Climate Change (Emissions Trading and Renewable Preference) Bill — In Committee 
Climate Change (Emissions Trading and Renewable Preference) Bill — In Committee 
[Volume:650;Page:18609] 
Climate Change (Emissions Trading and Renewable Preference) Bill 
In Committee 
Debate resumed from 2 September. 
Clauses 1 and 2 ( 
continued 
)  
Hon Dr NICK SMITH (National—Nelson) 
: 
 This afternoon we are being asked to continue the reckless and irresponsible fast-track process being made by this Clark-Peters Government on this very complex emissions trading legislation. I want the Committee to note that last Tuesday the Government tabled 785 amendments to this bill and passed them on the same day. I would bet that not a single member of this Committee would understand the implications of those 785 changes. The Minister responsible for Climate Change Issues has said: “Trust me. Trust me and my officials. This is all OK.” The problem is that only the week before in this Parliament in response to questions the Minister said that the bill did not need any further amendment and that the Government had it all right. We knew after the 1000 changes the Government tabled only 3 days before we deliberated on the bill that the bill had many errors and now we know it again. 
I will just give a couple of examples of where there are serious mistakes in this bill. The first is in respect of cogeneration. One of the good things that has happened over the last decade is that as people look to a more intelligent use of energy there has been a real growth of cogeneration—more growth in cogeneration than in any other area of the energy equation. Yet when we look further through the bill at the detailed clauses of clause 37 and other clauses cogeneration has been left out. If we go back to the Finance and Expenditure Committee report we see that when it comes to the determination of allocations for industry the clear intent of the select committee was to include cogeneration. Members opposite say that this is a minor technical issue and that it is only a word and they ask why we would be bothered with a single word. Well that single word will cost New Zealand’s single biggest company Fonterra $13.5 million—$13.5 million every year. That is just the cost for Fonterra let alone the cost for the other industries. So I ask members opposite why we are picking on cogeneration and why we are discriminating against that particular form of energy. 
Let me give another example. When industries are meeting their obligations in this emissions trading scheme they are able to opt in and take responsibility for their emissions. But the bill again because of a drafting error does not allow gas or coal that has gone through a wholesaler to be included. Again people may say that that is all a bit complicated and ask what it means. For five of New Zealand’s major companies it means that they are not able to manage all of their emissions which is the very purpose of being able to opt in. Again we have a serious mistake that will cost industry millions of dollars. 
So I say to the Minister in the chair the Hon Pete Hodgson and to the Government that this is reckless and irresponsible lawmaking. As the  
Dominion Post  
editorial asked so well yesterday: why is the Government wanting to ram through this legislation when it is absolutely obvious that it has significant and serious errors that need to be worked through? There is only one reason. The Government has been in office for 9 years. Its climate change record is awful. We have the biggest growth in emissions of almost any country in the OECD. Every single element of climate change policy has turned to pickle. I would have hoped the Government might learn from the experience—that this stuff is difficult and complicated. And what we are doing is exactly the same as we did on the matter of electoral finance and I fear that Parliament is again making serious errors—errors for which New Zealand will pay dearly. 
CHRIS TREMAIN (National—Napier) 
: 
 National has consistently advocated a well-designed carefully balanced emissions trading scheme as being the best tool to efficiently reduce emissions. In 1999 the National Cabinet decided that an emissions trading scheme was the right way forward on climate change policy and the National Party expressed concern when the emissions trading scheme was dropped in favour of a carbon tax after the current Government initially took office. Nick Smith promoted an emissions trading scheme in National’s  
A Bluegreen Vision for New Zealand 
 document in 2006. Last year we supported the Government’s decision in principle in favour of an emissions trading scheme and voted for the first reading of the bill. 
R Doug Woolerton 
: Oh that’s a load of rubbish. 
CHRIS TREMAIN 
: Mr Woolerton may remember that vote although it would be one of the few parts of the bill he does remember. 
However the rushed legislative process has resulted in a bill that has major deficiencies. The Finance and Expenditure Committee’s consideration and deliberation process has been rushed and reckless driven to meet a political agenda and not the concerns of New Zealand as my colleague Nick Smith has canvassed here today. Only approximately 12 hours of the committee’s time was allocated to considering the 483-page departmental report and 60 supplementary departmental reports on specific issues. Committee members received over 1000 amendments to this 237-page bill only 3 days prior to the committee’s final deliberation. 
With the exception of the Minister and perhaps the chair of the select committee there has been no serious engagement by Government members in respect of the critical issues to New Zealand in this bill as is evidenced by there having been no fewer than 24 different Government members subbed on to that committee throughout the process. I raise the question: how many of those Government members who were subbed on to that committee had any idea whatsoever about what was in the bill? 
National members who were far more consistently present on the committee and who queried the important issues have repeatedly been told that things are a certain way because they are Government policy not because they are in the best interests of Kiwis. If that is not bad enough 785 amendments were dropped on the House at the commencement of the Committee stage and are now to be rushed through the process. 
Over the weekend some embarrassing new errors have been found in the emissions trading scheme. New errors that have been identified in respect of cogeneration and emissions from gas and coal bought through wholesalers expose the Government’s reckless process— 
R Doug Woolerton 
: For heaven’s sake! 
CHRIS TREMAIN 
: Does the member think it is a good thing that over the weekend $13 million in additional costs were found in the bill—costs that were not covered by those 785 amendments? Just a small $13 million in extra costs! That is absolutely unacceptable. These significant errors entirely the result of a rushed process are coming home to roost for businesses throughout this country. Costs that amount to $13 million are significant and should not be overlooked. 
These problems could have been overcome if the process had not focused solely on a political agenda and on putting a trophy in the cabinet of the Prime Minister’s office in terms of getting this legislation through according to her agenda. This bill represents one of this country’s biggest economic reforms. It is grossly irresponsible to be ramming it through with hundreds of new amendments at the ninth hour. The public has had little opportunity to comment and not a single MP—or very few MPs certainly on that side of the Chamber—has any idea of what is in the bill. 
The rush as I have said is about Helen Clark’s desire to have something to show on climate change after 9 years of Government and her record in that area has been abysmal. Whether it be in forestry or in greenhouse gas emissions this Government over its 9-year period in office has not delivered on its rhetoric. 
Hon Parekura Horomia 
: Come on! 
CHRIS TREMAIN 
: It is a fact I say to Mr Horomia—in greenhouse gases in forestry. There has been deforestation and increases in greenhouse gases over the last 9 years. Is that an acceptable record? 
Sue Moroney 
: Does John Key believe that? 
CHRIS TREMAIN 
: We are talking about the Labour Government’s record on this I say to Ms Moroney. It has been appalling—absolutely appalling. 
This legislation is as I say a rush to get a trophy on Helen Clark’s wall so that she can go out on the international stage and claim that she has such a trophy—as opposed to actually looking at the appalling record of this Government on climate change. Like I say this bill is one of the most important pieces of legislation to hit this country in two decades. 
Hon DAVID CARTER (National) 
: 
 I want to pick up on the comment just made by my colleague Chris Tremain. I agree with him that the Climate Change (Emissions Trading and Renewable Preference) Bill is the most far-reaching legislation this Parliament has considered for 20 years. It is therefore the most far-reaching legislation that nearly every member of the House has considered. I do not think that Parliament has done justice to the process of this bill either in the Finance and Expenditure Committee or in the Minister last week tabling close to 800 amendments. 
