Chauvel Charles: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Chauvel Charles: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
[Sitting date: 24 November 2009. Volume:659;Page:8054. Text is incorporated into the Bound Volume.] 
CHARLES CHAUVEL (Labour) 
: 
 We are about to pass a bill into law the Climate Change Response (Moderated Emissions Trading) Amendment Bill that is fundamentally flawed on multiple levels. It is economically irrational socially inequitable environmentally counter-productive and fiscally unsustainable. Its hallmark has been one of poor procedure and hasty consideration. 
The Committee stage of the bill was taken in about 8 hours under urgency. That allowed for no proper chance to remedy the defects associated with the select committee process including the withholding by the Minister for Climate Change Issues of key aspects of the official analysis of the legislation. What is worse is that the 8 hours were completely insufficient to allow Parliament to come to terms with the two sets of amendments tabled only yesterday. One from the Minister was a Supplementary Order Paper of 121 pages with at least five mistakes that I have found already in the explanatory note which we opposed. The other one was from the Maori Party enacting a Treaty clause. We ultimately decided to support that notwithstanding that there was no proper scrutiny allowed for those particular amendments. What is worse National the Maori Party and Peter Dunne voted down every amendment put up by the Opposition designed to improve this bill. Having deprived the people of an adequate select committee process those parties then prevented any real improvement being made in the later stages of the legislative process. 
We proposed an amendment to cap overall levels of free allocation given that the bill as it stands puts in place an uncapped intensity-based allocation model. An uncapped method allows the overall level of allocation and therefore emissions themselves to increase because there is no cap in the “cap and trade” scheme. So it carries with it an extensive fiscal risk if recipients of free allocation choose to increase production. That is why the Parliamentary Commissioner for the Environment told Parliament that it is vital to create the right incentives to reduce fiscal risks and to create policy certainty for business. But National the Maori Party and Peter Dunne did not support this amendment which sought to advance fiscal responsibility and environmental effectiveness. 
Labour also tabled amendments to phase out free allocation to industrial and agricultural activities completely by 2030. We did this because as the bill stands the level and duration of allocation is excessive. Providing free allocation for more than 80 years with a phase-out rate of only 1.3 percent a year defies any common-sense idea of a transition. Even the Minister says that 1.3 percent will not survive future reviews which begs the question of why he wishes to enact it in the first place. At this level of generosity as with any protection or subsidy—as we saw with supplementary minimum prices in the 1980s—future Governments will find it very hard to roll back this level of assistance. Allocation recipients will have a very powerful incentive to maintain the status quo. National the Maori Party and Peter Dunne voted to keep these permanent pollution payments. 
Given the immense costs of the levels of allocation not just fiscally but also economically and environmentally it is crucial that there should be transparency over how allocation takes place. But this bill reduces that transparency so Labour sought to enhance it and put in place safeguards against corruption by requiring the details of all allocation to be published. Allocation involves the transfer of enormous amounts of wealth in the form of carbon credits from the taxpayer to individuals and firms. The taxpayer deserves to know the level of these subsidies and have a clear analytical rationale as to why they are provided. If we do not have that transparency there will be no public trust in this scheme and there will continue to be rightly held suspicions that allocation levels are based more on politics rather than economics. Labour tried also to require any donation to a political party by a recipient of allocation to be disclosed. But National the Maori Party and Peter Dunne do not support the right of the public to know these things. 
We also tabled amendments to remove the half obligation and raise the price cap from $25 to $100 during the 2010-12 period. The half obligation is unnecessary. It shifts costs by more than half from the polluter to the taxpayer and despite the Minister’s claims in the electricity sector it will not reduce the impact on electricity prices. The European experience shows that it will not. What is worse is that the fixed price is set at such a low rate that it does not fulfil the purpose of any transitional price cap to provide certainty against price spikes. Any price cap should be set high enough to act as a safety valve not just another subsidy. 
We also sought to prohibit the banking of non-forest New Zealand units during the transition period. This would have prevented the collection of credits while the price of carbon is low and then the selling of them at a higher price once the cap is removed. Banking and trading free allocated credits taken with price caps will result in increased emissions and windfall gains to polluters. But National the Maori Party and Peter Dunne did not support fixing the bill in these ways. 
We also tried to put back the entry date for agriculture from 2015 to 2013. As the Parliamentary Commissioner for the Environment told Parliament there is no evidence to justify delaying the date of entry of agriculture to 2015. We can measure emissions at processor level from 2013 and emissions-reducing technologies are available particularly in the form of nitrogen inhibitors. Delay merely keeps the full cost of emissions with the taxpayer until 2015 and postpones appropriate levels of emissions-reducing investment and proper behaviour in this sector. National the Maori Party and Peter Dunne did not support these changes either. 
We also sought to establish a fund to reduce greenhouse gas emissions through the promotion of complementary measures. All the evidence internationally is that an emissions trading scheme can do only part of the job. There need to be robust complementary measures in place as well. The amendment that we proposed would have provided for an annual appropriation for revenue accrued from the emissions trading scheme to promote energy efficiency renewable energy and research and development. We put this amendment forward because assistance provided to households beyond 2012 has been axed. This bill gets rid of the household fund in the original legislation. That fund would have provided a billion dollars of energy-efficiency assistance to low-income households over 14 years. The Maori Party traded off its abolition for a one-off $24 million scheme targeted at low-income households. Let us do the maths on that. Low-income households many of which are Maori will receive $976 million less in energy-efficiency assistance than they would if this amendment was not passed. National and Peter Dunne were part of that deal. 
The bill as it stands makes highly undesirable changes to the Act in order to achieve alignment with the Australian Carbon Pollution Reduction Scheme an objective that Treasury the Parliamentary Commissioner for the Environment a leading independent expert and others all tell us is without any clear analytical basis given the unique emissions profiles and industrial profiles of the two countries. The fact that the Carbon Pollution Reduction Scheme is still proposed only but went through a $7 billion revision only this week in order to try to get Liberal Party support only adds to demonstrating the incoherence of the harmonisation proposal. We proposed amendments to remove the harmonisation objective and to take out the criterion as a relevant one that the Minister should take into account when determining allocation plans. Despite this clearly being in the national interest National the Maori Party and Peter Dunne opposed it. 
We also tried to enshrine national emissions targets in law and to require the Minister to ensure that they are actually met. Targets should not simply be a matter of pious intention. The current levels duration and model of allocation are completely incompatible with the Government’s target to reduce 1990 emissions by 50 percent by 2050. If the Government’s “50 by 50” reduction target is anything more than a catchy slogan the Minister should have been prepared to agree to enshrine the target into law. 
Finally we proposed amendments to establish an independent advisory committee on climate change to provide advice to Ministers and promote informed public debate on the public policy response to climate change. The development of climate change policy in New Zealand has been controversial; we all know that. There is no consensus on key issues as there is for example in Europe. There has been insufficient independent analysis of the costs and the benefit of climate change policy initiatives. The select committee process that we have just witnessed aptly demonstrates why such an independent body is so sorely needed in this country. National the Maori Party and Peter Dunne opposed even these measures. 
This bill is fundamentally flawed. As I have said previously it will make New Zealanders poorer our economy weaker and our emissions increase. The amendments Labour tabled over the past day would have addressed some but not all of these significant deficiencies but like our attempts to reach a consensus with National earlier in the year they were spurned.