Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill — First Reading Second Reading 
Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill — First Reading Second Reading 
[Volume:651;Page:756] 
Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill 
First Reading 
Debate resumed. 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 It will come as no surprise to this House that the Labour Party will be opposing this legislation vociferously. We think the decision of the Government to wind back biofuels is simply wrong. We think that it is unjust. We think the process that is being used by the Government is particularly unjust. We think that it is wrong for a Government to pass legislation that takes away the productive capacity of this or that individual enterprise without the enterprise having an ability to submit its case. We think that is wrong. We think that is unjust. We think that it is economically damaging. Quite apart from the fact that this company or that company will have to close and that there will be a loss of jobs—and in the case of one such company the loss of 46 jobs—it is economically damaging. Quite apart from that it is also economically damaging in the sense that it does not allow New Zealand to make slow and early steps—and let us make it clear that the progress of biofuels is in its infancy—towards a biofuels future. That has now been stopped by this legislation. 
Hon Gerry Brownlee 
: No no! 
Hon PETE HODGSON 
: The Minister is deluding himself. It is environmentally damaging in the sense that our ability to replace the fossil fuels used in our transport sector will now be reduced. 
Hon Gerry Brownlee 
: No it is not. 
Hon PETE HODGSON 
: It will be reduced and that will be environmentally damaging. 
Most important it seems to me that this legislation will go through the House this week without a rationale and it is that absence of a rationale that I want to concentrate on. The rationale of course was what the Minister in his first reading speech attempted to lay out. I listened to the speech very carefully and I have taken notes from it. I find that the argumentation of the Minister’s first reading speech is dishonest. I find that the argumentation is dishonest and I am saying that it is dishonest in order to stay well within the Standing Orders. I now want to lay out step by step why I think the argumentation is dishonest. 
The Minister began—I thought quite correctly—by pointing out that biofuels can cause enormous damage. They can displace an awful lot of arable agricultural space for example and they can also cause a great deal of deforestation. That is known; that is accepted. The Minister made the point correctly. However he failed to point out two other things. The first is that the legislation this bill seeks to repeal does not allow for that type of biofuel to come into New Zealand. Secondly by the repeal of that legislation such biofuels will now be able to come into New Zealand— 
Hon Gerry Brownlee 
: Rubbish! 
Hon PETE HODGSON 
: —unless there is some regulation that the Minister has forthcoming that we do not know about. He sits there and says “Rubbish!”; he is wrong. It is a matter of fact that the biofuels legislation that was passed by this House earlier this year contains a significant number of sustainability safeguards. Furthermore it is a matter of fact that the Ministry for the Environment and other agencies had indicated to the Government of the day—and would have indicated to this Government too I have no doubt—that their final regulatory regime would be ready by about July 2009. Yet we are getting rid of this legislation. We are getting rid of the sustainability parts of it that are in the primary legislation. The Government is squealing that somehow that is a good thing but it is clearly something that will take our country backwards. 
The Minister says there are not enough biofuels now to supply the sales obligation. What should be a surprise about that? The Government would lay out a sales obligation give the industry notice put up the obligation by a little bit each year and then the industry would invest to meet that target. Those targets will no longer exist if this legislation is repealed—those sales obligations will no longer exist—and most if not all of the biofuel industry in this country will shut down. Mark my words! 
The Minister said that the standards were not in place; I say that if he had waited 7 months they would have been in place. The Minister said that the standards could not be put in place but that is contrary to the advice that officials gave to this Government and to the select committee on the original bill etc. 
But the thing I disliked most was the Minister saying that the Parliamentary Commissioner for the Environment opposed the bill and said that it was wrong. 
Hon Dr Nick Smith 
: That’s right. 
Hon PETE HODGSON 
: It is right. 
Hon Dr Nick Smith 
: Absolutely right. 
Hon PETE HODGSON 
: It is right but what is wrong is that the bill was changed and the Parliamentary Commissioner for the Environment then said that the legislation was in satisfactory form. The legislation was passed with her blessing but the Minister has failed to acknowledge to the House that that parliamentary officer did her job. The Parliamentary Commissioner for the Environment went into the select committee process with the bill as introduced and said it was not good enough and it was not. The select committee fixed it up so that it was and she said then that it was satisfactory but the Minister in his first reading speech failed to advise Parliament of the views of one of Parliament’s own officers on the bill as it came out of the select committee—failed to advise Parliament. That is what I think is dishonest argument. I think the Government is bewildered on this; I think it is bewildered illogical and wrong. 
Let us now go to the next point that the Minister raised which is to do with money. The Minister said that the price of biofuels would cost somewhere between 2c and 8c a litre additionally. Well that was the advice received by the select committee from the oil companies—that is what Chevron Oil said or BP said. If the Minister is to become some sort of spokesperson for the “seven sisters” that is fine and dandy but why did the Minister not also advise the House what the official advice would have been on that cost differential? Why did he not do that? It seems to me that he did not do it because it did not suit his argument. Here—unfortunately for the Minister—are the official advice figures: the cost would not be from plus 2c to plus 8c per litre; the cost would be from minus 4c to plus 1.3c per litre. That was the advice that was given to the select committee— 
Hon Gerry Brownlee 
: Just like the climate change—Kyoto credit analysis. 
Hon PETE HODGSON 
: —and whether the Minister believes that advice or not it is really pertinent that he did not put those figures into the public arena when he was trying to give this lovely measured example of why he has to undertake this act of environmental vandalism. The member has made a botch of this. He has done it for substantially political reasons. It will mean loss of jobs. It will mean that our ability to progress biofuels will not be able to proceed. 
There is the whole case of Mr McNicholl and his investments but I will leave that for other speakers to talk about because that is an example of someone who invested on the basis of certainty and law and who found that that certainly did not carry through to the next Parliament and that the incoming Government was going to roll back that law. That is an example I think of where the Government has decided to take a series of steps for political reasons rather than for reasons of good policy. All I can say is that in the entire first reading speech which is when we would expect the rationale to come out there is a Minister who is using dishonest argument who is using figures that are selective and who is in fact totally befuddled when it comes to the logic of sustainability because this legislation sweeps away the sustainability criteria that are now in the primary legislation. At the end of this week there will be none of that and then anything will be able to flood into this country. 
So here we are in only the second week of Parliament and the list so far is that the emissions trading scheme will be put to a so-called high-level select committee that biofuels will be wound back that somehow or another it is really bad to have halogen or fluorescent lamps around this country and that the country will have other forms of environmental vandalism—all of which add up in total to this country moving into reverse. Later this week we will even be saying that it is OK to have gas-fired power stations all over again. 
Does the member not know that climate change is now up front of and central to global politics? Does the member not realise that there have been elections in recent times in Australia and in the US? Does the member not realise that far from being a leader around the place on a response to climate change this country is now becoming a follower? It has lost its way it is a slow follower—it is not a fast follower by any means—and it is illogical out of date heading in the wrong direction and completely befuddled. That is a disgrace in my view to this country. 
Hon Dr NICK SMITH (Minister for the Environment) 
: 
 I want to make a number of important points in commending Gerry Brownlee on this Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill but I will not let pass the lectures from the Labour Party on climate change. The only things New Zealand led in the 9 years of a Labour Government were increased emissions and deforestation. They are the only areas in which Labour in 9 years of Government was able to lead on climate change policy. I say to members opposite that before they get on their feet and start lecturing us they should make some apologies for their appalling record. I am advised by officials that the figures we will report to the United Nations next year and the year after that will be the legacy of the previous Government’s appalling record around deforestation and the increase in emissions. 
The second point I make is that the Leader of the Opposition in opening this session of Parliament said he would hold the Government to account for its promises. What did the National Party promise on biofuels? It promised that it would repeal this stupid compulsion and replace it with a tax incentive. Why is it that now that we are trying to fulfil our promises we get these sorts of arguments from members opposite? 
The fundamental difference between members opposite and those on the Government side of the House is that Labour members believe in compulsion. They believe in the nanny State. Members on this side of the House believe in incentives and let me go through the reasons why such incentives make very good sense. Firstly I will deal with sustainability issues. I am yet to hear any Labour member provide some logic as to why the compulsory obligation for biofuels came into effect on 1 October even though the sustainability standard is at least 12 months away. What a loopy policy! Fancy saying to people: “You’ve got to have biofuels but we haven’t worked out what the rules are about sustainability.” How can people make sensible decisions about investment when they do not know what the rules are? It was a classic case of putting the cart before the horse and that is why we need to repeal the legislation. 
The second thing I want to raise is that members opposite have claimed that with this legislation there is no sustainability standard for importing biofuels. The honest truth is that if someone wants to import ethanol made from palm oil from Brazil or Indonesia there is absolutely nothing to stop him or her from doing so under the old legislation that was passed by the previous Government. I say to members opposite that they are misleading the House in saying otherwise. It is true that the compulsory requirement is not met but it is not true to say that any control at all is imposed on the importation of sustainable biofuels. 
I come to the next really important point. The median range estimate on the cost of this biofuel obligation is 4c per litre. Officials say that each cent per litre represents $60 million. In other words the biofuel obligation amounts to a cost obligation of $240 million per year. 
Moana Mackey 
: They did not tell us that it was 4c per litre. That is not what the officials said. 
Hon Dr NICK SMITH 
: I ask Ms Mackey how many members in this House believe that we have proportionality correct when the cost obligation is $240 million on biofuels despite all of the questions asked internationally about their advocacy and when we are spending $4 million a year on the greenhouse gas consortium looking at agricultural emissions. I think members of Parliament instinctively know that those proportions were all wrong. 
Then we hear the ultimate in economic lunacy from those members. They claimed that the biofuels bill was actually going to save 5c a litre. Well hang on a moment— 
Nikki Kaye 
: Yeah right! 
Hon Dr NICK SMITH 
: Exactly. Would we need to have compulsion if the legislation was actually going to cost less than existing fuels? Not on your Nelly! I say to those dreamers on the other side of the House that they should connect with the economic reality. The only reason for compulsion was that the cost was greater. 
That is why the approach of the new Government makes such good sense. We are giving a kick-start to biofuel technology. Let us provide a consistent tax advantage of an exemption from excise as currently applies to ethanol. It is far better as we face this challenge of climate change not to go in the nanny State direction where we compel people to do things but rather to provide a financial incentive— 
Hon Dr Michael Cullen 
: Oh dear. 
Hon Dr NICK SMITH 
: Well I am not surprised that Dr Cullen likes compulsion. He spent 9 years on the Government benches telling ordinary New Zealanders how to live every part of their lives—how much water they could have in a shower what sort of light bulbs they could use and how much biofuel to use. I ask the House what the wisdom is in believing we can define down to the narrow part of a percentage point the exact perfect amount of biofuel that should be used. 
Pete Hodgson is wrong. He claimed that the Parliamentary Commissioner for the Environment supports a retention of a compulsory obligation on biofuels. That is wrong. The Parliamentary Commissioner for the Environment said and this is absolutely right that if we narrowly define the criteria for what sustainable biofuels are—and we do not know what they are yet because it has not been worked out—and we then use compulsion we provide a wonderful cash cow for those in the biofuel industry. It is all very well for members opposite to talk about the odd job that might be created as a cash cow when there is compulsion but what about the number of jobs that will be lost by the cost imposition of $240 million a year across the economy? Of course if I was a biofuel manufacturer I would want this law to stay as it is. It is a cash cow but the real question for this Parliament is whether that approach is sensible. In the Government’s view a financial incentive that is provided by way of the excise is a more sensible way to go. 
