Climate Change Response (Moderated Emissions Trading) Amendment Bill — First Reading 
Climate Change Response (Moderated Emissions Trading) Amendment Bill — First Reading 
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Climate Change Response (Moderated Emissions Trading) Amendment Bill 
First Reading 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 I move  
That the Climate Change Response (Moderated Emissions Trading) Amendment Bill be now read a first time. 
 At the appropriate time I intend to move that the bill be referred to the Finance and Expenditure Committee with an instruction that the committee report finally to the House on or before 16 November 2009 and that the committee have authority to meet at any time while the House is sitting except during oral questions and during any evening of a day on which there has been a sitting of the House or on a Friday in a week in which there has been a sitting of the House and to meet outside the Wellington region during a sitting of the House despite Standing Orders 187 189 and 190(1)(b) and (c). 
This bill is about implementing for New Zealand a workable and affordable emissions trading scheme. It takes a responsible approach to the climate change problem caused by greenhouse gas emissions while being realistic about how much a small country like New Zealand can contribute. The bill is also about the John Key - led Government delivering on its promises. We said we would legislate for and implement a carefully balanced “all sectors all gases” emissions trading scheme. We said we would take an emissions intensity approach. We said we would align our emissions trading scheme more closely with Australia’s. We said we would not pocket billions of dollars by nationalising our emissions allowance. We said we would not discriminate against small and medium-sized enterprises and we said we would align the phase-out of industry support with that of our trade competitors. This bill does all these things. The bill is also consistent with the recommendations of the Emissions Trading Scheme Review Committee which was ably led by the United Future leader Peter Dunne. 
Let me briefly outline the specific changes in the bill. The industrial energy and transport sectors will enter the emissions trading scheme on 1 July next year and agriculture in 2015. There will be a transition phase for the next 3 years with a half-obligation and a fixed-price option of $25 a tonne. These changes will halve the cost increase for electricity and fuel for consumers and businesses. 
Support for trade-exposed emissions-intensive industry is changed in four ways. First the arbitrary threshold of 50000 tonnes which penalises small and medium-sized enterprises is replaced by a high and a medium-intensity threshold. This expands the number of eligible companies from an estimated 21 to 65 companies. Secondly the allocations will be based on an industry-average basis and not an arbitrary 2005 level. This will ensure we do not reward those with higher emissions and punish those who invested early to improve their efficiency. Thirdly the allocations will be production based. If companies cut their production their allocations will drop. If they grow their allocation will increase. This is about addressing leakage. This Government is not about exporting jobs offshore; we are about incentivising more efficient production here in New Zealand. The fourth change is about slowing the phase-out of support to industry. 
The bill also makes 34 technical changes to fix faults in the current law and to make the scheme more workable. A good example is removing the liabilities created by the clearing of wilding pines. Another is removing the liability associated with nitrogen curing of cabling which could have cost New Zealand export manufacturing jobs. This bill recalibrates New Zealand’s position to a more pragmatic approach. The existing Act was a branding statement by a dying Government wanting to make gestures about saving the planet with little regard to whether they would work or their impact on consumers on jobs and on investment. 
Extravagant claims have been made by some that this revised scheme will mean taxpayers subsiding major emitters. This is untrue. There is a cost in reducing the immediate impact on fuel and electricity prices relative to the current scheme but there are also savings as a consequence of reducing allocations earlier. Officials backed up by Treasury estimate that over the first decade of the scheme these changes will actually provide a small saving for the taxpayer. The latest claims over costs relate to the period beyond 2018 when frankly any cost estimates are little more than guesses. The issue beyond 2018 is that under Labour’s scheme industry support is phased out at 8 percent per year compared with Australia’s 1.3 percent and the EU’s 1.7 percent. We are not absolutely married to the 1.3 percent phase-out as far as that into the future and note that the law provides for it to be reviewed every 5 years starting in 2011. We are however committed to moving in line with our major trading partners and we worry that Labour’s phase-out rate which is five times faster than that of any other country will encourage jobs and investment to be exported offshore. Other claims are that the environmental integrity of the scheme is weakened with the Green Party’s Jeanette Fitzsimons so incensed that she says that at Copenhagen she will wear a large sign around her neck saying she is ashamed to be a New Zealander. I ask that members get reconnected with planet Earth. 
This emissions trading scheme will be the first of any country outside Europe and on 1 July 2010 will be the most comprehensive by including transport industrial and energy emissions. New Zealand is the first country in the world to include forestry and under these amendments will be the first country in the world to include agriculture. Accusations have been made about New Zealand providing a soft ride for Rio Tinto’s aluminium smelter. Our Bluff smelter will be the very first of 168 in the world to face a carbon price for its industrial emissions. There has also been strident criticism of our production-based approach to industry allocations an approach that was recommended by both the New Zealand Institute of Economic Research and Infometrics at the select committee review. Australia is taking this approach and so too is Europe in the third phase of its emissions trading scheme. This is about incentivising efficiency rather than just exporting emissions-intensive industries to other countries. 
I want to acknowledge the constructive role the Maori Party has played in helping move this debate forward for New Zealand. Had it not stepped up to the mark we would most likely have been forced to defer again introducing a price on carbon and we would go to Copenhagen with our climate change policy unsettled. The Maori Party brings a balanced perspective to this debate with both a strong commitment to Papatuanuku but also a real concern about jobs and about the impacts on low-income households and an understanding of the importance of primary industry to New Zealand. The changes agreed with the Maori Party have halved the cost to households will see thousands more low-income homes insulated will see the Government working with iwi on afforestation schemes will see better support for our fishing industry and will see ongoing Maori involvement as we progress forward on climate change policy. Despite the politicking over that agreement most in this House know that these changes are good for Maori and good for New Zealand. 
