Norman Russel: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
Text is incorporated into the Bound Volume 
Norman Russel: Climate Change Response (Moderated Emissions Trading) Amendment Bill — In Committee Third Reading 
[Sitting date: 24 November 2009. Volume:659;Page:8060. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak on behalf of the Green Party on the third reading of the Government’s amendments to the existing emissions trading scheme in the Climate Change Response (Moderated Emissions Trading) Amendment Bill. One of the interesting points that I think is often forgotten in this debate is that people think if we muck it up now we can somehow fix things up later. The problem with greenhouse gas emissions and particularly carbon dioxide is that they pretty much last forever. A great proportion of the carbon dioxide that is emitted today will be around in several thousand years’ time. Carbon dioxide does not break down quickly but builds up in the atmosphere. It means that every year we increase our emissions we increase the stock of greenhouse emissions in the atmosphere. It is not that simple to get it out of the atmosphere again. 
If we want to reduce the level of greenhouse gases in the atmosphere below a level that we think is safe say 350 parts per million carbon dioxide equivalent it means the curve to reduce the level in the atmosphere—the emissions curve that we have to go down—gets steeper and steeper every year we increase our emissions into the atmosphere. There is no free lunch here. We cannot say that today we are not going to address our greenhouse emissions because we can deal with them later. Actually we cannot. The emissions that go out today will add to the stock in the atmosphere and increase the problem for everybody on planet Earth for the next couple of thousand years. 
I think it is important that we remember what this is all about. This is supposed to be a bill to reduce greenhouse emissions in order to reduce the risk of out-of-control climate change. That is what the purpose of this bill was supposed to be. My colleague Sue Kedgley described it as Orwellian and in a way she is absolutely right. It is Orwellian in the sense that this is a bill that says it is about reducing emissions but it does not. The result of passing the bill through this Parliament this afternoon will mean that there are more greenhouse emissions coming out of New Zealand than there would have been otherwise. That is just a fundamental truth. 
It is also important to talk about the current emissions trading scheme. The emissions trading scheme that exists now is not a great scheme. The Green Party supported it reluctantly because as David Parker said earlier the scheme already had very very high levels of allocations and subsidies to emitters. It was not what the Green Party wanted. It was not our ideal emissions trading scheme because the level of subsidies was far too high. However we supported it in order to get the beginnings of a price on carbon and because of the complementary measures that came with it in particular the billion-dollar home insulation fund. 
It is also true that the previous Government’s record in reducing greenhouse emissions was terrible. Emissions increased very significantly from 1999 to 2008 so we were pleased that there was some progress towards the end of that Government in terms of addressing greenhouse emissions and climate change but there was still a long way to go. Let us remember that the scheme did not cap emissions. It capped free allocations which was good but it did not cap emissions. It meant that people on the margin were paying the real price but emissions within New Zealand were not capped. It worked within the global Kyoto system. The amended emissions trading scheme by comparison not only does not cap emissions in New Zealand but also does not cap free allocations which is quite extraordinary. 
I was just reading an article by Geoff Keey who works for Greenpeace and has been at a lot of the international negotiations. When he described the new emissions trading scheme to some of the people he has been meeting at international negotiations they said: “But that just means New Zealand’s emissions can keep increasing and increasing.” which of course is exactly what it means. If we reduce the price signal we get more emissions. The fundamental idea of an emissions trading scheme the idea that the whole thing is based on is that price influences behaviour. When this emissions trading scheme reduces the price it will influence behaviour. The result will be more emissions. That is a simple fact about all emissions trading schemes and it is a fact that the Minister for Climate Change Issues tries to deny over and over but in the House the other day we pinned him on it. He does not like to admit the simple fact that emissions trading schemes work on the idea that carbon pricing over time reduces emissions so if we have a lower price we will have higher emissions. 
It is incredible to think that because the rate of abatement of the free allocations is only 1.3 percent per year it means that if an industry increases its output and it is output linked to emissions at more than 1.3 percent per year it will get more free allocations every year. That is an extraordinary thing. The taxpayer will be handing over more free allocations every year if an industry increases its output by more than 1.3 percent. For example DairyNZ tells us that over the previous 10 years the dairy industry increased its output by on average 4.4 percent per year. This means that the taxpayer will be increasing the allocation of free carbon credits which costs money because ultimately the taxpayer has to pay for them to the dairy sector every year. The subsidy from the taxpayers to the dairy sector will increase year on year. It is uncapped. It is most extraordinary that here we are today in a world where we are trying to reduce our greenhouse emissions and this Parliament is about to vote for a bill that will increase the free allocation to the dairy sector and others as they increase their emissions and their output. It is an extraordinarily stupid thing to do. 
The other part of it that I think is a real worry aside from the difficulty of getting carbon dioxide out of the atmosphere once we put it up there and the steepness of the abatement curve we will have to go down in order to get anywhere near reducing our emissions by the amount we need to is the political problem that has been alluded to in this debate. Because this bill sets in place a whole bunch of give-aways to friends of the Government and others in the form of free allocations it will be very hard to roll it back politically. There is a particular problem in Australia. The Australian Greens produced a legal opinion that shows that because these rights to pollute are considered property rights under the Australian Federal constitution it will be even more difficult in Australia. We have the same problem here in terms of trying to roll back these rights to pollute as they will be seen by the recipients once this Government hands them out. 
We have a further complicating problem about the binding nature of this scheme which is the bilateral investment treaties that we are signing left right and centre at the moment. These are otherwise known as free-trade treaties but a big component of them is investment treaties. The bilateral investment treaties mean that foreign companies operating in New Zealand will be able to sue the New Zealand Government for indirect expropriation if we change the rules around emissions trading schemes. In fact if we look at the Cabinet paper that went with this bill we see that when they talk about why it is that forestry credits have to be tradable internationally part of the reason they give is the bilateral investment treaties that bind us currently and the fact that if we were to place restrictions on the international trade of those credits we could be sued under those bilateral investment treaties by overseas-owned forestry companies. We have this problem around the binding nature of what we are about to do and how we are committing future generations to a very expensive process of trying to unravel the bill we are about to pass. 
Part of the idea of an emissions trading scheme is to facilitate the transition to a low-carbon economy. One of the things that has been most extraordinary about the process is that we have not had any time to read all the advice we have been getting. For example Suzi Kerr senior fellow at the Motu Economic and Public Policy Research Trust and visiting professor at Stanford University Economics Department gave us her advice right on the very last day at the select committee and of course absolutely canned the bill as anyone who knows anything about emissions trading has. To quote from her report: “Free allocation redistributes the cost of climate policy away from the owners of protected firms who tend to have higher than average incomes towards all taxpayers.”—Maori and Pakeha I would add. “It also significantly raises the overall cost of the climate policy to the economy. A policy that is fiscally neutral can still have large damaging effects on the parts of the economy and society that do not receive free allocation.” We are passing legislation that is damaging to the New Zealand economy in the long run. Treasury estimates that the cost of putting out all these free allocations including interest and looking at a price of $50 a tonne will cost the New Zealand Government around $110 billion by mid-century and that cost has to be borne. It also results in a misallocation of resources within the New Zealand economy because we are not as efficient as we should be. 
What is missing with all of this is all the complementary measures that should have gone alongside an emissions trading scheme whether it be fuel-efficiency standards; pest control on Department of Conservation land; measures to promote public transport walking and cycling; or a reduction in the spending on motorways.