I commend the Minister for dealing with this issue prior to Christmas. 
Moana Mackey 
: Why is it not going to select committee? 
Hon Dr NICK SMITH 
: That is a very good question and I will tell the member why that is. It is because the previous Government’s policy has oil companies floundering around right now as they try to work out how to meet this obligation. Those companies do not know whether Brazilian ethanol will qualify. They are scrambling around and that industry needs certainty. I say that this Parliament needs to move quickly. It needs to deal with the absolute mess that the previous Government’s biofuel policy was in and that was a compulsory standard with no biofuel standard in place. 
I hope the next speaker might possibly explain to the House why we should ignore the Secretary-General of the United Nations who has made a plea for Governments not to introduce mandatory biofuels obligations. Have members opposite not read the House of Commons’ report in the United Kingdom that makes absolutely plain that such mandatory obligations are both economic and environmental lunacy? Have members opposite not read the report of the OECD that makes plain that these biofuels obligations are doing more harm in the world than good? 
I say to members opposite that a tax incentive is the right way forward and I will tell the House why that is the case. The truth is that we do not know how much biofuels will cost. My view is that if they are relatively inexpensive to provide a tax incentive may see them go to 10 or 15 percent. I do not have and this Government does not have some magical number. But we say that a financial incentive will put pressure on the biofuels industry to make its products as cost-competitive as possible rather than providing the blank cheque of compulsion. 
My very last point is that yes this bill does philosophically divide the House because members on this side take an approach of having financial incentives in respect of supporting biofuels as opposed to the nanny-State politicians who have been thrown out of Government. 
Hon Dr MICHAEL CULLEN (Labour) 
: 
 If that member opposite the Hon Nick Smith keeps mentioning the words “nanny State” long enough he convinces himself that he has some kind of argument in these matters. I can only assume that some of the people opposite must have had nannies when they were young whom they did not like so somehow the word “nanny” keeps them going in some kind of big way. 
Hon Dr Nick Smith 
: Tell us about the showers Michael. 
Hon Dr MICHAEL CULLEN 
: I wish the member would have a cold shower from time to time and I am happy for him to have a 100-litre-a-second cold shower whenever he wants one. This is a man who gave a speech about economic lunacy. He talked about half of that in his speech actually because that was lunacy more than economic lunacy. 
Let me just take him through the illogicality of his argument. He claims to want to see biofuels used; I think he said that. I think the Bluegreen manifesto said National wanted biofuels. He claims he wants to see certainty for those in the industry and then he says he does not have a clue how much biofuels there may be if we go to a tax-incentive system. Where is the certainty and where is the guarantee that we will move to biofuels? He says that he wants to make sure that biofuels come from renewable sources. So do we all. That is why the legislation as revised by the select committee provides a process to ensure that sustainability. The member is still attacking the Biofuel Bill as it was introduced. He did not even read the legislation that came out of the select committee. We have certainty for the companies which consists of basically saying “We do not care what you do. We do not care if you have any biofuels.” So what message will they take from that? They will take the message “Don’t have any biofuels.” What about those companies that have already started putting in tanks to cope with the higher proportion than the present 0.5 percent? Where has their certainty gone? Where has their return on investment gone? 
Let me take the member through the economic arguments. He somehow seems to think that if we have a tax incentive then that will solve the problem. Actually it is not really a tax incentive. It is not taxing biofuels; it is continuing the regime where biofuels have no excise duty on them. Has that produced a rash of investment in biofuels? The regime that the National Government is suggesting is the regime before the biofuel legislation came into force minus the requirements in the legislation for some kind of sustainability certification and reporting. That is what Gerry Brownlee’s bill actually states: it removes the requirement it removes the provisions around sustainability. That is where we have been for years and we do not have any significant usage of biofuels in New Zealand. The member wants that but he is not going to get it. 
But if we have no tax on biofuels then what does that do? Firstly it reduces the Government’s revenue from road usage. We have hypothecation now on road-user taxes so if there is a reduction in revenue the Greens and I will not see more money for public transport and the National Government and I will not see more money for roads. We will have less investment in roading and less investment in public transport— 
Hon Dr Nick Smith 
: Rubbish! 
Hon Dr MICHAEL CULLEN 
: —unless—wait for it—there is a further transfer out of the Crown account into the land transport account which must come from one of three sources. It must come first from increased taxation elsewhere such as personal taxes company taxes or GST; secondly from cutting spending on services elsewhere; or thirdly from borrowing which means for future generations firstly higher personal taxes or GST; secondly a reduction in services; or thirdly more borrowing for their grandchildren which will lead to even bigger personal taxes or cuts in services. There is no free lunch in fiscal policy. The member has been there long enough now to have learnt that very very simple fact. He is asking for the Government to be able to tax elsewhere or to be able to cut social services. We have had a voluntary regime up until the passage of this Act and it has done nothing to produce biofuel usage in New Zealand. You see what the member is arguing is basically the big old Dick Cheney position. He is kind of the Dick Cheney of the National Party these days—he wants to do what big oil companies tell us to do. He does not want to do what some poor little New Zealander with only a few million dollars to invest has been trying to do to help this country because that person does not count. When it comes to the interests of Shell BP Mobil Oil and all the rest of them that poor little New Zealander does not count as far as National is concerned. National members get up in this House and make speech after speech with tears pouring down their faces as they talk about small business and all the rest of it. What is this bill about? It is about the interests of major international corporations versus the interests of New Zealand and New Zealand business. That is what this bill is about. 
Goodness me the main criticism that can be made of the current Act is not that it is the nanny State; it is basically leaving the kids at home with directions about where to find the food in the fridge. I think people could say that the problem with the current legislation is that it does not go far enough not that it goes too far. I hope that Ms Fitzsimons does not criticise us too much for that when she gets up and speaks because I think we are probably basically of one mind in that respect. There were jobs in this for New Zealand there was certainty moving forward as higher levels of biofuels began to be phased in there was a regime around sustainability— 
Hon Dr Nick Smith 
: What about the cost? 
Hon Dr MICHAEL CULLEN 
: The cost as the member well knows depends upon what the future cost of oil is. Ah suddenly there is silence. The penny drops. Oil at the moment is under US$50 a barrel. Less than a year ago—6 or 7 months ago—it was US$153 a barrel. If any member in this House thinks seriously that he or she knows what the cost of oil will be in 5 years’ time I would tell them: “Do not waste your time in here mate. Go out and make yourself a few billion dollars on the international market.” because if a member has that knowledge it is knowledge that nobody else in the world has. It is very precious and it is worth vast amounts of money. Why would one spend one’s time in Parliament beating one’s gums about the nanny State if one knows what the future price of oil will be? The member does not know that. None of us know that. We know—and I occasionally chip at the Green Party about this—that it will go up and down. We know there is huge volatility about oil prices but we also know one simple thing: the long-term trend of oil prices will be up. The trend may have been downwards recently over the last few months but it will be up over the long term. Why? Because at the end of the day it has to be a shrinking resource in relation to demand. If we really want to see people in the Third World increasing their living standards then whatever we do the chances are that it will increase their demand for fossil fuels such as oil—a pity but it is true. However much we manage to do in the next 10 years that is almost a certainty in that regard. 
So there will be pressure upon a finite resource. We do not know how big that finite resource is because we do not know what has yet to be discovered but one thing we do know utterly logically completely and obviously is that at some point the resource is finite and therefore it will cost more to extract. Therefore it will be demanded more and it will cost more. The cost argument is actually a particularly weak argument in this respect. What of the cost on the other side? The less we use biofuels the greater the liability under the Kyoto Protocol or under any likely subsequent agreement in terms of a charge to the Government because in the first instance that is a charge upon the Government it becomes a liability on the Government accounts and therefore it has to be met in some form or another. Again there is no free lunch here. This can be met in effect by saying to the public that we are sending price signals that are designed to encourage them to use more efficient vehicles and to drive their cars more carefully in terms of how they accelerate etc. all of which have very significant impacts upon fuel consumption and can save people far more money than the impact of 4c a litre or whatever it was the member was claiming in that regard. We have seen petrol prices at the pump vary by something like 70-odd cents a litre within the last year or so and the member’s heart bleeds—bleeds—for 4c a litre when that is a tiny fraction of almost day-to-day trends. We have seen petrol prices go up or down by 5c a litre in a day as a consequence of market movements over the last year. 
So the member has to get with the programme in that regard. He simply does not seem to grasp the point that this denial this endless series of moves to deny to put off the emissions trading scheme to cancel the biofuels obligation to try to set up new thermal power stations for no particular reason to add to baseload capacity when there is a huge amount of potential renewable capacity for baseload generation—all of that suggests that in National we have a party that stupidly opposes what the previous Government did for the sake of opposing it and is now stuck with the stupidity of its position. 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 This tragic little Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill which is being rushed through all its stages under urgency by a Minister of Energy and Resources who is ignorant of most aspects of his portfolio—apart from perhaps sexy coal—will do exactly the opposite of what the Minister says it will do. It will replace a potentially sustainable local industry—stable secure and well known—with intermittent imports of biofuels from unknown sources which are likely to include palm oil from South-east Asia grown where the tropical forests the last refuge of the orang-utan used to grow and corn ethanol with a higher carbon footprint than petroleum subsidised by the US Government. That is what this bill will do. 
Let me tell members about who is already investing or is poised to invest in biofuels in New Zealand. Although there are many companies doing little bits there are three major companies involved. The company that people have heard most about is BioDiesel Oils (NZ) Ltd. Its managing director is Tom McNicholl and it has a plant already operating in East Tamaki that makes small quantities of bio-diesel from tallow as well as a large plant under construction in Waharoa to make 60 million litres a year. That plant has now been mothballed because there will be no market for the fuel under this plan—and I will tell members why that is so in a minute—and that has caused the loss of 46 jobs. The point Mr McNicholl makes is that unless the oil companies are required to set up blending facilities there will be no possibility of selling biofuels for blending but only the possibility of selling it for use in 100 percent biofuel vehicles which is a much more difficult market. In his letter to me Mr McNicholl states “Exempting excise and road-user charges from biofuels act only as a subsidy to fuel consumers. They do not compel the use of biodiesel unlike the biofuel obligation.” 
Secondly there is Ecodiesel Ltd in South Auckland which is producing small quantities of bio-diesel from tallow. It was planning an expansion of its production to 40 million litres but that has been delayed for at least 6 months because of the uncertainty created by this bill. 
Thirdly there is Biodiesel New Zealand Ltd which uses rapeseed oil grown as a rotational crop with other food crops so that the green material is ploughed back in as a green soil conditioner. The oil is extracted from the seeds and the seed cake is used as an animal feed. That is a sustainable biofuel and that company was planning to produce 70 million litres but that is now under review. 
That is what this bill has done. Those are three significant entrepreneurial companies in New Zealand that want to do the right thing by sustainability and that are all undoubtedly sustainable by any definition of the term but now their investment is seriously under threat. 
Hon Gerry Brownlee 
: Why? 
JEANETTE FITZSIMONS 
: Perhaps if the member listens he will find out why. 
The intention of the bill is to set up a stable local market. It would have actually been better for sustainability to say that we will not allow the import of any biofuels and that we will have them made only in New Zealand so that we know where they come from and that they are sustainable. The Greens could have supported that but unfortunately people got nervous about the World Trade Organization and so forth and did not think that was an option. 