The reason this legislation is so far-reaching is that the costs that will be imposed on our economy are huge. We know that. The real difficulty is in being able to accurately measure those costs. I looked back through the submissions that were made to the select committee and the documentation we received from officials gave a carbon price starting at $15 a tonne. They acknowledged that it could be $25 a tonne and they gave the odd example of the international carbon price being at $50 a tonne. The Reserve Bank of New Zealand I know has recently done some work and assumed it would be $21 a tonne. But I have just managed to find out that the current price is actually $45 a tonne. With that sort of price per tonne of carbon electricity for household consumers will go up by 20 percent. But the particular area that I am interested in is agriculture and according to the information presented to us at the Finance and Expenditure Committee that price will cause a drop in farmer output prices of around 30 percent. 
R Doug Woolerton 
: No renewables won’t cost a cent. 
Hon DAVID CARTER 
: Doug Woolerton can laugh about that but if he bothers to go back and dig out the papers that he was presented with at the select committee when he should have been taking part he will see that at $50 a tonne the net effect on national sheep and beef budgets is a drop in profit before tax of 160 percent. That is the figure that was presented by the officials to the select committee. 
R Doug Woolerton 
: They can bring the emissions back and not pay a cent. 
Hon DAVID CARTER 
: Doug’s interjections are hard to respond to. He does not seem to understand any part of the legislation despite sitting on the select committee. But I tell Mr Woolerton in the last couple of weeks that he has left in this Parliament to listen carefully. If one has put in an emissions trading scheme that reduces the profitability of sheep and beef farmers by around 160 percent they will not— 
R Doug Woolerton 
: They won’t. 
Hon DAVID CARTER 
: The member now interjects and says “They will not.” The officials supplied these figures to Mr Woolerton at the select committee. He took no active involvement in the select committee. If he had bothered to read his papers he would know that that was the figure that came from the select committee people— 
R Doug Woolerton 
: I raise a point of order Madam Chairperson. That is factually incorrect and a person can check the record of the select committee. I was there almost every day—in fact far more than Mr Carter was. 
The CHAIRPERSON (Hon Marian Hobbs) 
: With due respect that is a debatable point not a point of order. 
Hon DAVID CARTER 
: As I was saying if Mr Woolerton was there that much and had taken a conscientious involvement in the paperwork presented to him he would know the figure I am quoting came to us from the very officials who advised the select committee. That figure is that at $50 a tonne the average sheep and beef farmer will see his profitability decline by 160 per cent. I will tell Mr Woolerton what that means. It means that the sheep and beef farmers in this country will not survive. They will not survive and if the member thinks the international market for sheep and beef products will dry up then that is another reason why he will not be here for more than another couple of weeks. I say to Mr Woolerton that what will happen is that this production will then occur elsewhere in other countries that have not imposed an emissions trading scheme on agriculture. Mr Woolerton needs to be reminded that no other country in the world is going down this path at the moment—no other country in the world. 
Chris Tremain is absolutely right when he asked the question why we are rushing this legislation through just before the election. It has more to do with Helen Clark’s next job at the United Nations. 
TIM GROSER (National) 
: 
 I suspect that most members know the phrase “the devil is in the detail” and what it means. My interpretation of it is that whether one looks at a contract whether one looks at a bill or whether one looks at an international economic agreement the bold preambular language is all very nice and very attractive but the bits that actually matter are usually highly technical provisions formally contained in footnotes and annexes that only high priests can understand. That is the general experience that people have in mind when they use this phrase. When we are presented as legislators with 785 amendments coming on top of a bill of unbelievable complexity there is a high chance of mistakes and a high probability that this Parliament is passing this far-reaching legislation with little idea whatsoever about its effects. 
My colleague Dr Nick Smith has just given one example—only one example that we have recently found out about—in respect of cogeneration. I want to drill down into another issue which I suspect is far far larger than the issue of cogeneration. It is a deeply technical point—but remember the phrase “the devil is in the detail—and it is the implication of what is called the greening of the assigned amount units. It is about the Russian hot air units. The underlying question is—and I did ask the Minister during the Committee stage to come up with an economic estimate but even an approximate one would have been fine—what is the likely long-term impact to our economy of this so-called technical change in limiting access to the cheapest available assigned amount units? No answer was given of course; not even an attempt at an answer. 
Let me just try to explore this a little more deeply. As I understand it—and I am no expert in this; let me make this clear—inside the European Union there is a range of prices for carbon credits. They range roughly from around €9 to around €20—that is around US$21 and NZ$44 to NZ$45. The difference is very large when one multiplies it by the Government’s estimate of some 22 million tonnes of carbon dioxide - equivalent gases that we will actually have to pay for. It makes a vast difference to the bill as to which end of that price spectrum one goes into. Of course outside the European Union even lower prices are available on the international market and some of them no doubt are rather dubious. But nevertheless the point is that this is an integral part of the Kyoto Protocol framework. 
We all know that inside the more extreme parts of the green movement this is actually a very controversial issue. They do not particularly like the idea of Russian hot air units and like to put maximum pressure on people to avoid using them. But it is part of the political balance of Kyoto. Without it Kyoto would not have been put together; without it the Russians would not have come into the Kyoto agreement; without it we would be looking at a much different deal. So it is part of the negotiating balance of the agreement. 
Of course the people on the extreme end of this view do not seek to get a balance between the economic and the environmental sides of this equation so they are not interested in the underlying rationale for this which is to drive this down as we put a price on carbon in the international economy at least cost. That is the whole structure. But the people who do not care about these costs want to make it as difficult as possible for countries to meet their obligations using the full tool kit of the Kyoto Protocol. So I want to know from Government members: what is the nature of the deal behind this? What is the price range in practice as a consequence of this enabling legislation? It is my understanding that the actual regulation will have to be written later but what is the economic impact of limiting New Zealand’s access to low-cost assigned amount units? As far as the rationale of quoting the European Union which scorns the use of this is concerned I find this to be hypocrisy on a giant scale. First of all it ignores the fact that the European Union has limited the key issue in its own emissions rating. 
Hon BILL ENGLISH (Deputy Leader—National) 
: 
 The Climate Change (Emissions Trading and Renewable Preference) Bill has all the feel of legislation that is being passed by a Government that does not believe it will be around to implement it. It has the feel of legislation that is being passed purely for political and symbolic reasons. As I think any number of people have suggested one of those political reasons is so that the Prime Minister can put it on her CV that she has implemented one of the world’s most comprehensive emissions trading systems in order to help her to gain more international recognition and possibly employment should she stop being the Prime Minister of New Zealand. We think it has that feel because the Government has proceeded in such a reckless manner with such complex legislation. 
My colleague Nick Smith has pointed out the problems that arise from the fact that the legislation overlooks what has been one of the more popular types of energy efficiency in New Zealand in recent years and that is cogeneration. In this case that directly affects Fonterra and our largest export industry. How can a Government conceivably market itself as being interested in sustainability when it appears to have no idea what actually happens with regard to our largest energy users and when it rushes through Parliament legislation that effectively rules them out of the system it is creating? 
I think the legislation has the same effect on one of the largest enterprises in my electorate: the Finnegan freezing works now run by Silver Fern Farms. It has just implemented a large-scale cogeneration project that means that all the energy except the lighting energy for that freezing works which employs 1000 people will be generated on site from waste products. I have no idea whether this measure cuts out that project and we have a matter of maybe hours to sort that out. That is a high-profile big step forward in energy efficiency from the agricultural sector which the Greens in particular lambaste month after month. The Greens have gone along with the Government’s reckless process that essentially says to that sector: “We want to kick you for doing nothing but when it comes to writing the rules we don’t even know you are there.” That is one of the reasons—only one of dozens of reasons—why we have opposed this legislation. 
