Parker David: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Parker David: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
[Sitting date: 24 November 2009. Volume:659;Page:8058. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 I can but disagree with the last speaker Hekia Parata. How can extending subsidies for carbon pollution until 2080 if not longer be the road to independence and self-reliance? It is exactly the opposite. The ambition of the emissions trading scheme is to reduce New Zealand’s greenhouse gas emissions. That is stated in the existing legislation. It is meant to do that at the lowest possible cost to the economy by reflecting into the economy the cost that arises from the Kyoto Protocol to the New Zealand economy of increases in emissions. So if one produces emissions one is meant to pay for them; if one reduces emissions one gets rewarded. That is what happens to New Zealand already under the Kyoto Protocol. The Climate Change Response (Moderated Emissions Trading) Amendment Bill undermines the effectiveness of the emissions trading scheme to do that. For those who are major emitters the amendment pays for virtually the whole of the costs of their emissions. 
The existing scheme was already generous in the free allocation to trade-exposed industries and that was for good reason. I think on all sides of the House we are agreed that during a transitional period when some other countries are not properly pricing emissions it would be wrong to force major emitting industries to pay for all of the cost of their emissions because that could make them broke. In the case of industries that could move like the steel aluminium or cement industries they could relocate to a country like China with no environmental benefit but with an economic loss to the country. For that reason the existing Act is already very generous in its allocation. It gives free allocation to those industries of 90 percent of their 2005 emissions—90 percent not 10 percent not 20 percent not 50 percent but 90 percent of their 2005 emissions. So the idea that that was not generous was always nonsense. The free allocation of that 90 percent rate was to go unabated until 2018—a decade from last year when the legislation was passed. Industries had a decade of that 90 percent allocation of 2005 emissions provided to them free—a decade to adjust before it started to abate. Then it would abate at 8 percent per annum but it would all be over by 2030. 
The independent expert advising the select committee Dr Suzi Kerr is a pre-eminent world expert. We are very lucky to have her in New Zealand. She is not just an expert in a New Zealand context; she is so expert that she is currently a visiting professor lecturing in emissions pricing at none other than Stanford University in the United States of America. She told the select committee that the existing scheme which had free emission rights phased out by 2030 was already if anything too generous to major emitters that it was economically wrong for New Zealand to be so generous and that we should be less generous. But this bill does the opposite. 
I will turn to a couple of other things. We heard Hekia Parata say that this bill saves people money on their power bills. Well that is not necessarily true. New Zealand’s power price is heavily influenced by the cost of new generation capacity. That new generation capacity cost is not changed by this short-term gift of free extra emission rights to the heavy emitters in power generation. So I proposed an amendment. I said “Let’s guard against double-dipping here.” All that amendment said was that before major emitters in the power industry got free emissions they had to show to the Commerce Commission that the prices would have gone up but for that extra free allocation. The reason I put that amendment forward was that the experience in Europe which we ought to have learnt from shows that if we do not do it power generators put up their power prices anyway and pocket the extra free allocation that they get at the cost of taxpayers. That is not fair. National and the Maori Party voted against that amendment and it did not proceed. People now face the risk that they will get an increase in the power price when the Government is giving even more free allocation to the electricity sector. 
I will talk a little about Treaty issues. We have agreed to the Treaty clause in this legislation which says that the Treaty principles ought to be honoured in terms of consultation around forms of regulation. I felt somewhat uncomfortable doing that because it did not go through the normal select committee process and it was just dumped in the bill yesterday. We did not have the time to properly examine it but we read it as thoroughly as we could within that time frame and we thought it was fair enough so we voted for it. But we do not support this unprincipled additional free allocation to only some owners of pre-1990 forests or the land on which those forests lie. The principle that National has breached is the principle of full and final settlement in Treaty settlements. Once there is a Treaty settlement and the assets pass from the Crown to iwi those assets—and they are mainly land assets—should be subject to the laws of the land. I am bound by the Income Tax Act; so are Maori iwi. I am bound by the Resource Management Act; so are Maori iwi. I am bound by the emissions trading scheme and so should Maori iwi be. There is one exception to that: if the Government through some duplicitous wrongdoing hides from Maoridom at the time of the settlement some undisclosed liability for future cost that undermines value that is wrong. That would either amount to a misrepresentation by the Crown or the withholding of important information that ought to be transparently made available to the iwi in the settlement. So again I put up an amendment. I said well if there is that yes there should be additional compensation payable. But if they cannot show that there was withholding of information or misrepresentation then the same laws of the land should apply to all. I think it does not bode well for National nor the Maori Party that they have breached that principle. They breached it for the benefit of let us be honest the corporate end of town. Just as they gave money to the corporate end of town for the major emitters they have done the same to Maoridom. They have ensured a profit for a few Maori at the cost of the rest of the community including most Maori. It is wrong and it undermines the effectiveness of the scheme. 
The cost of free allocation in the agricultural sector is plainly unsustainable. We have a scheme that purports to transition to emission pricing but allows emissions to increase in the interim. That would be like going back 20 years in New Zealand’s history; phasing out tariffs but actually increasing tariff protection while we phase them out is as stupid as that. It is as stupid as that. The best comparison I can think of is one I have already made with supplementary minimum prices. Again it was a National Party folly—that time under Mr Muldoon. The rate at which this Government is falling into debt is bad with Government debt already spiralling out of control in New Zealand. This will add to it. Supplementary minimum prices held up land prices by artificially subsidising farm output and profitability of farms. That is what this bill does to farmers. They get more than 80 percent of the additional free allocation. In fact I think they get more of the total free allocation; 90-something percent of the overall free allocation goes to farmers. Eventually that will have to be withdrawn because it is unaffordable for the country. Otherwise Government debt will go up by $110 billion by 2050. Even if we exclude interest the additional cost of free allocation in all sectors—the vast majority of which goes to agriculture—is $50 billion dollars. These are astronomical numbers—$50 billion. It cannot be sustained. When that free allocation is withdrawn farm prices will crash. People who have been farmers throughout will not be any worse off because they have been farmers throughout. The people who buy farms in the next 20 years will do their dough. They will do their dough and they will be poorer. They will suffer as people suffered in the 1980s following the removal of supplementary minimum prices. 
This bill is fundamentally flawed legislation. It undermines the environmental outcome. Our emissions will go up relative to where they would have been under the existing scheme. As Brian Fallow said the point at which New Zealand’s emissions peak will be later and the amount that they peak at will be higher before they decline. That will be at an environmental cost to the planet and at an economic cost to the country. It is not just me saying that: it is Treasury it is the Ministry of Economic Development it is the Parliamentary Commissioner for the Environment and it is the expert advisor to the committee Dr Suzi Kerr—it is virtually everyone. And still the Government proceeds.