Smith Nick: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Smith Nick: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
[Sitting date: 24 November 2009. Volume:659;Page:8052. Text is incorporated into the Bound Volume.] 
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 third time 
. This bill is about implementing for New Zealand a workable and affordable scheme that will provide an incentive to reduce emissions and to encourage afforestation. It strikes that right balance that we need to find between protecting our environment and ensuring New Zealanders have jobs. It ensures that we do our fair share on climate change without the pretence the previous Government ran of New Zealand being carbon neutral. 
New Zealand has actually been going round and round in circles for over a decade on trying to get a price on carbon pollution. This bill means that on 1 July next year there will be that important price on carbon as part of our package to respond to the challenge of climate change. This revised emissions trading scheme is consistent with National’s commitments to the electorate. We said we would align our scheme more closely with Australia; the bill does that. We said we would provide incentives for industry to reduce emissions without encouraging an exodus of jobs and investment overseas; the bill does that. We said we would rejig the scheme to be fiscally neutral so households farms and businesses would not be funding multibillion-dollar windfall gains to the Government; the bill does that. 
If this bill was not passed the existing scheme would come into effect on 1 January and it would increase power prices by 10 percent and put $400 million a year in costs on to industry. There are also no allocation plans and there are a number of serious areas in the existing legislation that would cost jobs and do damage to the environment. This Government is not prepared to burden households and businesses with that scale of costs at this time when we are just seeing the fragile signs of an economic recovery after the worst economic downturn since the Great Depression. The scheme would have to had to be delayed until 2011 if it were not for an agreement with the Maori Party for which I must thank them. Frankly mokopuna in the future will thank them also. They have been constructive players and want to move New Zealand forward. 
The Maori Party brings a very balanced perspective to this debate with both a strong commitment to Papatuanuku the environment 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. In the Opposition’s criticism of the Maori Party it has been said in one breath that this does too much for Maori and in the next breath that it does too little. Well both cannot be right and I think that reflects the fact that we have come to a very fair agreement. 
I also acknowledge the role of United Future who have consistently—not just now but also over the last decade—played a very constructive role. I particularly acknowledge the work of Peter Dunne in chairing the Emissions Trading Scheme Review Committee. I also thank the very capable Craig Foss for the work he did in chairing the Finance and Expenditure Committee. I acknowledge the hard work of officials particularly those in the climate change and risk directorate of the Ministry for the Environment led by Stuart Calman; the Ministry of Agriculture and Forestry team led by Julie Collins; and select committee staff. I particularly acknowledge the Parliamentary Counsel Office officials who have worked extraordinarily hard. It is interesting to me that for all the debate on the bill over the last 2 days scrutiny of Supplementary Order Paper 98 which we have moved through the House has found not a single error. 
This bill makes a number of important changes to make our emissions trading scheme workable and affordable. The industrial energy and transport sectors will be entering the scheme on 1 July 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. Those changes will halve the cost increase for electricity and fuel for consumers and businesses. 
The bill also makes changes to support for trade-exposed emissions-intensive industry which I think is the most challenging dimension of climate change and emissions trading scheme policy. First a high-intensity and medium-intensity threshold is specified. Secondly the allocations will be based on an industry average and not on 2005 levels. That will ensure that we do not reward those that have been laggards and have had higher emissions and punish those that have invested early in efficiency. Thirdly the allocations will be production-based. That is as per the economic analysis that was done by the New Zealand Institute of Economic Research and Infometrics showing that that was the most effective way to address the problem of leakage. This Government is not about exporting jobs offshore; it is about incentivising more efficient production here in New Zealand. The fourth change is about slowing the phase-out of support to industry so that it is in line with our major trading competitors. 
There has been a nonsense claim of $110 billion worth of cost to families. Let me go through and challenge that. First it is not a cost; it is a lower level of revenue. 
Hon David Cunliffe 
: The New Zealand Treasury is not a nonsense. 
Hon Dr NICK SMITH 
: The analogy I make for Mr Cunliffe who interjected is that if his research and development tax policy which cost $260 million a year was costed in the same way that he wants to cost this emissions trading scheme bill it would cost $43 billion. That is if we add all the years up and add all the interest we get that sort of ridiculous figure. All the rhetoric about debt etc. is simply a smokescreen for Labour who fundamentally have not been able to find fault with this bill. 
There has been criticism that this bill is too generous. This emissions trading scheme will be the first in place of any country outside of Europe and it will be the most comprehensive by including transport industrial and energy emissions. New Zealand is also the first country in the world to include forestry and under these amendments because of our unique emissions profile it will also include agriculture. There has also been criticism of our production-based approach which was recommended in the analysis in the Finance and Expenditure Committee review. I note that Australia is taking that intensity approach in its Carbon Pollution Reduction Scheme which is expected to be passed in its Senate this week. It is also the approach that has been taken by 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. It is true that we are making a provision in this bill to ensure that it does not snuff out the early recovery of the economy. The passing of this bill means we have an emissions trading scheme that balances environmental and economic outcomes while showing the international community that we are serious about tackling climate change. 
After having achieved the milestone of passing this bill attention will have to turn to the complex intellectual job of implementing the scheme. The Government looks forward to working with industry to ensure a smooth implementation. The passing of this bill will be an important first step for New Zealand towards addressing climate change. It allows us to get on and implement an affordable and pragmatic scheme and to play our part in addressing this global problem. I emphasis that it is a first step and that New Zealand must remain nimble-footed with regard to agreements that may be reached internationally to decisions that our trading partners make and to advancements and updates in the science. Getting the emissions trading scheme up and running will be a major programme for the Government over the next year. Challenges include providing the allocations of emission units to those intensive trade-exposed companies and that will include consultation with industry and other New Zealanders about how we calculate and implement those entitlements. 
This bill will deliver for New Zealand a workable and affordable emissions trading scheme. I am pleased to commend this bill to the House. It is a critical and important first step in our nation’s effort to do our fair share in combating climate change.