As my colleagues have pointed out the National Party has for several years indicated a strong level of goodwill towards an emissions trading system. We have supported it and have argued that if we are to do something about climate change that is the best method of doing it. The Government has persisted as it does in many ways with its own self-serving partisan agenda which it has put ahead of the interests of New Zealand. The interests of New Zealand are best served by an emissions trading system. Therefore the interests of this country are best served by a considered and measured process that deals with all the issues now raised by something like 1400 amendments since the Finance and Expenditure Committee stopped considering this bill. 
Parliament needs to be clear about this. The bill spent a number of months before the select committee. The Opposition took a considered and diligent approach to submissions. We listened to them all we considered all the issues they raised and the environment in the select committee was positive with the Greens in particular contributing from their depth of knowledge—even New Zealand First contributed to the atmosphere of goodwill. Since we stopped considering the bill maturely as a Parliament the Government has wheeled out over 1400 amendments and that is reckless. That flies in the face of the goodwill that the Opposition and all the other parties in Parliament—which are I think all represented on that select committee—applied to this legislation. The Government has decided to proceed regardless of the consequences. We can only presume that is because it does not believe it will be in office to implement the legislation. Of course the consequences of this legislation are many and they are very complex. This legislation has to me the feel of the original fishing quota legislation. 
SHANE ARDERN (National—Taranaki-King Country) 
: 
 It is an honour to follow my colleague Bill English in this debate and to oppose the Climate Change (Emissions Trading and Renewable Preference) Bill. I do so on a number of grounds. First of all I have all of the Supplementary Order Papers—that I know of—that have been tabled in the House. When we look at those Supplementary Order Papers we have to ask serious questions about the process of this legislation. Given the long select committee process and the arguments put forward by National throughout that whole process that this legislation needed time—and we certainly had not got it right at that stage—when we look at the 785 amendments and listen to all of the answers from the Government that National is just buying time to try to put off the inevitable and to protest against it again we see that the only conclusion anyone can come to is that the process has been a mess and it has been shonky. It would be great if any Minister would take a call to explain to us why at this stage we have had over 1000 amendments to this legislation since it came out of the Finance and Expenditure Committee. 
I also have some photographs with me that I am sure the Minister would be interested in. In this photograph we have the beautiful Punehu Stream and Mount Taranaki in the background and we also have a riparian margin of pine trees and native plantation. That is not a carbon sink under this legislation. Those pine trees are not a carbon sink; they do not take carbon out of the atmosphere according to this legislation. I have another photograph of the same farm with similar trees— 
Pinus radiata 
 well known to New Zealand—planted at the same time in the same year post-1990 and they are carbon sinks. The trees in one photograph are carbon sinks and the ones in the other are not—same trees same farm. 
By using the Global Positioning System (GPS) we are able to measure down to the nearest 20 centimetres the area of each of these plantations. Most territorial authorities are using that technology for building and other resource consent applications so this is not something the Government had to invent; it is already available. We know exactly how many trees there are and where they are but the trees in one photograph are carbon sinks and the trees in the other one are not. That is a bizarre and ill-conceived policy. 
I would love the Minister to take a call to tell us what analysis was done in terms of the cost of establishing an area. An arbitrary figure of 1 hectare has somehow come out of the process. Arguably I guess it is easier to measure 1 hectare if we are measuring it with a tape measure or perhaps we are back in the days of having surveyors out there with their chains—the 22-yard length chains—measuring the area. Instead as I say we could measure it by using GPS or satellite measurement so we know the exact measurement using modern technology. Unfortunately that is not able to be done in this legislation. 
We also know that during the whole period from 1951 through to 2006 1.9 million hectares of trees were built up—a massive asset a massive forest in this country. Trees are the issue that is argued about most and certainly there are special clauses relating to trees in this legislation. I note that last year 13600 hectares of trees were cut down with no intention of replanting them. Quite aside from the environmental debate the economic argument that could be mounted around that issue is something that this Government should at least take a call on. The Government should explain to those who may be listening to this debate why it has come to the conclusion that the policies it has had up until now have brought about this absolute devastation to the forestry sector but that the policies under this legislation are somehow going to turn that around and we are going to see reforestation again going forward as a result of this wad of paper. 
Hon PETE HODGSON (Minister for Economic Development) 
: 
 We are about half an hour into the debate now and it is probably worthwhile taking a call in order to make just a couple of points. In response to the member who has just resumed his seat Shane Ardern I say—and I am sure this does not need to be said—that the Kyoto Protocol was put together with the idea that 1990 was year zero. It was done a long time ago. It was signed in 1987. It was signed by the National Party. That was 11 years ago and that is why trees are counted differently. Secondly on the issue of cogeneration I say that that decision was made by the Finance and Expenditure Committee. Most of the members who have been speaking in the debate are on that select committee so I will not address that point but other members may wish to do so. 
It seems to me that so far there is really only one question asked by the member Tim Groser which probably does need a bit of exploration. I remind the member of his question—and perhaps I am using slightly different language from that which he used—which is that given that the Russian hot air units are off limits what does that do to price? The answer right now is that they do not alter the price at all because they are not on the market. Of course there is the possibility that they will come on the market but then again they are able to be used for wash-up purposes at the end of the quinquennium. At that point although one cannot make a prediction because one does not know how many are coming on the market one can predict that the price change may not be zero but it will be either very low or zero. 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 I would like to speak to clause 2 but just before I do that I point out to the National Party that the issue it has been going on about in respect of industrial heat is in the officials’ report to the Finance and Expenditure Committee on pages 32 and 33 and then on pages 235 and 236. Several National members sat on that select committee received that report and did not raise the issue at the time. So to claim that it was an error as National members were doing recently and that the Government did not know that it had forgotten about industrial heat is certainly contradicted by the evidence. 
To return to the provisions relating to the transport sector coming into force I say that this is the very heart of the obligations in the Climate Change (Emissions Trading and Renewable Preference) Bill because until the sector has entered the scheme nothing happens. The bill as introduced had the transport sector entering the scheme in January next year so transport was going to cover its emissions for 4 years out of the 5 for which New Zealand is responsible. An announcement was made by the Prime Minister in around April or May that because petrol prices were so high the entry of the transport sector would be delayed for 2 years meaning that transport would cover its emissions for only 2 out of the 5 years for which New Zealand had to pay. The reasons given were high petrol prices which were inflationary and the fact that households would find it difficult to cope. The extraordinary idea was put forward that it would somehow be easier to add 6c a litre to the price of petrol in 2011 than it would be to do so in 2009. That seems to ignore the fact that 2011 is another election year and that the long-term trend for fuel prices is up. Well today petrol prices are 11c a litre less than they were when the Prime Minister made that announcement which meant that the 6c could have come in and petrol prices would still have gone down compared with what they were when the announcement was made. I think it would take a very brave person to predict that in 2011 prices for petrol will still be down. It seems very likely in fact that they will be considerably higher than they were even when the Prime Minister made this announcement. The timing was changed at the select committee not because the select committee chose to do that but because it was a Government announcement and it was passed by majority at the committee. So that is what the bill now says. I predict that whoever is the Government in 2011 with an election coming up will find it very difficult to add 6c a litre to the price of petrol given where oil is going and I fear that we may leave transport out for even longer. 