Mr Brownlee says the Parliamentary Commissioner for the Environment recommended against the passing of the Biofuel Bill and that is true. She came to the Local Government and Environment Committee when the bill was in its form as introduced to the House and she said “the bill currently before Parliament should not proceed in its current form”. That bill was not proceeded with in the form it had then because that was before the Green Party negotiated with the Government a sustainability provision. We made it clear that without that sustainability provision we would not support the bill at all. That provision was drafted—and I had a large hand in that—it went through the select committee and it was adopted. As far as I can make out that sustainability provision is the most stringent sustainability provision in the world yet it is being abolished by the Government today. It says that to be sustainable a fuel has to reduce by at least 35 percent the carbon it produces relative to petroleum it must not be grown on land suitable for food production—it must not compete with food—and it must not be grown on land of high conservation or biodiversity value. Those are the three criteria—they are in section 34H(3) of the principal Act—and those have now gone. 
Members opposite have been making a big feature of the fact that the regulations to give effect to that section are not yet drafted. They are partly drafted. The Minister and I met with the officials and said the idea that they could not do that until 2011 was rubbish. We asked whether they could do it by the middle of 2009. They said yes so they were directed to do that by the middle of 2009. The amount of biofuel that is required under the legislation to be used in New Zealand by the middle of 2009 is so infinitesimally minute that there was no reason not to proceed without the regulations. But the fact is that because the section is in the Act there is still a conceptual standard against which to measure biofuels that come into the country. It was always the intention that there would be a reporting obligation for those biofuels. 
In her advice to the committee the parliamentary commissioner provided a table of carbon emissions for a wide range of different biofuels around the world showing that some of them—like the US corn-to-ethanol programme—have higher carbon emissions on a life cycle basis than petroleum and others particularly those made from wastes like tallow have very low carbon emissions. Not all biofuels are equal. That is the thing the National Party has never been able to grasp. 
The Minister said that the work on drafting the regulations will continue. Well I ask what he will do with those regulations because now there will be no primary legislation under which they can exist. We cannot have regulations that just hang in the air. 
The Minister also says biofuels will cost up to 8c a litre more than petrol. That figure comes from the oil companies. I remember back to the days when we had a big campaign to get lead out of petrol because it poisoned children’s brains. The oil companies told us repeatedly that petrol would be massively more expensive—I think they said 10c a litre more expensive at the time—if the lead was taken out. Eventually we forced them to take the lead out and nobody even noticed any change to the price. The oil companies are absolutely the last people we should trust if we want to know what biofuels will cost. 
The fact is that whether biofuels cost more or less than petrol will depend on the price of petroleum. The Ministry of Economic Development gave advice that whether biofuels would increase fuel prices will depend firstly on the amount of infrastructure investment required by oil companies. Currently that is estimated to add 0.2c to 0.4c per litre to the price. Secondly it will depend on what the price of petroleum is at the time. When oil actually reached $157 a barrel biofuels were cheaper than petroleum. But it cannot be left just to the market because if we do not have the infrastructure if we do not have the industry all that the market will do is to produce a fluctuating import—or not—of fuels depending on what the price is. So we will get the worst stuff going. We will have no stability in the market we will have no blending and we will have no New Zealand industry. All we will have is ad hoc imports from wherever biofuels might be available in order to make up the difference. 
The Minister says he wants to give a tax subsidy instead of a mandatory obligation. I will pick that issue up in my second reading speech. There is plenty more to say. 
DAVID GARRETT (ACT) 
: 
 I rise to support the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill which is no big surprise I suppose. But what might be a bit of a surprise is that I agree with much of what has been said both on the Labour side of the House and amongst the Greens. No one can argue that there is a decreasing supply of petroleum. No one can argue that at some point it will become very scarce and very expensive and will eventually run out. We should not actually use petroleum as a transport fuel if we can avoid it for one very good reason which is that it is a unique substance with many unique properties that allow it to be used for many other far more important things. So I agree with members on the other side of the House that the idea would be that we use 100 percent biofuel—tomorrow. The problem is that like lots of ideas it is great in theory. 
In my view this whole case is an example of the folly of going into things as the world leader as we were going to be on climate change—or as some still say we should be. The theory regarding the need to use biofuels is great but let us look at what has happened. The United Nations which is not known for Draconian pronouncements has said that biofuels are a crime against humanity. That point was completely ignored by members on the other side of the House. We should not use them for at least 5 years said the World Food Programme an agency of the United Nations. Why? The reason is that the whole idea is flawed. Although sustainability the buzzword of recent years sounds good biofuel production has led to side effects unintended consequences if you like such as deforestation in Brazil and increasing the price of food for poor people who would have eaten rapeseed that is now being made into biofuel. It has increased the price of food because land that would have been used for food is now being used to grow crops. The use of biofuel is just not a good idea because we have launched into it too soon. 
The speaker from the Greens said the biofuel would have to be produced locally so we know where it is grown. Well the problem with that is that in order to meet the target set by the outgoing Government we do not have enough land here. We do not have enough available land on which to grow biofuel crops. The European Union target for biofuel uptake—one that is not dissimilar from ours—would involve the use of up to one-quarter of the agricultural land. So the European Union will have to import it too. 
As I have said biofuel crops have increased the price of food distorted land use and led to the UN food agency calling them a crime against humanity. Not a great idea! The European Union apparently would require 14 percent of the world’s oilseed production just for itself. Leaving aside the food-price distortions and the other problems that 14 percent of the world’s oilseed production is double what is grown in the European Union now. Where will all that biofuel come from? As my colleague the Hon Heather Roy said in this House during the passage of the legislation Brazil is currently the second-largest biofuel producer in the world. That is great one might say except that when we scratch beneath the surface we see that Brazil has embarked on a massive deforestation campaign and is turning grasslands into sugar cane production areas for biofuel. Increased demand for biofuels would put further pressure on those areas leading to the slash-and-burn clearing of rainforests. 
So if the Green Party is serious about its environmentalist credentials and if it is serious about saving the planet—it is a bit like the nuclear argument which it goes very quiet about; the Europeans say nuclear power the way to go and is the cleanest fuel although I do not know whether I agree with that—then it should support this bill and vote against the use of unsustainably produced biofuels. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 I am proud to come to this House to share the excellent news from Te Tai Tonga about the global success emerging from Blenheim. The Marlborough biofuel company Aquaflow Bionomic Corporation has created bio-diesel which has been saluted as the eleventh best invention in the world for 2008 by none other than  
Time 
 magazine. The bio-diesel formed from wild algae at Blenheim’s waste treatment oxidation ponds is branded as green crude. The international profile is not just great for business; it also demonstrates to the world that Aotearoa is serious about its commitment to reduce the rate of carbon emissions. 
Our entrepreneurial enterprise in advancing alternative sources of energy is well-known. One of my own iwi Ngati Koata is currently in the process of establishing a biofuel plant to supply users of static machinery such as school boilers. This particular initiative was going to focus on tallow but we were also investigating other sources to ensure we had a guaranteed supply. The ultimate example of home-grown New Zealand - made industry was the McDonald’s vege car—a car powered 100 percent by used vegetable oil. The McDonald family drove from Cape Reinga to Bluff gathering support from mayors who blessed the bonnet with their signatures. Today this Parliament is voting to overturn the decision made in the 48th Parliament to implement a biofuels sale obligation policy. What then do we tell local mayors who were prepared to sign up to the concept of biofuels and who welcomed any initiatives to promote sustainability security of energy supply and the reduction of greenhouse gas emissions? How then does the bill on the Order Paper for today affect our international reputation with regard to our capacity to contribute to climate change initiatives? 
The Parliamentary Commissioner for the Environment Dr Jan Wright told the select committee last year that there are two key issues we must uphold when considering biofuel legislation. We need to be able to assess how well the biofuel initiative will reduce carbon dioxide emissions and we need to be able to ensure that we can increase the security of our supply of transport energy. These are critical issues for any discussion on sustainable biofuels. 
But other issues are at play. We need to be able to determine the energy return on energy invested. This is the concept of a life-cycle assessment of emissions determining the nature of the cultivation and processing of material inter-fuel. Although biofuels are carbon neutral when burnt we need to be clear about the carbon emissions released in the process of production. We need to be able to identify the ecological effects of biofuel production. Effects such as soil depletion or the reduction of indigenous biodiversity adversely affecting land with high conservation values have to be weighed up to ensure that sustainability remains of the highest order. 
Another priority is to determine the effects on the food supply. This was a key issue for the Local Government and Environment Committee when the debate around biofuels proceeded last year. The committee recommended that biofuels must not compete with food production or be produced using land of high value for food production. We must also be able to assess objectively what difference the legislation will make to small producers versus agri-business. The situation for those fledging industries that have gone full steam ahead into producing sustainable biofuels is particularly precarious. Nowhere is this more apparent than in the case of BioDiesel Oils New Zealand. This company has invested some $10 million in research and development in the construction of a processing plant in East Tamaki and in the process of building a 60-million litre facility in Waharoa. 
But it is not just money we are talking about; it is about meaningful work—real jobs. The strategic plan for BioDiesel Oils is to employ 22 staff on three shifts at the Waharoa plant and 24 staff on three shifts at East Tamaki. All in all that will be a total of 46 full-time jobs when both plants are in full production. And it is about time. Tom McNicholl the managing director of BioDiesel Oils has invested 9 years of his life into developing bio-diesel from the most difficult raw material available—tallow. This company took up the challenge of converting tallow as part of the commitment to increase renewable energy through the National Energy Efficiency and Conservation Strategy. 
The Minister of Energy and Resources earlier today raised some of the difficulties that we too have been concerned about—in particular the impacts that biofuel production contributes to deforestation or the way in which biofuel production competes with food production. But the point that we cannot ignore is the fact that so many of these concerns made it through to the select committee stage and were treated with due responsibility. Those issues included taking into account the social economic and environmental impacts of biofuel production alongside investment in standards of qualifying biofuels. It was because of the thorough and comprehensive way in which the biofuel debate was managed that the Maori Party determined that it would support the Biofuel Bill to introduce the biofuels sales obligation policy. We heeded the warning from Dr Wright about the need for caution before rushing into the biofuel industry and I want to distinguish here between the relative effects of biofuels derived from waste as opposed to biofuels made from ethanol from corn. The former emits up to 80 percent less carbon dioxide than fossil fuels while ethanol from corn emits about the same amount as diesel. 
The Maori Party has always spoken about the need for sustainable environmental management. It has promoted the concept of a genuine progress index. We must aspire to make the economy great but not at the expense of the environment. The commitment to renewable energy resources including geothermal hydro wave wind and solar resources is a commitment that we look to support through every avenue we can. We must pull out all the stops to protect and preserve limited resources such as oil gas and coal. We must create incentives to promote the use of biofuels and have a mandatory obligation as a key part of this. We know that many groups including iwi have invested in the manufacturing infrastructure of biofuels. We believe that this bill will disadvantage us and indeed detract from the promise of prosperity and innovation that the blossoming biofuel industry has demonstrated. We cannot support this bill. 
Hon PANSY WONG (Associate Minister of Energy and Resources) 
: 
 I do not intend to repeat all the arguments stated by the Minister of Energy and Resources the Hon Gerry Brownlee. I intend to take a short call because the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill is very focused concise legislation. It is a very good demonstration of why Labour ended up on the Opposition benches and will remain there for a very very long time. We are once again repealing a piece of mandatory compulsory “Government knows best and does not trust the public to make choices” regulation. 
