Smith Nick: Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill — First Reading Second Reading 
Smith Nick: Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill — First Reading Second Reading 
[Volume:651;Page:759] 
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.