I was also very interested to notice when some Cabinet papers were released through the Official Information Act that Treasury had advised the Government to bring transport in gradually perhaps over 3 years or so—a little each year—so that there would not be such a sudden hit on either the motorists’ pockets or on inflation. That is exactly what the Green Party proposed and has been proposing throughout the year. It is a matter that needs to go up in lights when the Green Party agrees with Treasury’s advice—it does not happen very often but sometimes we agree. It is unfortunate that the Government chose not to take that advice and that transport emissions will be allowed to grow because they are not covering the full cost that they cause to the country in terms of their greenhouse emissions. When the petrol levy comes in in 2011 we can expect that transport emissions will be even higher than they are now and that therefore the hit on the motorists will be even worse. The important thing is that we need to start getting those alternatives into place and until there is a proper price on carbon that will not happen. 
CRAIG FOSS (National—Tukituki) 
: 
 First let me acknowledge the officials. It has been hard work going through the Climate Change (Emissions Trading and Renewable Preference) Bill with all its various changes. The officials have been sitting in the Chamber until late every day and I appreciate what they have been doing. 
Huge thanks must go to the members of the public who submitted on the first version of this bill. They did a very good job. The members of the Finance and Expenditure Committee travelled up and down the country to listen to them. There were very considered and in-depth analyses all over the place. But those people are due an apology from this Parliament because the bill that they submitted on is awfully different from the one we have before us now. They submitted on the bill before a thousand amendments were made to it just before it arrived in the House and as my colleague Shane Ardern who spoke earlier said there are 785 amendments before the Committee. 
Why is this legislation being rushed through the House right now? Why is it being rushed through before our competitors have introduced similar legislation? Why is New Zealand taking the bleeding edge on the emissions trading system? There is acknowledgment out there of climate change so why is this Government trying to push the bill through with a majority of fewer than two or three votes? The Green Party is not 100 percent happy with what we have here yet it is still voting for it. Many parties on the other side of the Chamber are very unsure about this emissions trading scheme yet they are still voting for it. Why put the issue at risk? If those who want to remedy the problem of climate change want the process to have any integrity whatsoever surely they want the bills that are passed by this Parliament to have integrity by way of cross-party support across this House rather than their being passed with a majority of just two or three votes and just before an election. To sneak such legislation through the House before an election is an incredible admission of defeat on the part of those who are pushing it through. It is an incredible admission that they do not expect to be here in a few months’ time to do further work on this legislation. The bill in its current form should go back to the select committee given that 1785 amendments are being made to it after people had submitted on it after they had spent so much time and resource on it. 
It was announced that one of the parties supporting the bill had received in return a one-off payment of $150 for each household to be delivered apparently via Working for Families to compensate for the increased energy charges. From the way that the bill is written yes every household will get a one-off payment but the increased charges will be there forever. The cost of being in New Zealand and the cost of doing business in New Zealand will be higher than the same kinds of costs of our competitors. Our costs will be higher than the same kinds of costs in the places where 80000 New Zealanders move every year. Our costs will be higher than the same kinds of costs are where 45000 New Zealanders move every year—Australia. Why are we taking the lead ahead of those countries? We cannot afford to do so. 
If this bill and what comes out of it do not have integrity they will fail. New Zealand will end up paying twice because the rest of the world is moving at a different pace from us and we will end up having to adopt what they design what they do and what their time frames are rather than our doing what the current administration thinks is gold-plated. It is not gold-plated. Nothing from this House can be gold-plated unless it has cross-party support. Climate change is bigger than one two or three parties in this Parliament. Sustainability is bigger than a few parties in this Parliament. It affects all of us. It affects our generation the next generation and the next generation after that. For what people say on the hustings about climate change and emissions trading to have any integrity this bill must go back to the select committee to have further work done to it. 
I challenge Labour members on the other side of the Chamber. I notice that the Minister in the chair the Hon Pete Hodgson was in Hawke’s Bay the other day. I challenge him to go to the processing plants in Hawke’s Bay where 2000 jobs are projected to be lost and tell those people where the replacement jobs are. You should front up and tell them. Where is the engineers union on this issue? It is forecast that 22000 to 50000 jobs across the country will be lost because of the bill being in the form that it is now in. You should front up to the door front up at smoko and tell those people where those jobs will come from. I challenge members on the other side of the Chamber who are voting for this bill to do that. 
I tell you what: at the very least it is—to put it kindly—misleading to not say upfront what the solutions are and where new jobs will be found to replace the jobs that will be lost. Those people’s livelihoods come from our agricultural-based economy and you are putting them at risk. You are putting Fonterra at risk. You get up and talk about Fonterra yet you are signing up to and voting for a bill that will cost it $30 million right now. The officials acknowledge that. How can you stand up and do that? The bill should be sent back to the select committee. 
The CHAIRPERSON (Hon Marian Hobbs) 
: Just before I give the call to anyone I ask members please not to bring the Chair into the debate by using the second person. 
Dr PAUL HUTCHISON (National—Port Waikato) 
: 
 Thank you Madam Chair for the opportunity to speak on the very important Climate Change (Emissions Trading and Renewable Preference) Bill. National was pleased to support this bill in the first reading in good faith in the belief that the Government would make every effort possible to ensure this extremely important bill was thoroughly and properly considered because of its long-term effects. Indeed it would have been ideal to work towards a consensus between the parties because such a consensus would have been enduring. 
Of course as it has transpired the select committee process in the Finance and Expenditure Committee was rushed. The process was flagrantly abused by the Labour Government with little hearing time given to some of the most important submitters and now the Labour Government is literally ramming through some of the most important legislation of this century. At the last minute just prior to the select committee’s deliberation there were a thousand extra unconsidered amendments. To make matters worse at the beginning of this Committee stage there were 785 further new unconsidered amendments—amendments that the people out there in the sector have simply not had time to consider. This was as the Hon Dr Nick Smith labelled it an example of absolutely reckless irresponsibility by the Labour Government. 
This afternoon I looked at the 2002 Climate Change Response Bill. I noted that the Labour Government has consistently been wrong over many of the issues around climate change. In the first reading version of that bill the Labour Government had planned to send carbon police into the farms and businesses of New Zealand with the right to arrest people if they considered it appropriate. That is how ill-considered and zealous the Labour Government was just a few years ago. That was described by Professor Joseph of Canterbury University as State-sanctioned trespass. 
I will come back to the bill—it is absolutely appropriate that I do so. Last week I also spoke to the chief executive officer of New Zealand Steel. He said that by rushing through this bill a $1 billion investment in that very strategically important plant for New Zealand would be put at risk. Part of that investment is a $200 million investment in a vanadium extraction plant and already $12 million has been spent on it. But as we sit here this afternoon that development is being wound down. That has to be a huge tragedy. The chief executive officer reminded me that New Zealand Steel cogenerates 60 percent of its energy needs through its own processing plant and that many plants around the world do not have cogeneration. But here in New Zealand we have a steel mill that has been verified by benchmark studies as being one of the most efficient in the world. 
The Labour Government in its last set of amendments which it did not consult widely with the sector over has changed the rules again. That will significantly affect the trade-exposed industries whereby credits are given only for the part of trade that is overseas. European mills of course are exempt. If Labour were to run the New Zealand Steel mill out of the country two things are likely to happen. Firstly New Zealand would have to import our steel and with that would be all the carbon miles implied because of the huge distances that steel would have to be imported over. Secondly an offshore replacement mill is highly likely to be much less efficient than one in New Zealand and it would gush out far more greenhouse gases into the atmosphere than our mill does. It is almost as though this Labour Government wants there to be a loss for New Zealand and a perverse increase in emissions by passing this legislation so inappropriately. 
