English Bill: Urgent Debates — Emissions Trading Scheme—Government Announcement 
English Bill: Urgent Debates — Emissions Trading Scheme—Government Announcement 
[Volume:642;Page:12095] 
Hon BILL ENGLISH (Deputy Leader—National) 
: 
 The National Party has taken the view that the framework announced by the Government today is broadly in line with National’s thinking on the issue. This is not to say that there will not be a raft of difficult issues ahead for the Government and Parliament to deal with. Some of them are technical issues that will have to be resolved if New Zealand is to have a sensible carbon emissions trading system. For instance there needs to be a high degree of confidence among those who are trading that the measurement of carbon is consistent and reliable. That is clearly not the case yet. There will be decisions to make about not only where the carbon is measured but where the credit or the debit is actually incurred. There is a range of views about where that should be. 
The objective of further development of emissions trading systems should be certainty. Markets are used to factoring in variations in price but they like certainty about the rules. Today’s framework is a step forward in respect of creating that certainty. Those in say the business and agricultural sectors will be supportive of the framework; it is what they have come to expect. If anything we have had pressure from the business and the agricultural communities for politicians to get on with establishing a framework. A classic example would be those who are making investment decisions in the energy sector. They need to know what the rules will be even if the price of carbon will be uncertain. 
There will be some other issues in addition to the technicalities of the trading system that will warrant further discussion. The linkage with the European market and whether that is the kind of market that will work for New Zealand are among those issues. 
To just step back from the detailed issues I think we should record here today the rather remarkable outcome—which was probably hard to imagine 10 years ago—that across the political spectrum political parties have converged on the idea that one can have financial incentives and tradability as a way of achieving environmental outcomes. I expect that as a result of the progress made on the emissions trading system we will see more of that type of thinking being applied to the environment. In fact it is becoming increasingly clear that given the complex interaction between maintaining environmental standards and achieving economic growth a market price will be about as good an instrument as one can get to transmit information about technological progress about consumer preferences and about the limitations or otherwise of Government regulation. 
I want to step back briefly to make sure Parliament understands the long history of this issue because we need to see it in context to understand that this is another step—a significant one—on a pretty long pathway. The previous National Government back in the early 1990s was heavily involved in negotiating the initial framework that anticipated carbon trading. I was pleased the Minister noted the contribution of Simon Upton who was then and probably still would be now one of the pre-eminent environmental politicians in the OECD. It was actually Simon Upton and the New Zealand negotiating team that invented forest sinks. Until New Zealand put that idea forward it was not part of the framework; it was negotiated in by New Zealand in New Zealand’s interest. I note that the Government in its forecasts about carbon emissions is relying heavily on about a quarter of a million hectares’ growth in forestry which simply shows that across the political spectrum there is an understanding of the particular New Zealand characteristics of climate change and of the kinds of tools that we need to have to deal with those matters. 
Another step along the pathway occurred in March 1999 when the National Cabinet of the time decided that it preferred emissions trading systems over a carbon tax. That was a Cabinet decision made at the time. There was a lot of discussion then about carbon tax. It was not fully discussed in the public arena but the Cabinet of the time demonstrated that the direction should have been towards emissions trading systems rather than the carbon tax. In 2002 that decision was then changed back to a preference for the carbon tax. Then in 2006 there was another change back to emissions trading systems. So I think it is fair to say that the emissions trading system has had almost 10 years of debate in Cabinet and each Cabinet has found it difficult to get to grips with the technicalities and implications of the system. But it has survived that process and that on its own signals that it is sufficiently robust to warrant broad party support and sufficiently robust to survive successive Governments which is pretty important to make it all work. 
From National’s point of view we published a Bluegreens document last year that indicated further progress towards the emissions trading system. I think that an important decision at least for us was to move to the idea that it should be comprehensive and all sectors should be incorporated in it. The Government has outlined in its document a transition of sectors coming in and I think that any of the sectors interested in it would consider it to be a pretty fair and reasonable transition which is not to say there will not be all sorts of difficulties. The point I make to the Greens is that the transition will of necessity unavoidably mean that there are winners and losers as accidents of history. The issue is how to make that transition in a way that is fair and how to make sure we get to an end result that will have the effect of slowing down then perhaps one day reducing carbon emissions. 
There are a few implications from this that will work themselves out over the next few months. In my capacity as finance spokesman I note that the fiscal liability associated with signing up to Kyoto back in 2002 remains substantially on the Government books. That is one implication. It may well be that there are not other better answers but if I can make something of a political point the Government signed up to Kyoto in the belief that it would generate a positive benefit for New Zealand. This should be a lesson to Governments that analysis is not the only answer because signing up to Kyoto has turned out to be a significant liability and one way or another the taxpayer will meet that cost. 
We have made the point in a press release that we look forward to ongoing discussion about the issues because there is a great deal of uncertainty out there amongst the public. I know that the Minister has made the point that the costs could be relatively small. That does depend on particular assumptions about the carbon price which is a bit like the assumptions about the Kyoto liability—it could be wrong or it could be right; we simply do not know and we do not believe that the Government knows. But it will be important for this framework to have credibility with the public that we can get a reasonable degree of certainty about the cost impacts on them. I think I have heard Dr Cullen say that everyone is interested in climate change but no one wants to pay the price of changing the climate. That is a risk for the whole framework and it is important to make sure that the public understands it. We are also keen to make sure that the implications for growth in the economy are well understood and not unreasonable and that is also a matter of dealing with the devil in the detail. 
I note that the hard decisions have been left until after the election as the Greens have pointed out. There are only benefits before the election and there are hard decisions after it. It was not going to be any different but the Government needs to understand that if it is very committed to climate change it may have to give more indications about the decisions it would make if it survived as a Government because the public will be just a wee bit sceptical about that particular distribution. 
The last point I make is that if we go into carbon trading that should actually mean less emphasis on regulatory solutions not more. The whole point of having a price is to get dynamism and innovation which a regulatory system cannot deliver. To all those who will be subject to this regime we need to make it clear that they will not be subject to both systems—both a carbon trading system and whimsical regulation on the part of bureaucrats and politicians who want to get their photos taken.