lot but I didn't think I'd already done four minutes but there we go. Thank you. I do have that impact on some people sometimes though.But getting back to the bill. So we have an emissions trading scheme a capped emissions trading scheme. That means by definition we have a limited number of emissions certificates. Those certificates are required for every tonne of—one certificate is required for every tonne of emissions emitted. And so the Government has come out with a budget and that will limit the number of emissions—there's a sinking lid—all the way through to 2050. It's a great system and will work incredibly well without most of us knowing it's operating in the background. However before we get to May next year we have an auction coming up of New Zealand Units (NZUs) on 1 December. We had an auction earlier in the year where we breached the cost containment reserve and more units were put into the market to cover that under the legislation. They have to be backed and presumably they will be backed internationally. That means the Government will go into the international market possibly the EU or some other country with an emissions trading scheme a credible one. They'll buy those certificates and they'll shred them. That's what we expect they'll do. And that will then mean that emissions will be reduced elsewhere effectively; we're offsetting our emissions elsewhere which is fine because actually the atmosphere covers the entire world and it doesn't respect international borders. However we then have an auction coming up on 1 December and then we have another one on 16 March all before 31 May and then immediately after that—on 31 May—on 15 June there's another auction. So you can see where we're going here. We have a number of emissions certificates that will be auctioned well ahead of a settled emissions reduction plan. The emissions reduction plan has at last been released or the draft one and it was interesting in the select committee when I asked the officials because in the preamble to this bill it says quite clearly that the rationale for this change in this bill is that the consultation was delayed. In fact the officials quite clearly said in select committee that the cause of this issue was the Ministers in Cabinet hadn't actually made a decision. So it had nothing to do with COVID; it had all to do with the Government Ministers not coming to a decision and getting a draft emissions reduction plan out for consultation and we would wonder why. Clearly there was some reason in the background. I'd like to know what that was because it's effectively what the Climate Change Commission put out in their report anyway. So it's just a cut and paste. So what was the hold up in that? I'd like to know why and I also want to know about the calculations and what informed those calculations around the emissions certificates that will be available next year in the first two auctions because one will occur before 31 May and one will occur less than two weeks or two weeks after this legislation or this schedule comes into effect. This is a very important issue because the market is very sensitive to these things. These emissions certificates are not just traded when they are released into the market at an auction they are traded daily through some markets. And I've just looked up a little earlier. We'll go back a little bit. If we go back to just prior to the Climate Change Commission releasing their report off the top of my head it's something like $40 a tonne was the NZU price. Today it's $65 and a bit of change. If we look out into next year it's $66 a tonne—that's the futures market—and it's through to $67 by 2026. So these things are being traded all the time. Andrew Bayly: They're likely to go higher than that Stuart.STUART SMITH: Well they will go higher than that and Mr Bayly's quite correct. They will go higher than that. This is a market which is supply and demand. Unfortunately the Government can control the volume or they can control the price but they can't control both. They're controlling the volume at the moment and they've lost control of the price and so this is incredibly important and the market will settle on a price. They don't go out there and collude on it. It's just a simple supply and demand.What we don't know is how they're going to react to this because we need a clear pathway through to 31 May and we haven't got one. So the market will then make decisions. Why this is so important—I'm sure the Minister in the chair Mr Faafoi would be very interested in this. Why this is so important is that decisions are being made right now by landowners about what's the best use for their land what's the best return for them. And I can tell you at $70 Minister at $70 a tonne that makes carbon farming a lot more attractive than it does at $65. And actually it's on its way to $100 I believe just we don't know when. So these things are incredibly important and it requires the market to be informed. This bill is quite clear on what it's trying to achieve but it misses the market completely and really what we have is an information gap. I think there's an opportunity for the Minister—and I note Mr Chair you said who is coming to be in the chair today as the Minister in the chair and we don't have the climate change Minister coming in. Mr Faafoi is going to be a good substitute for that. So I'm sure he'll be all over this. I know that he's incredibly interested in it. I can see he's champing at the bit now to get up and tell us all about it. But I urge you even if he can't do it just now to get those officials on to it and come back to us with a really good answer because we have the 1 December auction we have the 16 March auction and then we have immediately after this comes into effect on 15 June another auction. And as I said before the Government can control the volume or they can control the price but they can't control both. They are controlling the volume. What are they doing to assess the volume given that they haven't got an approved emissions reduction plan? How are they putting that—is there a wet finger in the air exercise? Is it informed by what? It's something I know I'm incredibly interested in I'm sure the committee is incredibly interested in but more importantly those actors in the market are interested in this because if they don't know they will make their own calculations and those calculations won't be informed by what the Government's going to do because they haven't told them. So they will make those assessments themselves. If the price goes up by let's say 50 percent which it went up by more than that from the Climate Change Commission's initial report right through until now—if it did that again that would have a massive impact on land use in New Zealand where we'd see and I think in Keith Woodford's words he's a former professor at Lincoln University we will see the largest land use change in 100 years.