CHARLES CHAUVEL (Labour) 
: 
 We have heard yet another speaker—in this case one who was not even on the Finance and Expenditure Committee hearing the public submissions—bring up the shibboleth just now about the move overseas of a polluting plant to a jurisdiction that does not have any restrictions on carbon as if somehow all New Zealand industry will be at risk when this legislation is passed. The member conveniently ignores—as do so many members on the Opposition side of the Chamber—the fundamental truth that the entire world will ultimately face a cost of carbon regime. Some form of emissions trading regime or a carbon tax is likely at some point to be a requisite for every country. So it is not as if there will be some great division of the planet between those nations that face costs of carbon and those that do not. It is time to stop peddling that myth. The evidence heard before the select committee backs up exactly what I have just said even though it is not convenient for members opposite because it does not fit with their spurious arguments in opposition to this legislation. 
The fact is that the bill as reported back from the select committee and as it will be amended by the Supplementary Order Paper that is under debate now has not changed in terms of the core design principles of the emissions trading scheme. 
Hon Dr Nick Smith 
: So the detail doesn’t matter? 
CHARLES CHAUVEL 
: Dr Smith clearly does not understand the scheme as he has shown throughout the select committee process and throughout this debate. The reality is that it is a proposal to include “all gases all sectors”. The reality is that it is important that greenhouse gas emitters should face the full cost of their emissions at the margin from the outset. That has not changed in any proposal before the House or before the Committee at the moment. Assistance for industry remains at 90 percent of the 2005 emissions. There will be no free allocation of emissions units to firms that can pass off the costs of accounting for their emissions on to consumers. These core principles are vital to producing an economy that is resilient against the low-carbon future we must face for the sake of our planet. 
The bill has been amended in ways that will enhance our existing ability to help New Zealand meet our international obligations to reduce greenhouse gas emissions while protecting the competitiveness of our business. It is not impressive to hear members call for the matter to be referred back to the select committee. Every matter that is dealt with in the amendments before the Committee was exhaustively canvassed in the select committee process. The issues are very clear. The issues were ventilated. It is very clear for those who paid attention during the select committee and were present at the meetings that every matter dealt with by an amendment before the Committee of the whole House was considered in the select committee. There would simply be no merit in going back to a select committee process. It is time to stop delaying and to get on with the job. 
Hon Dr NICK SMITH (National—Nelson) 
: 
 The chair of the Finance and Expenditure Committee has told the Committee of the whole House that the select committee carefully considered all of the amendments. Let me tell this Committee what actually happened. The Government strolled in on the last day—the day on which we were to deliberate—with a thousand amendments. There were a thousand amendments I say to Mr Chauvel and if he believes that any single member of the select committee had time to consider their implications then he really is pulling a very long straw. 
I put this very simple question to the member opposite and I could put hundreds of such questions— 
Charles Chauvel 
: Some of us read our papers. 
Hon Dr NICK SMITH 
: Oh the member says he has read his papers. Well let me check that by asking him a simple question. Why does new section 57 inserted by clause 43 not include reference to cogeneration? The silence is deafening. Now members opposite may say that is just a technical issue and they have got the concept right. Well let me tell members the implication of not including cogeneration—that one word. That omission will cost Fonterra $13.5 million each year. 
Hon Judith Tizard 
: Gibberish is not helpful. 
Hon Dr NICK SMITH 
: Well I ask Madam Tizard whether she would like to answer for me the question of why in new section 69 inserted by clause 43 there is no inclusion for the wholesaling of gas and coal. 
Hon Judith Tizard 
: When you start talking sense we’ll all talk to you. 
Hon Dr NICK SMITH 
: The member Judith Tizard says she cannot explain that. 
The problem I say to Judith Tizard is that the process followed by the Labour members on this bill has been reckless and irresponsible. We had all these assurances before. Do members remember the Electoral Finance Bill? Do they remember that bill from about a year ago? 
R Doug Woolerton 
: What great legislation that was. 
Hon Dr NICK SMITH 
: Mr Woolerton and New Zealand First say it is great legislation. It is legislation about disclosure and I am somewhat surprised that Mr Woolerton would want to advance the cause— 
The CHAIRPERSON (Hon Marian Hobbs) 
: Dr Smith speak on the Climate Change (Emissions Trading and Renewable Preference) Bill please not on another bill. 
Hon Dr NICK SMITH 
: I was responding to— 
The CHAIRPERSON (Hon Marian Hobbs) 
: Ignore the interjections. 
Hon Dr NICK SMITH 
: The parallel between the two bills is that we had all the same assurances from the Government on the Electoral Finance Bill that we have had on this bill yet now the agency that is responsible for administering the Electoral Finance Act says the Act is a mess. It is more serious than that because the implications of this bill are even larger than those of the Electoral Finance Act. Certainly the Electoral Finance Act is a hassle for political parties and candidates and it makes participating in an election a nightmare but this bill will have an impact on every single household and business in New Zealand. 
It is just reckless and irresponsible for this Government to be ramming this legislation through without the necessary scrutiny. You see this Clark-Peters Government is not actually concerned— 
Charles Chauvel 
: Crosby/Textor lines! 
Hon Dr NICK SMITH 
: Well actually I can tell the member that Winston Peters is part of his Government and the corruption that is being exposed in another room in this building— 
The CHAIRPERSON (Hon Marian Hobbs) 
: Come back to the bill please. 
Hon Dr NICK SMITH 
: Well I simply say to the member opposite who is part of this Clark-Peters Government—[ 
Interruption 
]. Those members laugh because they are embarrassed; they know about this Clark-Peters Government and its irresponsible legislation of this sort. 
I have a last very important question. In stitching up the amendments and the support from New Zealand First and the Greens the Government has announced $1.5 billion of spending on various measures. I ask the Minister in the chair the Hon Pete Hodgson where the money is coming from. 
R Doug Woolerton 
: What part of it don’t you agree with? 
Hon Dr NICK SMITH 
: I would simply like to know where the money is coming from. Can the Minister tell us that? 
I will tell members what we are told. David Parker the Minister responsible for this legislation said the money was coming from the extra profits of the Government’s State-owned enterprises. The problem with that line of argument is that Dr Cullen has said—and it is on the public record—all of the profits from those State-owned enterprises will be required to meet the Government’s 90 percent renewable energy target and any suggestion that the money could be used for alternative purposes meant that the Government did not have a hope of meeting that target. 
I ask the Minister in the chair where the money is coming from that has enabled the Government to buy the support of New Zealand First and the Greens for this bill. Does any member on the Government benches know that? Judith Tizard had a lot to say for herself a few moments ago; would she be able to advise me as to where that money is coming from? Can the Minister in the chair tell me where the money is coming from? Mr Charles Chauvel who was very keen to interject a moment ago may be able to fill us in on that. I ask members where the $1.5 million is coming from. 
Charles Chauvel 
: I raise a point of order Madam Chairperson. The member referred to support being bought by the Government. That is not an appropriate reference and he knows it. 
The CHAIRPERSON (Hon Marian Hobbs) 
: I take the member’s point. 
Hon Dr NICK SMITH 
: All we know is that New Zealand First and the Green Party are supporting this bill only as a consequence of the Government agreeing to provide $1.5 billion worth of extra items. My question— 
The CHAIRPERSON (Hon Marian Hobbs) 
: Thank you. I am actually dealing with a point of order. I had thought the member was replying to that point of order. Objection was taken to the use of the word “bought” because it has all sorts of undertones that are not particularly nice. I ask the member not to use that word. He can explore the concept but I ask him to please not use that terminology. 
Hon Dr NICK SMITH 
: We know as a matter of public record that the Greens and New Zealand First agreed to support this bill only as a consequence of the Government committing to $1.5 billion of expenditure: $1 billion for a solar water heating energy efficiency fund in the case of the Greens and a fund for compensation. My question to Government members because we have not heard the answer to this is: where is that money coming from? It is interesting that Government members have had much to say but on a very basic question such as where the money— 
Charles Chauvel 
: Ask Jacqui Dean if she can get it from overseas. 
