Smith Nick: Climate Change Response (Moderated Emissions Trading) Amendment Bill — First Reading 
Smith Nick: Climate Change Response (Moderated Emissions Trading) Amendment Bill — First Reading 
[Volume:657;Page:6854] 
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 first time. 
 At the appropriate time I intend to move that the bill be referred to the Finance and Expenditure Committee with an instruction that the committee report finally to the House on or before 16 November 2009 and that the committee have authority to meet at any time while the House is sitting except during oral questions and during any evening of a day on which there has been a sitting of the House or on a Friday in a week in which there has been a sitting of the House and to meet outside the Wellington region during a sitting of the House despite Standing Orders 187 189 and 190(1)(b) and (c). 
This bill is about implementing for New Zealand a workable and affordable emissions trading scheme. It takes a responsible approach to the climate change problem caused by greenhouse gas emissions while being realistic about how much a small country like New Zealand can contribute. The bill is also about the John Key - led Government delivering on its promises. We said we would legislate for and implement a carefully balanced “all sectors all gases” emissions trading scheme. We said we would take an emissions intensity approach. We said we would align our emissions trading scheme more closely with Australia’s. We said we would not pocket billions of dollars by nationalising our emissions allowance. We said we would not discriminate against small and medium-sized enterprises and we said we would align the phase-out of industry support with that of our trade competitors. This bill does all these things. The bill is also consistent with the recommendations of the Emissions Trading Scheme Review Committee which was ably led by the United Future leader Peter Dunne. 
Let me briefly outline the specific changes in the bill. The industrial energy and transport sectors will enter the emissions trading scheme on 1 July next year and agriculture in 2015. There will be a transition phase for the next 3 years with a half-obligation and a fixed-price option of $25 a tonne. These changes will halve the cost increase for electricity and fuel for consumers and businesses. 
Support for trade-exposed emissions-intensive industry is changed in four ways. First the arbitrary threshold of 50000 tonnes which penalises small and medium-sized enterprises is replaced by a high and a medium-intensity threshold. This expands the number of eligible companies from an estimated 21 to 65 companies. Secondly the allocations will be based on an industry-average basis and not an arbitrary 2005 level. This will ensure we do not reward those with higher emissions and punish those who invested early to improve their efficiency. Thirdly the allocations will be production based. If companies cut their production their allocations will drop. If they grow their allocation will increase. This is about addressing leakage. This Government is not about exporting jobs offshore; we are about incentivising more efficient production here in New Zealand. The fourth change is about slowing the phase-out of support to industry. 
The bill also makes 34 technical changes to fix faults in the current law and to make the scheme more workable. A good example is removing the liabilities created by the clearing of wilding pines. Another is removing the liability associated with nitrogen curing of cabling which could have cost New Zealand export manufacturing jobs. This bill recalibrates New Zealand’s position to a more pragmatic approach. The existing Act was a branding statement by a dying Government wanting to make gestures about saving the planet with little regard to whether they would work or their impact on consumers on jobs and on investment. 
Extravagant claims have been made by some that this revised scheme will mean taxpayers subsiding major emitters. This is untrue. There is a cost in reducing the immediate impact on fuel and electricity prices relative to the current scheme but there are also savings as a consequence of reducing allocations earlier. Officials backed up by Treasury estimate that over the first decade of the scheme these changes will actually provide a small saving for the taxpayer. The latest claims over costs relate to the period beyond 2018 when frankly any cost estimates are little more than guesses. The issue beyond 2018 is that under Labour’s scheme industry support is phased out at 8 percent per year compared with Australia’s 1.3 percent and the EU’s 1.7 percent. We are not absolutely married to the 1.3 percent phase-out as far as that into the future and note that the law provides for it to be reviewed every 5 years starting in 2011. We are however committed to moving in line with our major trading partners and we worry that Labour’s phase-out rate which is five times faster than that of any other country will encourage jobs and investment to be exported offshore. Other claims are that the environmental integrity of the scheme is weakened with the Green Party’s Jeanette Fitzsimons so incensed that she says that at Copenhagen she will wear a large sign around her neck saying she is ashamed to be a New Zealander. I ask that members get reconnected with planet Earth. 
This emissions trading scheme will be the first of any country outside Europe and on 1 July 2010 will be the most comprehensive by including transport industrial and energy emissions. New Zealand is the first country in the world to include forestry and under these amendments will be the first country in the world to include agriculture. Accusations have been made about New Zealand providing a soft ride for Rio Tinto’s aluminium smelter. Our Bluff smelter will be the very first of 168 in the world to face a carbon price for its industrial emissions. There has also been strident criticism of our production-based approach to industry allocations an approach that was recommended by both the New Zealand Institute of Economic Research and Infometrics at the select committee review. Australia is taking this approach and so too is Europe in the third phase of its emissions trading scheme. This is about incentivising efficiency rather than just exporting emissions-intensive industries to other countries. 
I want to acknowledge the constructive role the Maori Party has played in helping move this debate forward for New Zealand. Had it not stepped up to the mark we would most likely have been forced to defer again introducing a price on carbon and we would go to Copenhagen with our climate change policy unsettled. The Maori Party brings a balanced perspective to this debate with both a strong commitment to Papatuanuku but also a real concern about jobs and about the impacts on low-income households and an understanding of the importance of primary industry to New Zealand. The changes agreed with the Maori Party have halved the cost to households will see thousands more low-income homes insulated will see the Government working with iwi on afforestation schemes will see better support for our fishing industry and will see ongoing Maori involvement as we progress forward on climate change policy. Despite the politicking over that agreement most in this House know that these changes are good for Maori and good for New Zealand. 
I am disappointed that Labour has taken such umbrage at the agreement and has pulled out of talks with the Government. It is equally disappointing that Labour has thrown its toys out of the cot and today has blocked this bill going to the special select committee that has spent the last 9 months working very hard on this issue. It has been my long-held view that climate change policy is bigger than any political party and that there would be real benefits for New Zealand from a wider and broader consensus. That is why as an Opposition member I wrote in 2005 seeking an engagement with the then Government. I never received a reply. I have engaged for months in good-faith talks with Labour. There is little difference in this bill from what was agreed in those talks. My hope is that through the select committee process we can get back round the table to resolve the few remaining issues. 
I make this point in conclusion. New Zealand has had a 15-year-long debate about how to put a price on carbon. We have flip-flopped under both National and Labour administrations between a carbon tax and an emissions trading scheme. We need to move forward. This bill will on 1 July next year enable us to make that start. I urge all members of this House to put aside party politicking to recognise the importance of the issue of climate change and to back the balanced way forward in this bill which is a response to this huge challenge and one that is balanced in respect of the economy. I commend this bill to the House.