Not only did the Minister make a sensible move to fulfil one of the promises that National has campaigned on but he has also included the viable alternative of introducing tax incentives. That I think is a sensible way to embrace the biofuel sector because a lot of the science research and standards are still in the process of being developed. How can anybody in New Zealand embrace the concept of requiring by 1 October 2008 a mandatory level of biofuel to be sold through the petrol pump when the standards to test whether biofuels are sustainably sourced are still being drafted? How can one reasonably stand in this House to defend a requirement before the standards have been drafted and put out there? How do we know that those biofuels would not repeat the previous mistakes? We have seen some members jump right into wanting to lead the world only to then see the first wave of biofuels cause problems with regard to food shortages and deforestation. Why should we continue to repeat those mistakes? The European Union after 2 years has not developed the standards to ensure that biofuels are in fact obtained from sustainable sources. 
I think the Minister the Hon Gerry Brownlee should be congratulated on putting a stop to the mandatory compulsory requirement while at the same time bringing in a very sensible scheme of introducing tax incentives. I think that will send a better pricing signal that a mandatory “Government knows best” signal would. The Minister also sensibly pointed out that there is a need to develop a process for proving the sustainability of biofuel production. This National-led Government believes that New Zealanders understand and care about the environment. New Zealanders are being given the right information and tax incentives in order to actually make the right choices under this biofuels regime. While I am on my feet I also want to congratulate the Minister on being consistent in showing our belief in New Zealanders. He has also put a ban on the regulations brought in by the previous Labour Government to try to tell people how long they can take hot showers for and what sorts of light bulbs they are allowed to use. 
It is a real pleasure to stand up and support sensible legislation that shows our confidence in those New Zealanders who got rid of the Labour Government which used to tell people how to run their lives. 
MOANA MACKEY (Labour) 
: 
 After that speech by Ms Pansy Wong it is hard to know where to start. As someone who said she wants to listen to New Zealanders maybe Ms Pansy Wong might want to explain why the only quotes the National Party has used have been from the chief executives of big oil companies none of whom are New Zealanders none of whom are going to support small businesses here that create biofuel. For all the talk about New Zealanders it is New Zealanders who are going to suffer because of the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill. 
I also want to challenge what the Hon Pansy Wong said—that we should not have mandatory requirements because we do not know what the standards are. Apparently that did not apply when it forced through an education amendment bill last week that gave the Minister of Education complete power to do whatever she wants—a blank cheque saying that she is going to develop what will be gazetted but without telling the House. It is not one law for all with this new National-led Government; it uses an argument when it suits it and when it does not it will completely abandon it. I would also like to know how the Hon Pansy Wong reconciles her position on this bill with the fact that that education amendment bill passed last week is a bill about compulsion. It is about forcing the education sector to do something that it is horribly opposed to was opposed to during the election campaign and which despite being watered down is going to force our schools to merely replicate what they are already doing just so that the National Government can save face because without that bill it has no education policy. 
This is yet another huge environmental backtrack from this new Government which has been in place only a week. Within a week we have gone from a country that people admired to a country that people can now ridicule for the position that we have taken on the emissions trading scheme—with a select committee to revisit the science of climate change. That is humiliating on the global scale especially for a country that campaigns on being clean and green and relies on being clean and green as a marketing advantage and also for tourism. I am getting a sense that the argument we will get on every piece of legislation dealing with the environment is that because some biofuels are bad we should do nothing. Because carbon dioxide is a gas that has a useful purpose in the atmosphere apparently we should do nothing despite the fact that in excessive amounts it severely alters our climate. The argument we are getting is that unless we can be convinced that every single biofuel ever produced in the world never does any environmental damage we will never do anything about it. If that is the position that this Government takes we will never do anything. Of course some biofuels are worse than others—we know that. That is why the Labour-led Government changed the bill and put in sustainability principles. 
Let us not forget that the National Party declared its hand on this bill very early in the select committee process. In fact very early in the select committee process before submissions had finished being heard before the bill had been changed National members declared that they would oppose it on principle. I think that needs to be put into the mix. This bill—like every bill last week—is not going to a select committee. This is another bill that is being rammed through despite the fact that this bill means people will lose jobs. We have already heard the case of a gentleman from Waharoa who has invested $10 million in two biofuel plants because of the Energy (Fuels Levies and References) Act and now he is going to lose that money. 
Hon Gerry Brownlee 
: Rubbish! 
MOANA MACKEY 
: Mr Brownlee says “Rubbish!”. Do members know whom I am going to listen to? It is to the man who spent $10 million investing in biofuel rather than to the Minister who is embarrassed about the fact that we are going into a global recession and who has cut research and development tax credits for our innovative companies. He is now cutting out the biofuels obligations which also provide research and development opportunities and jobs. This is at a time when we would expect our Government might be trying to create jobs and to save jobs. No Mr Brownlee has decided that because apparently he has something against compulsion those jobs should be lost and that $10 million invested by that company should be gone. I think that is shameful. At the very least this bill should have gone to a select committee so that that small-businessman—and those members talk a lot about small business when it suits them but they have been very quiet tonight—could have come to the select committee and told us exactly what the bill meant and what he needed to stay in place so that his business could keep going. I do not think that is too much to ask given that that is the normal practice of this House. 
The Act was incredibly important because it supported the development of the domestic biofuel industry. Many of the concerns that we all have about sustainability could be eliminated largely by having a domestic industry which means we would not have to import a lot of the biofuels that we all have a number of questions about. That was what the Act wanted to achieve. It was very reasonable and it was very modest in that respect. But the other thing it did was provide certainty to the sector. Everyone who came along including representatives from the oil companies said: “We just want to know what you’re going to do. Just tell us. If there’s going to be principles try to spell them out as simply and as clearly as you possibly can so that we can see the path you are going to go down so that we get the best idea possible.” The select committee worked incredibly hard. The officials worked incredibly hard on getting the principles in the legislation so that even though they are not legally binding at the moment the legislation is very clear. 
I have worked for an oil company. I know that oil companies do not make short-term investment decisions. They make long-term investment decisions. They looked at what we put in the legislation and saw a very clear steer that there was no point going to a long-term contract for biofuel production to import into New Zealand from a company that would eventually be ruled out when the sustainability criteria were put into place because they would lose money. Those contracts are long term; they are not short term. They wanted to know up front what they could import and what they could not import so that they could make business decisions based on that. 
Dr Smith who was on the select committee—but from his speech one would never guess because he obviously did not listen to a single thing that was said there—wanted to know why we passed the bill before the principles came into force. I think Jeanette Fitzsimons has largely answered that question. We did it because we wanted to provide certainty to the sector we wanted to provide a clear steer on sustainability and because the biofuel sales obligation for oil companies in the first year is 0.5 percent. This is about getting a sustainable biofuels domestic industry in New Zealand. We are not demanding 30 percent in the first year. It is 0.5 percent and going up half a percent every year. That can be done from our biofuels now. Dr Smith also wanted to know whether we had read—[ 
Interruption 
] Yes I do. I have read the officials reports I say to Mr Brownlee and he obviously has not. Dr Smith wanted to know whether we read the UK the UN and the OECD reports. Of course we did. That is why we changed the legislation. It was on steer from the Parliamentary Commissioner for the Environment and those reports that made us realise we could not simply put through a bill that had no sustainability steer whatsoever. 
Dr Smith remarkably also made the argument that we do not need to do anything because the market will provide this. The market has been fantastic for the environment so far. What an absolute success the free market has been for the environment. The fact is as Jeanette Fitzsimons pointed out these biofuel companies are going to rely on the oil companies to provide the blending capacity for biofuel. Does anyone really think they will do that voluntarily? Think back to when we had new players coming into the oil industry. I remember reading all the reports in the newspapers about how the existing oil companies were trying to shut the new players out. They were using the power that they had as the incumbents. These are companies in direct competition to oil. They are providing a product that makes the oil companies’ product less valuable. Does anyone think the blending facilities will be provided voluntarily when there is no compulsion under the law to do so? Dr Smith said that we were living in dreamland. I have to say I think the opposite is true. From working in that industry I can say that unless there is an obligation in the law I do not believe the cooperation will occur to allow that supply to happen. Dr Smith said that of course biofuel producers will say that because they have a vested interest. But he does not extend that same argument to the oil companies that he extensively quoted throughout his entire speech. Of course the oil companies have a vested interest so do the biofuel producers. The select committee weighed all this up considered all the submissions from all of them and moved forward on a bill that we thought met the needs of most as far as we possibly could. 
I want to talk a bit about the Parliamentary Commissioner for the Environment’s report on the original bill that was introduced to Parliament. It was presented before the select committee had reported back so significant changes were made to the bill. I read the report of the Parliamentary Commissioner for the Environment and I think she did a good job. She extensively used a paper that was published in  
Science 
: “Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change”; she relied heavily on that. But what has not been said is that a week later  
Science 
 had to publish a critique from the company that had developed the model that was used extensively in that scientific research saying that it had not been used properly. The study is called the Searchinger study because it has become quite infamous. A lot of people who oppose biofuels quote this study extensively and I think it is time to put on record that there is a lot uncertainty about it. The critique came from the folks at the Argonne National Laboratory which developed the model used in that research. They said that the research does not stack up and that the model was not used correctly. There is a good scientific principle that people might want to remember when they read research which is “garbage in garbage out”. We have to be very careful. I would be interested in seeing a critique of the bill done using that model correctly. 
The biofuel sales obligation was going to be 3.4 percent by 2012 in the original bill. The select committee reduced it to 2.5 percent because we had a look at what the capacity out in the sector would be. 
Hon PETER DUNNE (Leader—United Future) 
: 
 As I have sat here listening to the debate this evening I have been struck by a remarkable sense of déjà vu. In September we debated a biofuels bill and many of the arguments that have been run this evening were put back and forward across the House at that time. As I listen to the debate this evening I think that nothing much seems to have moved on from that point. Those who favoured the bill in September continue to favour its retention. Those who opposed that legislation then continue to oppose it tonight by supporting the repeal. I was one who supported the bill in September and I do not support its repeal tonight for the reasons that I will state. 
I think it is important to put this whole issue into some sense of perspective. Whatever happens in the short term at least there is not going to be a major biofuels industry in New Zealand. We are talking about a fledgling move. We are talking about meeting a need that will develop when we start to think about how we are going to use tallow for instance. We have three or four market players who are interested in developing an industry. They need some certainty and they need a framework within which they can make the investment decisions they will require to make their industry a viable one long term. When we think about it we know that that was all the original legislation sought to do. It was to set up the framework for the development of a domestic industry. 
Along the way some issues were given thorough consideration. There was the question of the source of the biofuel itself and there was the legitimate concern raised about using product that might be available for food development but instead might be used for fuel development. The original select committee dealt with that issue by putting in a sustainability clause. There was the debate we have heard a lot of reference to this evening—about the position of the Parliamentary Commissioner for the Environment—but again the original select committee in its report back dealt with the concerns that the parliamentary commissioner had been expressing. 
So I suppose we come back to the one unresolved issue as it were that has featured prominently in tonight’s debate—that is the question about whether the Government imposes by legislation a requirement or adopts an incentive-based approach through a tax adjustment. The reason why the original proposition was developed was as the previous speaker so correctly said to give a fledging industry a sense of certainty so it could commit to the investment that was going to be needed to develop what might become a larger industry in due course. It was as simple and straightforward as that and when members talk about “the market should decide” they should remember that ultimately whatever system is put in place the market will decide and it will decide by virtue of consumers determining what it is they are going to purchase. So I do not have a great deal of sympathy with the argument that says that by imposing a requirement we are in effect removing an element of market choice an element that would be preserved if we were to go down a tax incentive path. I do not think we are talking about an industry at this stage that is in any shape or form to be so determined. 