Hon Dr NICK SMITH 
: Would Mr Chauvel be able to inform the Committee? Where is the money coming from? 
Sue Moroney 
: Ask Jacqui Dean! 
Hon Dr NICK SMITH 
: Actually Jacqui Dean is not a member of the Government although she soon will be. But I thought the Government would know the answer to that. Maybe Mr Ashraf Choudhary could put the Committee in the picture as to where the money is coming from. Does Mr Woolerton know where the money is coming from? 
R Doug Woolerton 
: I’ve got a pretty good idea. 
Hon Dr NICK SMITH 
: Well would the member like to tell us? 
R Doug Woolerton 
: No I’m not interested in talking to you about it. 
Hon Dr NICK SMITH 
: The New Zealand First line is to say no it is not going to tell us because it is none of our business. This is Parliament and it is Parliament’s business. It is not the member’s $1.5 billion. I say to Mr Woolerton that this is not like the Owen Glenn money. This is public money and the public has a right to know exactly where the $1.5 billion is coming from. 
Members on this side of the Chamber are seriously concerned—[ 
Interruption 
] I am sorry Mr Woolerton? 
R Doug Woolerton 
: I think you probably weren’t there that day. 
Hon Dr NICK SMITH 
: The member is suggesting that I was not at the select committee on that day. The reality is that none of these measures were agreed to at the select committee. These amendments all came well after that. These are some of the 750 amendments introduced by the Government well down the track and that really does show how devoid of responsibility New Zealand First is in terms of the need to get such complex legislation right. 
I also draw the attention of the Committee to a poll today from the Fairfax newspaper group. It asked people how many of them supported this legislation and the emissions trading scheme. Of those people 12.6 percent said yes 64.8 percent said no and 22.6 percent said they had no idea what an emissions trading scheme was. I think that speak volumes and we should reflect— 
R Doug Woolerton 
: So why are you going to bring one in? 
Hon Dr NICK SMITH 
: The issue that Mr Woolerton does not understand is that National would take a far more considered and balanced approach to an emissions trading scheme. We would not have this sort of reckless legislation whereby this Parliament does not have time to consider it—and let me take the very important issue raised by my colleague Tim Groser which was the greening of assigned amount units brought in as a consequence of one of the 785 amendments. How many speeches have we heard from the Government to explain that? Zip! Zero! There has not been one. I say to this Committee that a provision as significant as that deserves to be debated a whole lot better than it has been. 
Our concern is that this legislation is rushed it is mistaken it is a reckless law with huge implications for New Zealand businesses and households and this is no way to advance it. 
TIM GROSER (National) 
: 
 I wonder whether New Zealanders listening to this debate would have fully taken on board that the last Government speaker Mr Chauvel was none other than the chairman of the Finance and Expenditure Committee charged with the awesome responsibility of steering this legislation through it. It has been described by many people from many different perspectives of New Zealand life as the most important regulatory framework to be introduced into New Zealand since the 1990s. I wonder whether they would have truly understood that he is the man who had that responsibility. 
Let me make this clear. In some respects I am not sure whether we should be very harsh on Mr Chauvel because he is a new member of the Government; he joined the Government only in the last 18 months to 2 years. I think we all understand the position that he was put in which was: “You make sure that this bill is rammed through in the life of this Parliament or your career is on the line.” We will never find a piece of paper saying that but I think it is widely understood in this House that that was the case. So my comments are not personal for that reason. 
Putting that aside I say he is living in a parallel universe. First in describing a process that he had the constitutional responsibility of leading he praised it as some sort of perfect process in which everybody had time to put his or her case was heard carefully and was given due consideration. I did not have the privilege of sitting on the Finance and Expenditure Committee but even I know that scores of submitters came out of that select committee that he was responsible for bitterly complaining that they had been given 5 minutes or 3 minutes to put their case when the whole future of their companies was at stake. Goodness knows what universe Mr Chauvel is living in! Of course I think we understand why he was forced to conduct the inquiry at that pace with so little regard for the views put forward by companies and by people who have put skin in the game. 
But of course those people and their views are dismissed as special pleading. One of the things that amazes me about the political debate that I have heard from the Government side is the sort of view that there is this thing called the Government sector and there is this not particularly pleasant thing called the private sector and when the private sector talks it is special pleading. We could not have the Government sector which is supposedly completely detached from the people who actually create wealth bear any cost because the bad polluters in the private sector would then get away with whatever they are meant to be getting away with. There is a complete lack of understanding that the Government does not have money of its own; the Government gets taxes from the people and they are telling this Government: “Do this at your peril.” The Government gets the money to provide public services from the productive sector and that sector is telling us time after time that this measure is a bridge too far. 
We had another one today. It is a relatively small organisation but one I personally have a lot of time for and that is the—what is the horticulture industry organisation called? Horticulture New Zealand is the new term for it. 
Hon Darren Hughes 
: That shows how much time he has for them—he doesn’t even know their name. 
TIM GROSER 
: I say to the member who in his arrogance thinks this is funny that he should consider the people out there in his area of New Zealand whom he will have to face down. You will have to speak to those people and if you think this is just a joke— 
The CHAIRPERSON (Hon Marian Hobbs) 
: Please avoid the second person. 
TIM GROSER 
: If the member thinks this is just a joke I think he will have a nasty surprise. Mr Fenton the Horticulture New Zealand President stated: “The legislation has been rushed. It is not well thought through in terms of its impact on our position as a global food producer and exporter. We calculate this will cost our industry in excess of $40 million a year.” He actually went on to say things that were a lot more extreme than that but I will let the member find that out on the hustings. 
That is just the latest in a whole series of industry statements. Phil O’Reilly the head of Business New Zealand has come out with a very trenchant criticism. My colleague Paul Hutchison talked about New Zealand Steel’s view on this bill. But all of that is dismissed as special pleading on the basis that only this wise Government is capable of measuring the actual economic cost and we are told that it is very small and it might turn out to be a benefit. 
One of the other things that disturbs me is that new middlemen are created by this legislation. 
CHRIS TREMAIN (National—Napier) 
: 
 A couple of speeches ago the chairman of the Finance and Expenditure Committee Charles Chauvel stood in the Chamber and said it was a fundamental truth that the entire world is likely to face a carbon tax. I am interested with regard to our major trading nations. I ask Mr Chauvel which of the following are likely to face a carbon tax in the near future. I ask him when the United States is likely to face a carbon tax when Australia is likely to face a carbon tax and when China is likely to face a carbon tax. I ask when Malaysia and India are likely to face a carbon tax. 
New Zealand is going down the track of being one of the few nations if not the only nation to implement an “all sectors all gases” emissions trading system. Let us focus on agriculture and consider which of the nations we export to are likely to face a carbon tax for their agricultural sector. Is China is likely to face a carbon tax for agriculture? Europe has a carbon tax now but not for agriculture. When is Australia likely to face a carbon tax for agriculture? That is one of the six issues that concerns National about the policy. 
National talked about balancing environmental and economic interests. We talked about industry incentives to exit New Zealand. We talked about windfall profits to the Government. In our minority report on the bill we also talked about an alliance with Australia to develop an emissions trading scheme about the importance of small and medium sized enterprises and also lastly about the unilateral phasing out of industry support. 
