Shaw JamesCLIMATE CHANGE RESPONSE (EMISSIONS TRADING REFORM) AMENDMENT BILLSecond ReadingHon JAMES SHAW (Minister for Climate Change): I move That the Climate Change Response (Emissions Trading Reform) Amendment Bill be now read a second time. E Te Māngai o Te Whare tēnā koe. Ki a koutou ōku hoa Pāremata huri noa i Te Whare ngā mihi o te tau hou ki a koutou katoa.[Madam Speaker greetings. To you my parliamentary colleagues throughout the house New Year's greetings to you all.]The most cost-effective way to reduce greenhouse gas emissions is for there to be a price on those emissions that reflects the true cost that pollution imposes on future generations and is sufficient to induce investment in and adoption of cleaner alternatives. That is what this bill aims to achieve. Once this bill passes our emissions trading scheme (ETS) will be one of the most efficient and effective tools that we have for meeting our climate targets.Now I know that many of the people and the organisations watching what we do here today will have been through an extraordinarily difficult time of late. This bill provides them with the certainty and the clarity about the future that they've been asking for. This bill is the product of five years' work carefully signposted and consulted upon every step of the way. Its orderly passage through Parliament is important to maintain the certainty and the predictability that has been built up over those years. It is in no one's interests that the busted market of the ETS remains busted a moment longer. A reformed ETS will lead to investment which will lead to increased productivity jobs and livelihoods as well as lower pollution levels.For New Zealand as with any country one of the most difficult aspects of the climate change challenge is to bend the curve of our emissions and get them on to a sustained downward trajectory. This has never before happened in our country. Once that happens things can move quickly from there which is exactly what happened in the United Kingdom. Once their emissions started coming down the rate of decline just kept picking up pace and even more so as the cost of low carbon alternatives started dropping too. The UK managed to reduce emissions by over 40 percent below 1990 levels whilst maintaining the highest levels of economic growth in the G20. We can achieve something similar here in Aotearoa. This bill in tandem with the zero carbon Act will help us to do that.Carbon pricing broadly follows two forms: a carbon tax or a cap and trade approach. Twelve years ago New Zealand opted for a cap and trade scheme. But previous Governments left out one crucial part: the cap. We got a cap and trade system without a cap meaning that emissions permitted under the scheme were in effect unlimited. Combined with open access to a glut of cheap international units many of which were fraudulent or non-existent the New Zealand ETS failed to deliver on its purpose of bringing down emissions. Five years ago the previous Government reviewed the ETS and kick-started the process that led us here today and I would like to acknowledge them for that. I'd also like to thank the Environment Committee for its thorough consideration of this bill the officials from the Ministry for the Environment and the Ministry for Primary Industries who supported them and the members of the public who took their time to submit their views on it.This bill can be understood as having four constituent parts. It is about first aligning with the commitment that we have made internationally under the Paris Agreement. Second it provides the legislative foundation upon which we can start to make real change. Third it sets the framework for how the emissions trading market will work. And finally it strengthens the integrity of that market. Each part builds upon the last to create an emissions trading scheme that does what it is meant to do: reduce emissions. Let's take each part briefly in turn.As members will know the zero carbon legislation that this House unanimously passed last year was consistent with the urgent need to limit average global temperature increases to 1.5 degrees Celsius as outlined in the Intergovernmental Panel on Climate Change's 2018 report. Critically this bill updates the principal Act to align with our contribution to meeting that goal. This bill also amends the principal Act to lay the foundations for the future of the ETS. Once passed we can build on what we have in front of us today to better incentivise more organisations to invest in the transition to a clean climate friendly economy. These steps will happen through regulation but as you will have seen in the news this morning they do include a cap on the total emissions allowed in the ETS and clear rules on auctioning.Now as we know good Governments should seek to play a facilitative role in markets to help create and shape markets as well as provide the framework within which these markets operate. This bill does exactly that for emissions. For a start we're moving away from the scheme's $25 fixed price options for emissions units. This was always meant to be temporary but it has ended up as an artificially low ceiling on the cost of emissions. What it will be replaced with is both a price floor and a cost containment reserve. Working in tandem these mechanisms will stop the price of emissions either getting too low or too high. In effect then the gap between them between the lowest price an emissions unit can drop to and triggering of the cost containment reserve is where the market will operate.A feature of this market will of course be better incentives for afforestation and I know that there are some concerns about this. It is a simple fact that we need to actually cut emissions right across the economy rather than simply plant more trees to soak up ever-increasing emissions. As a Government we have listened to those concerns and taken them into account throughout the process that's got us here today. We must remember that it is the independent experts on the Climate Change Commission who will advise us on the proportion of New Zealand's emissions budgets that should be met by domestic emissions reductions and domestic emissions removals like forestry. I'm not going to prejudge what they say but I can tell you this: the commission is required to consider the implications or the potential implications of land use change for communities and that I hope will provide the reassurance that people need.Finally this bill markedly improves the integrity of the scheme. It will do this in several ways: first by phasing out free allocation to eligible industries on a fair and predictable pathway. We are also strengthening and simplifying the compliance regime as well as introducing new infringement offences for low level offending and much stronger penalties for the failure to surrender and repay units. The bill also improves the transparency of the scheme by requiring the Environmental Protection Authority to publish data on participants' emissions and removals annually. This will build trust in the scheme providing information to the market and allowing analysts to build a clearer picture on the emissions profile of firms within the scheme.I often tell the story of the chief executive who said to me during the passage of our zero carbon Act that his young daughter had told him one evening that she no longer wanted to have children because of the climate crisis. He asked me What do I say to her?" Well what I can say is that today because of this bill every organisation covered by the emissions trading scheme can start to play a greater part in making this world cleaner and safer a world that I am sure that chief executive is hoping will one day be home to his grandchildren.Nō reira tēnā koutou tēnā koutou tēnā tātou katoa."