So we end up with a bill this evening that overturns what was an essential first step in the development of an industry. I think there is a red herring about the time that the legislation was to take effect and the time that the standards were being developed because again that is part of the ongoing work in progress. The negotiation and the discussion that would occur between those industry players and the regulators in terms of the development of those standards are part and parcel of the normal process. By going back to square one tonight we are effectively saying to those who have an interest in developing a domestic biofuels industry “Not yet. Go away.” And we know that giving that signal means most of them will go away. So when the time comes that we decide that maybe it is right that we should now start to make a much greater emphasis on the use of biofuels domestically those potential investors and those technologies will not be available to us. I think that is the big loss here. It is not as though we have got ourselves into a situation where the changes that were made just 3 short months ago have proved unworkable; they have not even had a chance yet to be proven that they are going to be able to work. 
It is not as though we had a rushed piece of legislation originally. I cannot recall how long the bill was at the select committee but it was a considerable period of time. I recall having a number of discussions with the then Minister about some of the issues that have been canvassed in the debate this evening and I do recall a sense emerging at the end of that process that many of the issues that have been raised were satisfactorily addressed in the original legislation. 
So I have some difficulty this evening when I see a bill put forward to repeal a piece of legislation that was very much in its infancy. I think that is a mistake. I think that is something we will regret. I do not buy entirely into the argument that the whole world is watching and will see this as a retrograde step on New Zealand’s part. There is an element of that but I think that is being over-exaggerated. I just think that in terms of an opportunity that was available to New Zealand to start to give some credibility to those who wanted to develop a domestic industry to use a product effectively that we had available here as a by-product of our agricultural production this legislation stymies that opportunity. I think that is a sad mistake and for that reason United Future will not be supporting this bill through its passage tonight. 
Hon MARYAN STREET (Labour) 
: 
 As this is my first speech in this forty-ninth Parliament I would like to congratulate you Mr Assistant Speaker on your elevation to that position and your colleagues likewise. 
What the Luddites were to the industrial revolution the New Zealand National Party is to this sustainability revolution. The Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill is nonsense. To repeal a biofuel obligation in legislation that has not yet had a chance to work is nonsense. The National Government will go down in history as the Luddites of sustainability because sustainability has taken off in a revolutionary way internationally and it would seem that the New Zealand National Government is the only Government on the planet that will not accept that truth. I wonder whether this is what the fine crop of new National MPs knew they were signing up to. It seems to me that this legislation is a fast step backwards. 
I want to put this bill into context. First of all the National Government has done a number of things in the very short time that it has been in power. Dr Nick Smith frequently likes to refer to the blue-green credentials of the New Zealand National Party. I have to say in respect of this measure and several others which I will enumerate in a moment that those blue-green credentials are completely in tatters. The National Government went into a confidence and supply agreement with the only climate change deniers in New Zealand and that is enough on its own to turn us from being a leader into a laughing stock internationally. 
Second the Government removed the research and development tax credit which has an immediate impact on biofuel industry development. More than that the research and development tax credit completely stymies innovation and business development particularly where we need it most and where we need it most is in all of the industries that can capitalise on and progress sustainable initiatives whether it is sustainable food production sustainable fuel production or alternative fuel production. 
Third this National-led Government slowed down the emissions trading scheme and turned us from a leader in this area to what it likes to call “a fast follower”. The previous speaker from United Future Peter Dunne said he did not quite go along with all the rhetoric around the damage being done to New Zealand’s reputation. I advise this House that I have been to an Asia-Pacific conference on climate change and the effects on population development. Having just got back from that conference today I can report in quite fresh and stark terms that it was simply embarrassing to say that we were from New Zealand and that the New Zealand Government and its confidence and supply partner ACT had been reviewing and questioning the science around climate change. When one hears the stories from the countries—developed and developing—around the Asia-Pacific region and the impact that climate change is having already not only on their food security but on health and the struggles against poverty then it seems absolutely clear that this National Government is in a Luddite frame of mind. 
The fourth thing National has done which contextualises this legislation is lift the ban on thermal generation. So the answer to all our electricity generation difficulties and constraints in National’s view is that we need to build more thermal generation plants and pollute the atmosphere even more in the course of doing so. There are no aspirations from this National-led Government for renewable energy. There are no aspirations for developing renewable energy sources and for promoting those things and developing the kinds of energy supply that we are good at—in particular geothermal energy. A new plant has just come on stream to demonstrate that capacity most starkly. 
The fifth thing is that this National-led Government has moved away from and will not consider any standards for energy-efficient households in order to enable people to save money on their energy usage and to become energy conservation - conscious. The sixth thing in this complete litany of damnation in respect of the National-led Government’s proposals is the scrapping of the home insulation scheme. That in itself is something this Government needs to be ashamed of because the absolute pay-off in that fund and that scheme will come back to haunt it. 
We have heard already but it bears repeating that this Government which purports to be business-friendly has already with this measure plus the rescinding of the research and development tax credit brought development in this essential area of biofuels to a halt. The Waharoa example is but one example. Of course there has been anxiety—and it was widely canvassed at the select committee—about the production of biofuels from food crops. For that very reason the sustainability principles were written into the legislation. From this National-led Government we have a backwards step—something that will not only damage New Zealand’s reputation but as if that were not enough absolutely damage our capacity to produce alternative biofuels. 
In the first 2 weeks of its existence in this House this National-led Government has brought in legislation under urgency so that there can be no debate no referral to a select committee and no re-examination of issues. I will not go into the other pieces of legislation that do not immediately relate to this bill—about which the same things can be said—but I will say that the Government’s approach absolutely demonstrates a completely disrespectful attitude to the processes that this Parliament is meant to uphold. I cannot believe that this new intake of the new generation of National MPs are feeling very happy about this kind of legislation and these kinds of hallmarks which are going to live with this National-led Government for some time to come. Those members will regret not having been able to discuss these things more fully within their own caucus. 
One of the purposes of the mandatory biofuels obligation was to encourage oil companies to develop the infrastructure needed to deliver sustainable biofuels. It was simply an initial step but an essential one in order to create the backdrop required in order for a sustainable biofuels industry to be able to work in New Zealand. 
CHRIS AUCHINVOLE (National—West Coast-Tasman) 
: 
 Like previous speakers as this is the first occasion on which I have had to speak during this term I take the opportunity to congratulate the Speaker the Deputy Speaker your colleague Eric Roy as Assistant Speaker and yourself Mr Assistant Speaker Barker on your elevation to the position of Speaker. I think it is appropriate to say the people of Runanga where I understand Mr Assistant Speaker you were brought up as a boy particularly with your grandparents are very proud of the occasion. Although your ascension is from the West Coast and I now represent the coast I do not expect any special privilege to be afforded to me while you are in the Chair. 
I can understand the disappointment in the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill of some people who have an intense feeling over carbon emissions; I can understand their initial disappointment in the bill. But the fact is that the more serious that people are about that subject the better pleased they should be that this bill is being brought in. If this bill had not been introduced there would be a very real risk that New Zealand would be contributing to the global food crisis. 
Moana Mackey 
: Oh for God’s sake— 
CHRIS AUCHINVOLE 
: There are those like the member opposite Moana Mackey who will frown scrunch up their faces and say our requirements are so small they could not possibly affect the world food crisis. But the argument is like that with regard to carbon production: the production is very small but nonetheless it has an impact—the same thing applies. 
I well remember that when I first came into Parliament I was appointed as associate spokesperson on energy. That entitled me to one of the great things about being in Parliament which is access to people from all walks of life and from all sorts of industries. We had the opportunity to speak with a large oil company executive—he was a large gentleman but it was a large oil company—and he was talking about his company’s move into the use of biofuels. He made it very plain the purpose was to make money; it was not to save the planet. Indeed he did say in conversation that the production of biofuels in the way that his company was doing it would in fact create more carbon than it would save. Reducing carbon was not the issue. 
Hon Gerry Brownlee 
: That’s right. 
CHRIS AUCHINVOLE 
: I thank the Minister of Energy and Resources for remembering that occasion. 
The oil company executive spoke about the displacement of food crops—the corn wars in Mexico where suddenly corn for tortillas and those sorts of things was going into biofuel and not into food with the consequence that Mexico’s natural foodstuff which was generally a lower-cost foodstuff was going up in price to a point where it could not be afforded. He spoke about the benefits of using equatorial lands and sub-equatorial lands. He thought from the point of view of ensuring that crops were used to maximum advantage that perhaps genetically modified crops would be the best way to go. 
Far more has to be done in terms of ensuring we have standards for sustainable production of biofuels before we move too quickly into this area. A quick calculation shows we would need 60 million - plus litres per year. We have heard people speak about enterprises that were planning to have those sorts of figures; they certainly would not have them straight away. There would be a need to import biofuel and there would be no guarantee at all that the products we imported would be sustainably produced. Naturally many first-generation products like those made from soy rapeseed and sugar compete for food production and I am amazed to hear people say “No we wouldn’t grow it where you could grow food.” Well how can we have that classification— 
Hon Dr Michael Cullen 
: We’d just get it from overseas; don’t worry. 
CHRIS AUCHINVOLE 
: Say it again? 
Hon Dr Michael Cullen 
: Jacqui Dean—we’d just get it from overseas. 
CHRIS AUCHINVOLE 
: But how could we have that classification—that it will not be grown where food could be grown? If a biomass can be grown to produce biofuel I presume from that that unless it is on land that is vertical or overhanging the same land could be used for food production. It is incontestable that the sudden rush into biofuels is causing a huge destruction of rainforests. That is hardly going for growth and benefits in terms of the world biosecurity situation. The cost of production and the amount of carbon released nullifies the potential benefits of biofuel. 
We have heard the speeches this evening; they have been very intense and they have been very sincere from members from all sides of the House who have spoken. I was particularly taken with the points made by Rahui Katene albeit that she voted against the bill; I thought she argued the situation very well. Peter Dunne also brought up good points. But the reality is that there was going to be a cost obligation of $240 million per year; we heard that from Dr Smith. 
We use a sustainability standard we need a sustainability standard and we need to know that the biofuels that are produced are measured against that standard before there can be any compulsion in their use or a mandatory obligation. It is the mandatory obligation here that is the problem. 
Hon Dr Michael Cullen 
: Aha! 
CHRIS AUCHINVOLE 
: Yes it is! This is a Government of commitment not of regulating blindly for the sake of regulating. This bill is a good instance of a commitment to sensible and well-reasoned legislation. Thank you Mr Assistant Speaker. 
A party vote was called for on the question  
That the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill be now read a first time. 
Ayes 62 
New Zealand National 57; ACT New Zealand 5. 
Noes 59 
New Zealand Labour 43; Green Party 9; Maori Party 5; Progressive 1; United Future 1. 
Bill read a first time. 
Second Reading 
Hon GERRY BROWNLEE (Minister of Energy and Resources) 
:  
I move  
That the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill be now read a second time 
. During the first reading debate a number of points were brought up by people who think that this is the worst thing that could ever happen to the biofuel industry in New Zealand. But I have a few questions for them. They will be aware that there are about 20 million litres a year of biofuel produced in New Zealand right now. So the first question is: where is that being sold? Or are those people out there producing the stuff and somehow stockpiling it in hope of the day their captive clients by way of the obligation who need the stuff will come along to buy it off them? Of course they are not: they are selling it now; it is being used now. Since the obligation came in on 1 October have there been any purchases by some of the major oil producers or oil sales—or should we say motor fuel sales—outlets in New Zealand? No. So those companies like BioDiesel Oils (NZ) that are saying “It’s all over we’re out of here we are gone.” are not being straight up and down with the real current situation. 