It is the perverse incentives to exit New Zealand that I really want to focus on. One of National’s main concerns is the perverse incentive in the bill to export jobs and emissions offshore. The emissions trading scheme in its current form would encourage major industries like cement steel aluminium and—this is most concerning—agricultural products to be progressively relocated offshore and in most cases this would result crazily in increased global emissions overall. 
Let us think about our dairy industry which Mr Woolerton constantly talks about. The goal of the Kyoto Protocol is to decrease global emissions of greenhouse gases on a global basis. Now the dairy industry has growth in dairy products globally. I ask Mr Woolerton whether New Zealand’s emissions trading scheme will stop the growth of those dairy products globally. 
R Doug Woolerton 
: No it won’t. 
CHRIS TREMAIN 
: Probably not. The growth in dairy products will continue. 
New Zealand is one of the most efficient producers when it comes to producing a kilogram of milk fat solids. We have created a situation where we introduce an emissions trading scheme to our agricultural sector we put a cap on the production of milk fat solids in New Zealand—limit production—and we force production overseas where a kilogram of milk fat solids is produced less efficiently. So here we are with a perverse incentive implementing an emissions trading system that will increase the amount of emissions globally. How crazy is that? It is insane. 
Those are some of the major concerns and perverse incentives caused by racing through with the emissions trading scheme that covers “all sectors all gases” when a serious number of countries will not be facing a carbon tax in the near future. More to the point many countries will never face an agricultural carbon tax—certainly not in the near future. Those are some of the concerns raised in National’s minority report. It is a considered report. We have looked at the issues logically and have come up with a range of arguments for not supporting the bill at this point. 
R Doug Woolerton 
: National’s minority report is a whole lot of waffle. 
CHRIS TREMAIN 
: How can that be? How can the argument around the dairy industry be a load of waffle? How can exporting emissions offshore which would result in increased global greenhouse gases be a good thing? That member will be facing those questions on the hustings. I thank the Committee for the opportunity to speak and I rest my case at this point. 
Hon JUDITH TIZARD (Minister of Consumer Affairs) 
: 
 I move  
That the question be now put 
. 
The CHAIRPERSON (Hon Marian Hobbs) 
: There have been I think 16 speeches and I am a bit worried because there has been a remarkable amount of repetition. I do not know whether members know but I take notes of their arguments and I notice the level of repetition. I will take one or two more calls—I do not know exactly how many—but we must move to new material. Speeches are becoming remarkably repetitive. I call Shane Ardern and I live in hope. 
SHANE ARDERN (National—Taranaki-King Country) 
: 
 I shall start with some comments that are not repetitious. I was surprised to hear the chairman of the Finance and Expenditure Committee Charles Chauvel say that he had read all his papers and understood what he was doing. I know that member is reasonably honourable; he served for a brief period on the select committee that I myself chair and I know that he does his research. I know also that he is a lawyer and that he practised law before he came into this Parliament. That brings me to this point: how could somebody with that amount of knowledge of the law who chaired the select committee and who clearly reads his papers report back a bill that needed a thousand amendments on the last day of the select committee process and needs the 785 amendments that are before the Committee today? I say to the member there is something that is worse than ignorance and that is knowledge that one is doing the wrong thing but doing it anyway. I ask that member to take another call to explain to us how he came to his conclusion. 
My new material is this. Clause 6 of the bill defines what forest land is and what a forest species is. I will quote the definition of a forest species: “ ‘forest species’ means a tree species capable of reaching at least 5 metres in height at maturity in the place where it is located”. That is clear enough; I understand now. But I do not understand why a tree that grows like that is a carbon sink yet a tree that does not grow like that is not a carbon sink. I would love it if the Minister in the chair the Hon Pete Hodgson would take a call to explain why. Where is the science—what science was presented to the select committee—that says that a forest species such as I have described is a carbon sink yet for example manuka a native that grows over large tracts of New Zealand is not? The Department of Conservation is encouraging manuka and it is growing more vigorously than it has done for a long time. It is being allowed to grow on forest land that has been cleared and probably will not be replanted in the exotics that were there. I ask why manuka is not a carbon sink yet a tree that grows in the way I described is one. 
I also ask the Minister about the definition of “forest land”. It states “ ‘forest land’ means an area of land of at least 1 hectare that has or is likely when the forest species reach maturity to have tree crown cover from forest species of more than 30% in each hectare;”. Once again the simple question is why that land is able to be calculated as a carbon sink yet an area different from or less than that land such as the area that can be seen in the photograph I have in my hand is not. It is the same species of tree— 
Pinus radiata. 
 One is a carbon sink under the legislation and one is not. 
I have further new material. Why do we have before us a suggestion made by some people who have done an enormous amount of work on this legislation that the introduction of these amendments will impose a cost of between $600 and $1000 every year into the foreseeable future for as far as we can see on the average household? Why do we have that suggestion given that National knows that under the current proposal the Government itself will be pocketing something like $700 million or $800 million from its own State-owned enterprises? I know that the Government is about to make announcements or has made announcements in terms of the deal that it has done with the Greens and New Zealand First in regard to trying to offset that cost but the question that somebody needs to answer—a Minister any Minister someone who is here today—is why at a time when New Zealand clearly is not competitive internationally when 80000 people a year are leaving the country the Government thinks we should impose a cost of $600 to $1000 per year on every household. 
CRAIG FOSS (National—Tukituki) 
: 
 I want to speak about something that has not been raised in recent speeches. In an earlier speech I talked about the fungibility of the New Zealand system; the word was looked up and everyone knew what the word was. I will talk about the financial side of this legislation because a previous speaker talked about how the rest of the world will suffer a carbon tax or there will be one implemented in some way shape or form. Well if that is true it actually reinforces the point because it is about the timing of New Zealand racing forward and doing what it is doing now under the form of this current legislation. 
Let us say this bill goes through as designed here given all these amendments and whatever else is about to be flopped on to the Table. We have to think about others who might want to do business in New Zealand. They will look at New Zealand’s supposed carbon neutrality or Kyoto compliance and at the balance sheets of New Zealand institutions—be they farms businesses or businesses possibly looking to migrate here and start up—and they will look at the cost of doing business in New Zealand. On some of those balance sheets they will see an item—a credit or a liability—and then on those particular balance sheets they will see various items of New Zealand units etc. Well first they will see those items and will ask their accountants what on earth that means. Then they will try to get someone to explain it so that will cost them money to discover what the value will be of whatever it is that they are looking at to invest in New Zealand. 
But then they will think: “OK but is that bankable?” which I spoke about in a previous speech. If I am buying a company in New Zealand or looking to invest into capital-deficient New Zealand which is screaming out for foreign capital which we need to build our future then when I am pricing up something in New Zealand I will see these carbon credits or debits or some units on a balance sheet. They may have been used with a bank to provide security—for example if someone is buying a dairy farm. Members opposite keep saying that agriculture is not coming in until 2013 2018 or whatever. However they forget about the time value of money. The moment we know that something is coming in in the future we discount it back and look at the value today. So this legislation right here is impacting on balance sheets—today right now. 
We need certainty. We have just had 780-odd amendments to the bill. That is uncertainty which makes the value of doing business in New Zealand harder and the cost of investing in New Zealand less worthwhile. The larger financial institutions around the globe on the starting grid in particular I know are looking to see what will happen in New Zealand and to see what opportunities there are for arbitrage down here where things have been mispriced legislation has been rushed through and there are arbitrage opportunities. I know they are and by racing this legislation through right now and being in front of whatever the rest of the world designs New Zealand is opening itself up to be gouged out and we will be left with some businesses having some assets on one side of the balance sheet and some liabilities on the other but not being able to be matched because offshore entities will not recognise them. They cannot be banked against because no one knows—and I ask the Minister in the chair to define these—under what international financial banking agreements credits will be recognised. Will it be the International Swaps and Derivatives Association? Will it be the International Swaps and Derivatives Association master agreement between financial institutions? Will the credits be used as credit collateral? I ask the Minister in this economic situation we have right now whether I will be able to use my carbon credits to get further funds from my bank in the US or from a bank in Europe. These are the kinds of questions that need to be asked and answered before this legislation is thrust upon New Zealand. 
