Cunliffe David: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Cunliffe David: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
[Sitting date: 24 November 2009. Volume:659;Page:8068. Text is incorporated into the Bound Volume.] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I acknowledge Craig Foss the member who has just resumed his seat who is the chairperson of the Finance and Expenditure Committee which considered this bill. I acknowledge all members who have contributed to this debate on all sides of the House. More than many debates this debate has been a multi-sided debate. I particularly acknowledge Charles Chauvel Labour’s spokesperson on climate change who I think has done a sterling job in bringing forward a range of facts for the public’s consideration and David Parker the previous climate change Minister and the current Minister Nick Smith who has been prepared to debate with other colleagues the pros and cons of this bill and who has made a contribution in this House. 
Having said that it is with both great sadness and I guess a slow-burning kind of anger that I rise to speak in the third reading debate. This debate is the bottom of the third innings—the time to sum up the various arguments if you like—and this is where we try to draw together the threads so that the public can make sense of the debate when they look back in the future. My sadness comes as I have repeated several times because this bill bequeaths to our children a harder problem than we inherited. 
This bill is fundamentally flawed. It will make New Zealanders poorer it will make our economy weaker and it will increase greenhouse gas emissions relative to the law that was on our books before we started the debate. Of course the bill locks in subsidies and condones the proposition that we have created property rights to pollute which is a precedent that this House will come to regret. My anger I think comes because National’s conduct over climate change policy has been I am afraid to say both sneaky and shambolic. 
The Finance and Expenditure Committee process has been the worst I have ever seen. It was nothing short of a travesty which is all the more ironic because the substance of this bill is crucial to the future of our country and our planet. Official information was withheld from the committee process. Only a minority of public submissions were heard and then only after much debate. There was no clause-by-clause departmental analysis. There was a regulatory impact analysis that Treasury described as inadequate. There was no revision-tracked bill because there was not time. There was no supplementary economic analysis no sensitivity testing and no justification of the numbers. 
The result is I am afraid to say a “Nick Smith shambles” of the very worst kind. We are left with a “cap and trade” system with no cap and intensity-based emissions subsidies that are effectively infinite and will cost $110 billion including compounding interest by 2050—in other words an extra 17 percent of Crown debt which effectively doubles the total amount of debt that this Government inherited at the time it took office. 
What is wrong with the bill that has led us to this conclusion? There is almost too much to cover but let me offer a few potted highlights. The essential and obvious flaw is that the bill is so generous to large emitters in industry and agriculture that it shields them from the very incentives they need in order to be able to plan with certainty an adjustment path that would lead New Zealand into a low-carbon future at the least cost. By succumbing to lobbying pressure the Government has neutralised the very point of the exercise from its inception. 
Big industrial emitters already received a generous 90 percent free allocation and a 10-year window before abatement commenced at 8 percent per annum under Labour’s legislation and this Government has made that even more generous. Now big emitters will have a two-for-one lead-in deal for the first 2 years and an artificially low carbon price of $25 a tonne. Carbon is trading at about $40 a tonne at the moment I am told so the taxpayer will wear the risk and cost of the difference. There is no cap in the “cap and trade” system globally; there is instead an open-ended intensity-based system that subsidises the worst polluters the most. 
There are inappropriately placed arbitrary deals that provide windfall gains to people who cannot control the emissions. In fisheries the allocation is to the quota holder not to the fisher who is in the position to make the decision at the margin about how much fuel to use. It does not go to the farmer who is able to decide what feed to use or what strain of animal to run but to the processor who is removed from the decision point. Of course at the end of the day there has been a refusal from the Government to negotiate in good faith either prior to when the bill was introduced in the House or when it was going through the House and not one single constructive amendment from the Opposition has been accepted. 
What is the effect of this sorry tale? Well these are the facts: the Sustainability Council says that actual emission reductions will be only half what they would have been under the existing Labour scheme. Large industry makes up 13 percent of the emissions and now faces only 1 percent of the cost. By contrast the activities of people in small businesses many of whom voted for National at the last election make up 11 percent of the emissions and those people will face 38 percent of the cost because they cannot lobby as much or as well. Agriculture makes up 49 percent of the emissions but it now faces only 3 percent of the cost. Total fiscal cost on agreed carbon price paths which is now bipartisan is between $50 billion and $110 billion by 2050. 
Hon Dr Nick Smith 
: You don’t believe that. 
Hon DAVID CUNLIFFE 
: Yes those are Treasury numbers I tell the Minister. I do believe it and so does he. The only argument that remains is whether to include the compounding effect. That may be arguable but at the end of the day even $50 billion is a big big number and it will affect our children. 
The bottom line is that polluters gain and New Zealanders pay. They pay through their taxes through forgone debt reduction tax relief or alternative expenditure as well as at worst through paying charges through an international carbon system. This is not balanced nor affordable and it is neither environmentally nor fiscally sustainable. 
The Government has put forward some fiscal counterarguments. The first is that it is not really debt. Well yes it is. Provided that one is carrying any debt at all then one faces an opportunity cost of reducing that debt purchasing other essential services or adapting to climate change. In plain English it is like when we have a mortgage and a credit card bill and we have income that we could use either to pay down our credit card or if we are not using our credit card pay our mortgage. This is a carbon credit card that prevents us from reducing our national mortgage by 17 percent of GDP by 2050 and that is huge. 
The Government is prepared to accept Treasury’s advice at face value on the long-term fiscal outlook but it is not prepared to accept the Treasury’s equivalent criticism of this bill because as the Minister of Finance has said: “Good advice is that which we agree with. Bad advice is that which we do not agree with.” That is devoid of integrity and it is no way in which to make good decisions. The second argument is that it does not matter anyway—that is Nick Smith’s favourite. He says that it does not matter whether it is a 1.5 percent abatement or an 8 percent abatement because it will be reviewed every 5 years. 
Business is crying out for certainty. Business people want a bipartisan agreement. They need to plan their affairs. That is why it does not help them for the Minister to artificially have a 1.3 percent abatement now but frighten them by saying that he will change his mind in 5 years’ time. That is a worst-case outcome. 
The final argument is that New Zealand is already out in front. Fifty percent by 2050 will not be out in front at Copenhagen. In any case independent authorities—including the statutory authority on that matter the Parliamentary Commissioner for the Environment—have stated on the record that even if one accepted the target there is no conceivable way that this bill can achieve it. Even if one accepts every other argument that the Government has made the mechanics of this bill fail to deliver even the Government’s own outcome. 
The lessons of this process are that no Treaty settlement is now final. In Rajen Prasad’s day as Race Relations Commissioner he and his team worked hard to get the citizens of New Zealand to accept the Treaty process as final. It is no longer final because Pandora’s box has been opened for $24 million - odd.