I had one of my office staff phone that company’s representative to ask whether we could talk about its situation so that I could know more about it because I had noted that that particular company had had significant business development grants through Government agencies. I thought: “Why don’t I go along and see what they’ve done with that money and what is now at stake?”. The response was: “Don’t bother.” The representative said: “Don’t bother. They’re going out of business.” But if a company is producing 11 million litres of biofuel right now why would it go out of business? The problem you see is that the previous Government created an expectation that industries could be built off the back of compulsorily acquired customers. But that is simply unreasonable—quite unreasonable. 
My colleague Mr Auchinvole has just explained that to meet the obligation in the current year this country would need some 60 million litres - plus of biofuel. If we look at the list of what is being produced even if these organisations geared up there is no guarantee that domestic production would be aggregated purchased and blended by the oil companies here. The easy way around it is simply to import the lot and there we have the simple problem. There are no standards in place no measure against the sustainable production of that particular biofuel and there would be the strong possibility that New Zealand could be importing someone else’s problem. There would be no mark against us no measure against us but the world’s carbon dioxide emissions would rise as a consequence. The Greens sit there saying: “We must develop the local industry and if we do not have compulsory acquisition of product then it won’t happen.” The bill we are repealing did not make the compulsory acquisitions that their argument relies on. 
I want to make a couple of strong predictions for the future of biofuels in New Zealand. Here we are in 2008 a country that produces about 22 million litres of bio-diesel. I bet that in 2 or 3 years’ time we will be producing much much more. 
Hon Darren Hughes 
: How much? 
Hon GERRY BROWNLEE 
: I will put a figure on it. I say it will double in 3 years—there is no question about that. I have faith that the investments made by these organisations will see them able to sell their product in this country. I point to some extraordinarily exciting things like the deal that Solid Energy has done with the Stark fishing fleet in Nelson. Fishing boats out there are 100 percent fuelled by bio-diesel. That is marvellous; if they have a spill it is fish food. Do they have stinky diesel on the boat and the crew? No they do not. That sort of use is going to develop in this country and it is going to expand in this country. That is why we are going to persevere with the development of sustainable production standards for biofuels. That is why we will continue on our exercise of equalising tax treatment for bio-diesel bio-ethanol and other biofuel products. 
I ask those who are so downhearted about the future of the industry in this country whether—since if we were to go ahead with the obligation as it is in place currently by 2012 we would need some 300 million litres of biofuel a year—there would be any chance that we would get from 22 million litres a year now to 300 million in a couple of years’ time bearing in mind that Mr Hughes over there thought it was a huge joke for me to suggest that the capacity would double let alone go right up to 300 million. 
Hon Darren Hughes 
: The member’s capacity could easily double. 
Hon GERRY BROWNLEE 
: Yes it could. That is right. It would certainly not go from 30 million 20 million or 60 million or whatever it is to 300 million—absolutely not. It will not go up tenfold inside 3 years and the former Minister knows that. We were always in a position where this country would be heavily reliant on imported product and cannot guarantee where that product comes from. 
I do not need to recite to people here what the UN says about biofuels. It is amazing that members on the other side of the House always talk about how wonderful the UN is until they disagree with it. 
I want to make one other point: that the current law we are repealing made provision for those who are obligated by the law to come to the Minister of Energy and Resources and say “We can’t meet our obligation this year. Can we defer it?”. The answer to the House—before the question is asked—is that it is highly likely. In fact it was obvious to us that all of the major sales outlets were going to ask for that deferral. All we are doing is saying: let us get some standards in place let us continue to put the incentive—and significant Government money has gone into this industry—into developing the local biofuels industry and then have a look at how much we might see going into our daily vehicle fleet. I make the point again that 20 million litres - plus is produced in this country right now—all being sold. 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 This legislation remains a mistake. It remains a muddle. It has no logic in it that would withstand even a cursory examination—it is a crock. The Minister Gerry Brownlee who has just resumed his seat has shown again with the tantalising illogic of his contribution that he does not believe even half of the things that he is saying. This legislation puts ideology ahead of common sense. It puts low-grade politics ahead of any progress. It makes our economy dumber. It makes our economy more vulnerable and it is a part of a package of environmental regression that we have seen over the past week or two that is staggering in its extent. 
The point is that even if we forget about climate change—let us play that game ever so briefly—oil is running out. It is a finite resource. When we have used it once it is gone it does not come back it is not available to be used time and time again. Oil is non-renewable. And if this speech is sounding like something resembling a Norwegian parrot sketch then it is because I think that point needs to be made time and time again to a Government that appears to believe unlike any other Western Government in this world that oil can somehow go on forever—it cannot. It cannot so oil will be substituted one way or another sooner or later around the world. As the price goes up the substitution will begin and as the price goes up higher the substitution will quicken and so on. Electricity will be part of that substitution inevitably but so will biofuels. 
The difference between biofuels and oil is twofold. The first feature is that biofuels will be a range of products not one product—not just crude oil. It will be a range of products. It will be this that or the other feedstock used to produce some sort of alcohol and this that or the other feedstock used to produce some sort of lipid. We will have a range of technologies in the same way for example that electricity around the world is produced country to country by using a different set of technologies or a different mix of technologies. 
The second feature about biofuels that we know—this is not guesswork; this is known—is that the production of biofuels will be quite highly distributed. It will not be centralised. It will not focus on the small number of high oil - producing nations. Again like electricity it will be widely distributed across a nation or across the world just like agriculture is distributed across many nations across the world. Nearly every nation—I can think of one or two that may not—will be involved in the production of biofuels in my lifetime and most of them are now. Most of them are just starting off. 
But there are some impediments to biofuels. The biggest impediment the underlying reason for the sales obligation is that if the capital invested is to have certainty then investors need to know that it will be sold and because the person who produces the biofuels is not an oil company then they need to know that the oil company will step up to sell it. That means that oil companies will have to invest in this that or the other bit of kit in order to do that and oil companies do not like doing that sort of thing. 
As Jeanette Fitzsimons pointed out oil companies did not like it when we told them that we needed to take lead out of oil because it was addling our kids’ brains. Oil companies did not like it when we asked them to take some sulphur out of our petrol because the sulphur content is now so high that some new cars cannot run on it. Those cars have been designed for a much much lower sulphur content. The oil companies said that they could not do that. A negotiation was entered into and finally the capital investment at Marsden Point was made. Sulphur was reduced from 5000 parts per million to 500 parts per million and then to 50 parts per million and it is on its way to 15 parts per million—so-called zero sulphur. 
It was the same for benzene when the benzene level in this country rose to the point where the ambient benzene levels were known to be a cause of myeloid leukaemia where the link between the amount of benzene inhaled and the advent of that particular cancer is a straight line graph. It is one of the closest causes and effects in any cancer research that one could ever find. When we said that our benzene levels in New Zealand were too high and that they would cause a known amount of cancer the oil companies said that they could not help but now they have. 
So too with biofuels. The oil companies came to the select committee and said that it was 7c or 8c. The Minister in his first reading speech delivered that as evidence. It was wrong. It was wrong just like the oil companies always make their estimates wrong because it is in their interests to do so. The are behaving rationally when they go for a high level in their figures. The oil companies have made their point and the new Government has swallowed it hook line and sinker. In doing so it has delayed the inevitable. 
What is more when we find the situation arising where we are in a position where we need to produce some serious biofuels we will not be starting from level 1 or level 2 but we will be starting from scratch. We know that the legislation that is about to be repealed is modest enough. We know that by 2012 we would have got ourselves all the way up to 2.5 percent and that we would still be 97.5 percent dependent on fossil fuels but we would have begun to have some kit in place and we would have had some companies that were doing OK and if you will refining their production because of their research and development and their learning by doing. We knew that would be the case. We knew that there would be a competitive market. Therefore we can forget about any arguments about compulsion somehow raising the ability of a non-competitive approach because there would have been an international biofuels market. Whether or not the Greens preferred that it would be that way. That issue was not going to arise. 
The one issue that did arise was that none of the oil companies except Gull Petroleum wanted it. The oil companies did not say so because they knew they would be unpopular and they are already unpopular enough because they are making very substantial profits. They would prefer that their profits around the world continued. They would prefer to do biofuels themselves when their own product mineral oil became woefully unaffordable. That would be their preference when people stopped buying their product to then start making their own. But you see the future of biofuels will not necessary involve oil companies and they know it. They know it. In the same way that supermarkets are not particularly involved in agriculture so too would oil companies not be particularly involved in biofuels. 
Then there is another issue. In New Zealand the future of biofuels almost certainly will not be substantially around tallow and it will not be substantially around bio-diesel produced from algae although those will be important technologies. A still more important one will be biofuels produced from our woody biomass our trees and there we bring in a very interesting new dimension which is the patient capital of Maoridom. That seems to me to be a potential future—in fact it is more than a potential future—as the science is moving enormously quickly on that. I toured it in North America just about 4 months ago. For example on the issue of enzymes there is progress beyond belief. It is astonishing. The smart money of Silicon Valley has gone out of biotechnology and into biofuels just as this Government is heading in the opposite direction. 
We now have a Government in this country that is putting our country—inadvertently perhaps but doing so none the less—into reverse. This is regression. This is not progress. This is a dumb future not a smart future and this is very very dumb legislation. 
Hon Dr NICK SMITH (Minister for the Environment) 
: 
 I find it somewhat galling that that was the Minister who convened a group on climate change for 6 years under the previous Government. Let me remind the House of his record. This is the member who went around New Zealand promising a $500 million cheque from Kyoto but do members know what we have? We have a $500 million liability. This is the member who talks renewable energy yet during his period as Minister we saw a trebling in the amount of electricity produced from coal. If there is any member in this House who should be ashamed to show his head and to lecture the new Government about climate change it is Pete Hodgson. 
I also want to draw to the attention of members opposite their record of emissions over 9 years. The only thing the Labour-Green Government led on in respect of emissions was increases. Let me read the figures for the record that was reported by the United Nations. The increase in emissions from New Zealand in the course of the last Government was 18 percent. The record of John Howard’s Government was an 8 percent increase. The record of George W Bush was a 6 percent increase. So let us get the record straight: in Government Labour had a record that was twice as bad as John Howard’s and 3 times as bad as that of George W Bush. So for Parliament to have a lecture from the Labour Party about successful climate change policy is like being given a lecture by Dracula on domestic safety and anti-violence. You see Labour’s record on climate change is about as bad as it can get and one of the reasons we need this biofuels bill is that it is another chapter in that party’s botched policy. 
Let me systematically go through and point out the botched aspects of that biofuel policy. The first thing we heard from members opposite was standards for sustainability of biofuels. I have a simple question for members opposite: having been in Government for 9 years where is their sustainability standard? We on this side of the House searched under the ministerial desks and we looked in every nook and cranny of our ministerial offices because we were sure that somewhere there would be a sustainability standard after 9 years of rhetoric. We looked under the chairs under the desks and in the corners of our offices; it was nowhere to be found. After 9 years there was no sustainability standard. 
Hon Darren Hughes 
: Keep screaming. 