This is not party political; it is for the good of New Zealand to get this right as I said previously. Issues environmental issues of sustainability are bigger than one party. The arrogance of some to claim the matter is theirs speaks absolute volumes. If this legislation right in front of us here goes through as currently designed I tell members that unless those issues have been explored and looked at from outside New Zealand—and remember New Zealand is a debtor nation; we borrow much money from offshore—and unless this stuff can be used as credit against what we already have this legislation will put New Zealand on a hiding to nothing. Believe you me we will not be at place No. 22 in the OECD for much longer; we are heading further south faster unless the banking side of this has been agreed and unless the banking and financial sides have been investigated. Not one Labour speaker has got up to tell me how this will work in a macro sense. Not one Labour speaker has got up to tell us how this will work in a global financial sense and in recognising New Zealand’s balance sheet. 
Hon Dr NICK SMITH (National—Nelson) 
: 
 I want to talk about an issue that goes to the heart of New Zealand’s economic success over the last 160-odd years of our nation’s history—that is efficient land use. The reality is that the very core strength of our economy has been the capacity for land owners to be able to put their particular land to the use that will generate the most wealth possible. I recall the days of my grandad in Canterbury; he used to talk about all the dairy farms disappearing. And 80 years later we are seeing them reappear. In the Nelson region which I represent we have seen that areas that previously had been put into forests are now being converted back into pasture and other horticultural-type uses. So one of the key parts in the Climate Change (Emissions Trading and Renewable Preference) Bill that National has concern about is the way in which the legislation will stop flexible land use into the future. 
The real nonsense in this bill is that even if people do things that are absolutely proper for the environment there will be a restriction on the use of those things. I will explain. This bill says that if people own pre-1990 forests that cover over a million hectares of land and those owners want to change the land use to dairying horticulture or some other use then they need to pay for the carbon that is absorbed in those trees. But sensible people have asked “Well why don’t I go and plants some trees in an area of highly eroding hill country where the trees will not only absorb carbon out of the atmosphere but have the added advantage of addressing the huge problem of erosion we have?”. So I ask Mr Duynhoven in the chair and members of the Government why they do not allow that flexible land use. Why is the Government saying that if I harvest some of those trees and replant trees elsewhere that is not to be allowed under this bill? I attempted to move an amendment to address this very point and the Government voted against it. I ask how many Government speakers have addressed the point. Not a single member of the Government has addressed the issue. Is it important? Well of course it is important. 
As I have said flexible land use has been at the heart of New Zealand’s economic success story. The very reason that we are an OECD country with a good standard of living is that landowners have had that flexibility. I cannot understand why the Government will not allow that perfectly simple straightforward amendment. I remind members that there is absolutely no cost to the environment. The environment does not know whether a thousand hectares of trees have been planted on that block or another block. All it cares is that carbon dioxide is reabsorbed by those trees. National says that this is one of hundreds of issues—hundreds of issues—that have not been properly debated. The Government has just said: “Stuff you lot out there! We don’t give a heck about landowners who are screaming about this provision. It is just a minor detail.” Well it is a minor detail that will cost New Zealand tens if not hundreds of millions of dollars. It is a minor detail that will cost an organisation like the Anglican Church Pension Board—hardly the Business Roundtable—over $20 million. We say to the Government that the forestry provisions of this bill will not work and if there is any area of the climate change debate in which we need to get the detail right it is the area in respect of forestry. 
In concluding I remind Parliament of this Government’s record around forestry. Australia is on target to meet its Kyoto obligations; New Zealand is not and the key reason for that is the deforestation that has occurred here over the last 3 years at a huge pace. The provisions of this bill will not work for forestry which means that this bill will not work for New Zealand and that is a tragedy. 
The CHAIRPERSON (Hon Marian Hobbs) 
: The question is— 
Hon Members 
: Madam Chair— 
The CHAIRPERSON (Hon Marian Hobbs) 
: I am sorry; I began to put the question. The members did not call—either of them. The question is that clause 1 stand part— 
Hon Dr Nick Smith 
: Point of order— 
The CHAIRPERSON (Hon Marian Hobbs) 
: I am sorry but I began to put the question— 
Hon Dr Nick Smith 
: I raise a point of order Madam Chairperson. I saw the Minister in the chair rise to his feet—I know that you were facing this way—and I think that it would be quite out of order for the Minister wanting to take a call on this critical debate— 
The CHAIRPERSON (Hon Marian Hobbs) 
: I can inform the member that the Minister is about to move the Supplementary Order Paper splitting up the bill and he would have been out of order. I am sorry Minister for saying that. 
A party vote was called for on the question  
That clause 1 be agreed to. 
Ayes 64 
New Zealand Labour 49; New Zealand First 7; Green Party 6; Progressive 1; Independent: Field. 
Noes 56 
New Zealand National 47; Maori Party 4; United Future 2; ACT New Zealand 2; Independent: Copeland. 
Clause 1 agreed to. 
The question was put that the following amendment in the name of Hon Dr Nick Smith to clause 2 be agreed to: 
to omit subclauses (1) to (3) and substitute the following subclauses: 
(1)Part 2 of this Act comes into force on a day to be appointed by the Governor-General by Order in Council. 
(2)The rest of this Act comes into force on 1 September 2008. 
A party vote was called for on the question  
That the amendment be agreed to. 
Ayes 50 
New Zealand National 47; ACT New Zealand 2; Independent: Copeland. 
Noes 68 
New Zealand Labour 49; New Zealand First 7; Green Party 6; Maori Party 4; Progressive 1; Independent: Field. 
Amendment not agreed to. 
The question was put that the amendments set out on Supplementary Order Papers 231 and 232 in the name of the Hon David Parker to clause 2 be agreed to. 
A party vote was called for on the question  
That the amendments be agreed to. 
Ayes 64 
New Zealand Labour 49; New Zealand First 7; Green Party 6; Progressive 1; Independent: Field. 
Noes 56 
New Zealand National 47; Maori Party 4; United Future 2; ACT New Zealand 2; Independent: Copeland. 
Amendments agreed to. 
A party vote was called for on the question  
That clause 2 as amended be agreed to. 
Ayes 64 
New Zealand Labour 49; New Zealand First 7; Green Party 6; Progressive 1; Independent: Field. 
Noes 56 
New Zealand National 47; Maori Party 4; United Future 2; ACT New Zealand 2; Independent: Copeland. 
Clause 2 as amended agreed to. 
Hon HARRY DUYNHOVEN (Minister for Transport Safety) 
 on behalf of the  
Minister responsible for Climate Change Issues 
: I move  
That the Committee divide the bill into the Climate Change Response (Emissions Trading) Amendment Bill and the Electricity (Renewable Preference) Amendment Bill 
 pursuant to Supplementary Order Paper 233 
. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 64 
New Zealand Labour 49; New Zealand First 7; Green Party 6; Progressive 1; Independent: Field. 
Noes 56 
New Zealand National 47; Maori Party 4; United Future 2; ACT New Zealand 2; Independent: Copeland. 
Motion agreed to. 
Bill to be reported with amendment presently.