Hon Dr NICK SMITH 
: I ask Mr Hughes why he would compel the use of compulsory biofuels when there is no standard. When the United Nations the OECD and every reputable international organisation were expressing real concern about biofuels the previous Government compelled their use without a sustainability standard. I say to Mr Hughes that that is bad policy. 
Hon Darren Hughes 
: One-half of 1 percent! 
Hon Dr NICK SMITH 
: He says it is only half of 1 percent but half of 1 percent without a sustainability standard has the risk of being some sort of politically correct policy that might make him feel good in his conscience but that does absolutely nothing for climate change and actually risks doing real damage to the environment and real damage in terms of the starving in the world who are competing for food along that way. 
I have to say that the most extraordinary contribution I have heard in this debate was from the previous Minister of Finance Michael Cullen. Let me go through the logic of Dr Cullen’s argument. He said that if we go down the road of providing an excise exemption for biofuels as we do already for ethanol there is a cost to that but that—listen to this—a compulsion has no cost. How many members of this House really believe there will be no cost to the consumer as a consequence of compelling the use of biofuels? I say to Dr Cullen that if there were not a cost why do we need compulsion? The members opposite are silent. The only reason they are compelling the use of biofuels is that biofuels are uneconomic. There are lots of other good things we do not compel for. 
I heard another wonderful argument from Dr Cullen who said that the price of fuel has gone up and down by 70-odd cents a litre so who is worried about 3c or 4c extra cost? I say to the member opposite that each cent on a litre of gas costs New Zealand consumers $60 million. That is $60 million for every cent. In the middle of a financial crisis when households are finding it harder than ever to meet their budgets and when businesses are under a real squeeze we on this side of the House are concerned about every single cent of costs that we will be imposing on consumers. 
Labour’s real flaw in the bill was that it was flim-flam. The real problem for Labour members was that they were going into the election campaign and campaigning on that carbon-neutral world-leader grandiose argument when their record was appalling— 
Hon Lianne Dalziel 
: You’ve gone from fast follower to rapid reverse. 
Hon Dr NICK SMITH 
: The member should somehow explain how she reconciles the previous Prime Minister’s rhetoric of New Zealand being a world leader and the first carbon-neutral country in the world with the United Nations’ official figures that show that the previous Labour Government had the worst record—the worst record—of any country that we would want to be associated with in terms of actual increased emissions. I accept that the rhetoric of members opposite was bolder than anyone else’s on the planet—yes it was—but their record was awful and frankly on the issue of climate change the facts are more important than the rhetoric. 
Members opposite cry crocodile tears about jobs. If I was a biofuels manufacturer and I could persuade the Government to compel everybody to buy my product I would be in there like a robber’s dog. I would love to be able to pass a law to say that people had to buy my homebrew beer; I think it is good stuff and I think I could make good dosh by selling it. But is that good law? No it is not. 
I do not think that any member of this House can honestly say that the answer is electric cars biofuels or hydrogen cars. We need to provide sensible incentives in order for new technologies to come on stream. The sort of compulsory mentality of the previous Government is a flawed approach. The United Nations Secretary-General has urged Governments around the world not to proceed with mandatory requirements for biofuels. I am yet to hear any explanation from members opposite as to why they are ignoring that advice. 
The last word has to be with the Parliamentary Commissioner for the Environment. The Parliamentary Commissioner for the Environment said that this law was a real risk to New Zealand’s clean green image. That is why members on this side of the House say that it is a botched policy and the sooner we get it off the law books of New Zealand the sooner we can move on with some climate change policies that make sense and that will work for both our economy and our environment. That is the agenda of the new Government. 
MOANA MACKEY (Labour) 
: 
 Goodness gracious me! It is hard to believe that the member who has just resumed his seat was a member of the Local Government and Environment Committee which worked on the Biofuel Bill. To be fair to the member he did turn up to meetings. Unfortunately because he had declared his hand as being opposed to the bill very early on in the select committee process I do not necessarily believe his contribution was nearly as constructive as it could have been. If he had left himself open to the possibility that he did not know everything and that the submitters who came along and told us that they wanted this legislation might have had a point then maybe he could have worked with us and with the Greens to come up with the standards and principles that came out of the select committee. I certainly will not say the member failed to turn up to the select committee because he did attend meetings but he clearly did not listen to a lot of what was being said there. It is astonishing how much of the information that was given to us by officials has been twisted. In that speech coming as it did from someone who claims that climate change debates and environmental debates should be about fact there was not a lot of fact from the former select committee member. 
We are at the second reading of the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill. We had the first reading half an hour ago and it is always slightly odd to give a second reading speech half an hour after giving one’s first reading speech. But because we are under urgency this is where we pretend that the bill has been to a select committee. This is where we pretend that Mr McNicholl who is losing $10 million worth of investment in a Waharoa biofuel plant—the company’s plant is on two sites—has had the opportunity to come to a select committee and tell members of this House exactly how much money he will lose from the repeal of an Act that gave him some certainty in his business. This is where Mr McNicholl would have been able to come to a select committee and tell members how many jobs will be lost in his industry because of the repeal of Part 3A of the Energy (Fuels Levies and References) Act 1989 and he would have been able to tell the select committee how damaging the repeal of the legislation will be for our environmental performance and more important for the development of a domestic biofuel industry in New Zealand. 
But this bill is being rammed through under urgency. Mr Gerry Brownlee as Leader of the House now has a 100-percent record of bills in this House going through all stages and with none of them going to a select committee—100 percent of the bills passed so far by this new Government have not gone to a select committee. They have been rammed through and the public of New Zealand have not had a single opportunity to come to a select committee and take part in a process that we in New Zealand are very proud of. We know that sometimes there are reasons why bills might not go to a select committee but that is certainly the exception rather than the rule. 
This is important legislation. The Biofuel Bill was with the select committee for a long time because we wanted to get it right because we wanted to work really hard on getting the sustainability principles in place and because unlike National we did not believe in just throwing up our hands and saying that because the oil companies had come to the select committee and put up a few arguments we would scream that the issue was too hard to address and do nothing. We decided that doing nothing was not an option. We listened to the numerous submitters who came along to the select committee. Of course biofuel producers have as much of a vested interest in this issue as oil companies and we took that into account. We are certainly not naive in that regard. But we listened to the submitters and we came up with a bill that we felt balanced the need for a domestic biofuel obligation the need to create a domestic biofuel industry and the need also to not put too much compulsion on the people who are doing that. 
It occurs to me that perhaps the Minister in charge of this bill does not actually know what the principal Act does because the Act is actually extremely flexible. We were at pains to make sure that the level of compulsion in the legislation was limited only to the percentage of biofuel that is required to be sold. I will reiterate: in the first year it is 0.5 percent—0.5 percent—going up by 0.5 percent every year. The original bill had a final obligation of 3.4 percent. Again that is not exactly out of this world but from listening to the Government members speak one would think we had placed a biofuel obligation of 80 percent or 90 percent on the industry. We had an original obligation of 3.4 percent. But we listened to submitters and we listened to the oil companies. We got official advice that told us yes that an ethanol plant they had expected to be developed in New Zealand would not come on stream now and that they thought that perhaps the obligation should be dropped to 2.5 percent in order to reflect that. And we did that—we did that. We listened and we responded to the concerns of those in the oil industry that they would not be able to access enough biofuel in New Zealand to be able to meet their mandatory obligations. Of course that is what select committee processes are for if one is a member of a Government that believes in having them. 
I will talk about the biofuel obligation because a number of Government members have got up and talked about this issue being all about what is sold at the pump. In fact nothing in the Act states biofuel has to be sold through the pump. I am not sure whether the Minister is aware of that. A number of direct sales of 100 percent biofuel have already been done. We must remember there is a limit at the pump on the level of blend that can go through: a maximum of 10 percent ethanol and 5 percent bio-diesel. But companies can sell higher blends than that of up to 100 percent direct to customers if they want to and it does not even have to go through the pump. We did not tell the oil companies that they had to sell biofuel across the whole country and we did not tell them that they had to do so only in Auckland or Wellington. It was left up to them to decide how they implemented their obligation according to whom their clients were and what their existing infrastructure was. Let us not forget that a number of oil companies already import ethanol because they sell it. The oil company I worked for sold ethanol. Any claim that there is no infrastructure for the selling of solvents and for blending fuels is not true because oil companies currently sell ethanol as a solvent. Some oil companies already have the infrastructure there although others may have to develop it. 
But one of the advantages of bio-diesel and one of the reasons why we wanted to create legislation that would support the development of a local biofuel industry that would be predominantly bio-diesel is that there are not the storage requirement issues that one has with regard to ethanol. Ethanol is more dangerous than bio-diesel and requires a lot higher safety standards—a lot more double-skinned tanks and things like that. Those things are not required for bio-diesel which uses the same systems as diesel. Another advantage of the Act was in trying to create a local biofuel industry that we knew would be predominantly bio-diesel. It would mean that the obligation could be met from domestic production and that would as I said before eliminate a number of the concerns about sustainability. 
When we think about compulsion we need to remember that the Act is very very flexible. It allows the oil companies to implement their obligation how they best see fit and where they determine it needs to be implemented. The oil companies told us during the select committee process that they simply could not access enough biofuel to meet the original obligation of 3.4 percent. However when we looked into that using the oil companies’ own figures which they had provided to the select committee we found that with all the development that was in progress they could meet the original target of 3.4 percent. To say they could not meet the target when we had dropped the obligation in the Act down to 2.5 percent seems slightly ridiculous. 
Mr Brownlee likes to talk in terms of litres. Of course the obligation uses units of energy not of volume. To meet the 2.5 percent obligation requires 5.5 petajoules of biofuel; for the 3.4 percent obligation it was 8 petajoules. We were told that the potential for domestic production over the period to 2012 was for up to 4 petajoules of bio-diesel from tallow 2 petajoules of bio-diesel from rapeseed oil and 0.3 petajoules of biofuel from ethanol. That is enough to meet the original obligation of 3.4 percent in the bill but because the legislation was designed to provide certainty and to provide the basis for a domestic biofuel industry we did not feel the need to push that target and we took the officials’ advice. 
We have heard a lot about the impact of the biofuel obligation on the price of fuel. Dr Smith is choosing simply to quote the oil companies and not the official advice that we received at the select committee. 
Hon Dr Nick Smith 
: What’s your figure? 
MOANA MACKEY 
: Of course one of the difficulties about saying how much this measure will cost is that we need to take into account the price of oil the price of biofuels the exchange rate in relation to imports and also how the obligation will be implemented. If the oil companies chose to sell 100 percent biofuel direct to customers and none of it through the pump there would not be any impact on the price of fuel at the pump. Every week at the select committee Dr Smith would ask the officials to go away and do some more crystal ball - gazing and every time they came back with advice he would say it was not good enough because they could not accurately predict the figures. As Dr Smith knows—and I hate to think of all the grey hairs he gave the very young officials from the Ministry of Economic Development we had at that time—the officials came up with a group of tables that took into consideration a number of scenarios. Those tables said that for petrol it could possibly be a negative number which meant it would be cheaper— 
Hon Dr Nick Smith 
: If it’s cheaper why do you need compulsion? 
MOANA MACKEY 
: Oh my Lord! The tables also said that for Gull Petroleum which currently sells biofuels more cheaply than the other oil companies sell their regular petrol with bio-diesel the price could possibly go up by 1c to 3c per litre. 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 Well it seems that all National’s friends have deserted it except ACT. The Maori Party is not voting for this silly Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill and Peter Dunne is not voting for this silly bill. It is not a popular bill and it is squeaking through with a narrow majority. 
This is a second reading debate. Normally we would be debating what happened at the select committee and talking about all the people who came to talk about the effects of this legislation on them but we cannot do that so it is sounding like a very repetitive debate. I will talk just a little bit wider and look at where this bill sits because it is not just about biofuels. 
This bill is part of an extreme ideological position that says regulation is always wrong. Whether it is about energy efficiency standards for lights and hot water about a renewable electricity preference or about biofuels regulation—according to this Government—is always wrong. In fact this Government has actually abdicated its power to govern in favour of a Mr Smith and I do not mean the Dr Smith sitting opposite. We have two Smiths already in National but that is not enough. National has co-opted Mr Adam Smith as well to run the Government for it and the mantra is freedom choice and the market. Of course we all support freedom choice and the market but markets do not necessarily deliver the outcomes we want. 
Public policy usually aims to serve a purpose. Otherwise we would not bother having any. It has a goal. The goals of the biofuel legislation were two: firstly to reduce by a little bit our carbon dioxide emissions in order to start meeting climate change obligations and secondly to start preparing in a small way for the day when oil becomes unaffordable and then unavailable. That is about energy security which is a term I seem to have heard an awful lot about from the present Minister of Energy and Resources Gerry Brownlee but with this bill he is actually moving in the opposite direction. 
I hope Gerry Brownlee is around the next time an oil tanker headed for New Zealand turns round in mid-ocean and goes somewhere else. Some members may remember as I do when that happened in 1979. During the false oil crisis if you like that happened in the 1970s an oil tanker simply did not turn up at Marsden Point and that led to all kinds of restrictions in New Zealand. That was a very temporary situation because of an action taken by the Organization of Petroleum Exporting Countries. When it happens next time it will be part of a permanent situation of oil being very expensive and ultimately very much less available. 
I hope Gerry Brownlee is around to see that when it happens and I hope I am around to see his face when he realises that it would have been possible if he had left the law as it was for New Zealand to have a small local industry making sustainable diesel so that we could still run our emergency services and get food to the supermarket—because we will not be able to do that with electric cars. If we do not build an industry in New Zealand we can forget the idea that when oil becomes too expensive overseas we will be able to just import biofuel. If we cannot import oil then we will not be able to import biofuel. This is about energy security and the Government is opposed to it. 
Many countries overseas use sales obligations to meet goals of energy efficiency. They put sales obligations on the power companies to invest in energy efficiency renewable energy and biofuels. This is not rocket science. A myth is being perpetuated that regulation and mandatory standards are somehow mutually exclusive. That is almost never the case. Biofuel producers will still have to compete to supply the obligation. The oil companies will still have choice as to whom they buy from and if people try to price racket they simply will not have a market for their product. 
Mandatory standards have a number of other advantages. The first one is that it creates some certainty and business likes nothing better than it likes certainty when it is looking at where to invest its money. 
Hon Judith Collins 
: It really likes the National Government. 
JEANETTE FITZSIMONS 
: The National Government is creating anything but certainty and we are already seeing business go down the drain because of that. 
If we are looking at setting up a biofuel industry in New Zealand we are going to ask whether the market will be a stable market or a stop-go market. Producers would still have to be competitive to access that market but they need to know it will be there. If we want innovation investment and good science if we want biofuels produced from algae to flourish in the future when the science is ready and if we want ethanol produced from wood wastes in New Zealand—all totally sustainable and all made from New Zealand resources—then we need certainty for investment and this bill is taking that away. Mr Brownlee says that because Fonterra sends 22 million litres of ethanol now to Gull Petroleum it proves that there is a market now and that it can be increased many times over with no market certainty. Well I do not know where that comes from but clearly the fact that one contract exists does not mean there is an unlimited ability to expand. 
The next point is that if we want choice we can have it only if we have information. How are consumers to know whether they are buying biofuel or petroleum or if they are buying biofuel where it comes from and whether it is sustainable? How can consumers possibly exercise choice in this situation? Even the energy star labels on appliances are read only by the committed and that is why we needed minimum energy performance standards. 
Consumers’ day-to-day choices simply cannot meet long-term strategic goals. We need investment in infrastructure to meet long-term strategic goals and we do not get investment in infrastructure with a stop-go market and the daily fluctuating choices of consumers. How can consumers choose renewable electricity? They pretty much cannot and that is why we put an obligation on the power companies to build something that is renewable. How can consumers choose the best-performing lights when the best-performing lights are not even imported into New Zealand? Our market is dominated by junk light bulbs because it is not big enough for the good ones and they simply do not come in. 
Pricing and subsidies are often much more expensive than standards. In this case a tax exemption for biofuels will cost the taxpayers not the fuel users. I think that is an interesting distinction. A mandatory standard if it costs at all costs the fuel users in proportion to the amount of fuel they use. A tax exemption has the taxpayers subsidising the fuel users. I want to know why the cyclist the public transport user and the person with a small car should subsidise those with gas guzzlers because that is what this repeal bill does. 
National has a very inconsistent approach to subsidies. National subsidies? I thought National was not in favour of subsidies but it is proposing to remove a mandatory standard and replace it with subsidies. Phil Heatley said in the  
Herald on Sunday 
 that National was cancelling the green homes insulation fund because it would not tax people to pay for their neighbour’s insulation. Yet it is quite happy to tax people to pay for their neighbour’s health care when they have more severe asthma attacks because the home is uninsulated. Where are the logic and the consistency in that? Now we find that National is prepared to tax people to pay for their neighbour’s fuel. 
The principle seems to be that subsidies are OK when they go to big business but they are not OK when they go to ordinary people. The end point of this ideology is that we would abolish the building code because people can choose whether they want their houses to stand up or to fall down and whether they want them to be energy efficient. We would abolish driving on the left because people can choose whether they want to run into people. We would abolish regulations for hazardous substances for food safety for seatbelts for fishing quotas and for the Standing Orders in the House because on all of those matters the consumers could actually choose to run things the way they want to and we could get rid of mandatory things. 
Hon HEATHER ROY (Deputy Leader—ACT) 
: 
 I rise to speak to the second reading of the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill. ACT of course is supporting this bill and nobody should be surprised that we are debating it today because well before the election the National Party made it very clear that it did not consider it appropriate to incentivise the uptake of biofuels through a mandatory obligation and ACT stood in this House and supported that very stance when that legislation was rushed through under urgency shortly before the election. It made no sense then and it certainly makes no sense now. 
Moana Mackey 
: It had gone to select committee. 
Hon HEATHER ROY 
: The select committee discussion was held that is quite right so why do it again this quickly? It is interesting that Labour members are suddenly very worried about sending everything to a select committee. They certainly were not during their 9 years in Government. 
Anyway here we are and there are very good reasons to repeal this legislation. Many of them have already been discussed and I just want to briefly mention those again. Firstly there are very legitimate concerns around the claimed environmental benefits of biofuels. The booming biofuels industry is driving the deforestation of millions of hectares in rain forests in countries such as Brazil and Indonesia. 
Hon Pete Hodgson 
: It’s nonsense. 
Hon HEATHER ROY 
: Mr Hodgson is chipping in over there but the evidence is pretty clear. Many other countries are now exhibiting very serious lessons that we should be paying some attention to. In the United States the leading source of biofuels is corn or maize. Nobel Prize - winning atmospheric chemist Paul Crutzen a man not known for his climate change scepticism found in 2007 that biofuels made from corn and rapeseed—something that Jeanette Fitzsimons stood in this House and propounded the benefits of—contributed more to global warming than fossil fuels. If we are prepared to stand up in this House and ignore the evidence from other countries then we are not very clever are we. Biofuels made from corn and rapeseed contribute more to global warming than fossil fuels and there certainly is a lesson here that should be learnt. 
Back to Brazil; it is the second largest producer of biofuels in the world but we will not hear that from the other side—the second largest producer. How has it achieved this honour? It has been through having a large-scale slash and burn of the country’s native rainforest. Given the stance that the Greens have made about rainforests for I do not know how long—about the last decade—I do not think that we should be ignoring that. As if the rainforest was not diminishing at a rapid enough rate as it is Brazil has now embarked on an unprecedented campaign of cutting down rainforest to plant sugar cane for biofuel production. That is something that I did think the Greens and possibly some of the more conservative members of the Labour Party might have thought was important enough to consider during this debate. 
The loss of Brazil’s rainforest though is potentially not the worst impact of biofuels. The worst impacts may well be seen in Africa. In May 2008 Olivier de Schutter the United States food adviser stated: “The ambitious goals for biofuel production set by the United States and the European Union are irresponsible. I am calling for a freeze on all investment in this sector.” So why did he call for that? The reasons are twofold. Firstly food that was once used for its intended purpose is now being turned into biofuels. The very poor in the world are now starving because they can no longer afford what was very cheap food that made them sustainable. It actually kept them alive. Again the Greens and Labour once upon a time believed in helping out the poor of the world. 
Secondly land once used for intensive food production is now being converted to biofuel production. The cause is the latest fascination of the West and the victims are those in poverty in Asia and in Africa. Sadly those who are in poverty in New Zealand will now have more costs imposed upon them. Pushing food prices up will hurt most those who are least able to afford it. Legislation that diverts food supply into fuel for those least able to afford it is very dopey legislation and we in this House tonight are doing absolutely the right thing in repealing this legislation. The ACT Party fully supports this initiative by the National Party. It is the right and proper thing to do and we support it with pride. Thank you. 
Hon PANSY WONG (Associate Minister of Energy and Resources) 
: 
 We have not heard any new arguments from the Labour Opposition against the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill. Even the Green Party co-leader Jeanette Fitzsimons has run out of new arguments: she extended the debate into the so-called bigger picture. 
I want to emphasise once again that biofuel according to even one of the Labour Party members is actually on sale. It was available before the mandatory requirement was introduced by the passing of the biofuel legislation in the last parliamentary term. Biofuel is available and New Zealanders who choose to use biofuel can get it. It makes one wonder why the Labour Opposition is so hell-bent on making it a mandatory requirement. 
The Opposition is calling for a mandatory requirement in the face of two major deficiencies. The first is the lack of a standard for sustainable biofuels. My diligent hard-working honourable Minister Dr Nick Smith looks everywhere for one! For 9 years the previous Labour Government never made any effort to develop standards to ensure that the biofuel industry could grow. For 9 years it did nothing and now it is too late. The previous Labour Government was lazy and that explains why its members are on the Opposition benches. For 9 years it did nothing and the Labour Government in its dying days decided once again to try to mandate the bringing in of a compulsory requirement for biofuel to be sold. 
I am so glad to be able to take a call to support our sensible and credible Minister of Energy and Resources the Hon Gerry Brownlee. First of all he has repealed the compulsion part of the legislation. Even more sensibly he is creating a process to develop standards of sustainability so that the biofuel industry can prosper. More than that instead of compulsion the Minister is introducing a tax incentive. On this side of the House we believe that the growth of the biofuels industry is a desirable development and we want to see it happen. But we do not believe that compulsion is necessary because people already have access to and can choose to use biofuels. Tax incentives however make sure that the biofuel sector can grow. That is a good thing. I think the energy Minister the Hon Gerry Brownlee has made a fantastic compromise. He has put a lot of thought into it. 
We trust New Zealanders—our people are intelligent. When they are asked to make an informed choice they can make that judgment for themselves. There has never been any need for compulsion. When the last Labour Government tried to bring in compulsion it showed that it did not trust the people. What happened? On 8 November the people threw the Labour Government out. 
Debate interrupted.