I am disappointed that Labour has taken such umbrage at the agreement and has pulled out of talks with the Government. It is equally disappointing that Labour has thrown its toys out of the cot and today has blocked this bill going to the special select committee that has spent the last 9 months working very hard on this issue. It has been my long-held view that climate change policy is bigger than any political party and that there would be real benefits for New Zealand from a wider and broader consensus. That is why as an Opposition member I wrote in 2005 seeking an engagement with the then Government. I never received a reply. I have engaged for months in good-faith talks with Labour. There is little difference in this bill from what was agreed in those talks. My hope is that through the select committee process we can get back round the table to resolve the few remaining issues. 
I make this point in conclusion. New Zealand has had a 15-year-long debate about how to put a price on carbon. We have flip-flopped under both National and Labour administrations between a carbon tax and an emissions trading scheme. We need to move forward. This bill will on 1 July next year enable us to make that start. I urge all members of this House to put aside party politicking to recognise the importance of the issue of climate change and to back the balanced way forward in this bill which is a response to this huge challenge and one that is balanced in respect of the economy. I commend this bill to the House. 
CHARLES CHAUVEL (Labour) 
: 
 The Climate Change Response (Moderated Emissions Trading) Amendment Bill to amend the emissions trading scheme—a move for the New Zealand economy that is described by the member who has just resumed his seat as being as significant as the introduction of GST—has been in the hands of members for some 10 to 15 minutes. We have not seen the content of this legislation until now. To make matters worse the Government will not even release the Cabinet papers and the officials’ advice concerning the costs of this revised scheme. We asked for that information to be provided on an urgent basis under the Official Information Act but the Minister has made it clear that it will not be made available until well into the select committee process and no doubt there will be many redactions from the material that we will have to go to the Ombudsman about. This material should not be hidden from the people; it should not be hidden from the Opposition; it should not be hidden from the Parliament.  
It is shocking that this behaviour comes from a Government that parades what it calls its fiscal rectitude. It is introducing changes to the New Zealand economy that it says are equivalent in magnitude to the introduction of GST yet it is denying people the right to see the basic costings and the official advice behind the legislation and the changes and it has tabled the bill just when the first reading speeches have to be made.  
We have seen the problem with that in question time this week because we have a Minister with responsibility for the passage of the legislation who uses figures to suit himself. Papers were tabled in the House on Tuesday that purported to detail to the people the cost of this legislation. We now see on page 33 of the explanatory note of the bill the true table without the omissions that the Minister made when he tabled the document in the House. That is why the people need to see the official costings the analysis and the Cabinet papers. As Labour has learnt to its peril over the last couple of weeks the Minister is not one who can be trusted on the assertions he makes unless the material behind those assertions can be seen and tested.  
The Minister mentioned that there was a desire to send this legislation to the special Emissions Trading Scheme Review Committee but that Labour had declined to cooperate in that and I say we certainly have. The Emissions Trading Scheme Review Committee was a complete waste of time and money. That is demonstrated by the fact that although its specialist advisers ate up the entire Office of the Clerk’s budget for advice to select committees in 1 year at the same time the committee could produce only four minority reports as well as what the Government came up with as a result of that exercise. It is appropriate that this legislation should simply go to the Finance and Expenditure Committee. This is not a measure that will have anything to do with the environment. It will certainly not help to protect the environment; it is simply a measure that is designed to extend subsidies to emitters. As such it is appropriate that the expertise brought to bear on the legislation should be that of the Finance and Expenditure Committee.  
As I said we are considering a measure that has an impact on the economy equivalent to that of GST and we are considering it under urgency. Members ran out of work yesterday at 6 o’clock and went home but the Government has us back here today sitting under urgency on a major initiative.  
The existing emissions trading scheme puts a price on the emission of greenhouse gases which New Zealand has to account for under the Kyoto Protocol. In order to emit such gases on a continuing basis different sectors of the economy on a phased-in basis would under the existing scheme receive a defined level of free credits in order to continue to pollute for a defined period of time. If emitters needed or wanted to pollute over that level then they could basically buy a limited number of credits in order to do so. When they bought those credits the Government from the revenue it gained from that purchase would fund a series of complementary measures designed to help our economy to transition to the lower carbon using economy that we all know we need to have. It would fund home insulation the transition to electric vehicles and so on.  
Under the amendments contained in the legislation that the Minister has just introduced a very different scheme emerges. Under that scheme emitters will get a much longer transitional subsidy to allow them to continue to pollute. Those emitters are allocated ongoing rights to pollute on a so-called intensity basis but without a cap—unlike the proposed Australian scheme. It means that emitters are incentivised to continue to increase their pollution rather than to decrease it. It is the complete opposite of the intention of an emissions trading scheme. There is no cap in this so-called “cap and trade” scheme—no cap. The emitters have the dates on which they will enter the scheme pushed out by up to 2 years.  
In the short term the analysis in the explanatory note of the bill indicates that there will be to 2013 an extra cost to taxpayers of about half a billion dollars as a result of those changes. Then for the 4 years between 2013 and 2017 the costs will go down slightly but that seems largely to be because motorists are to be brought into the scheme up to a year earlier than they would be under the existing scheme. So there will be revenues for the Government that otherwise would not have been available. But if we look at the out-years which the Minister has blithely dismissed by saying we cannot make reliable estimates as to what will occur then and if we look at the full table—it ought to have been tabled in the House on Tuesday—that appears on page 33 of the explanatory note of the bill we see that the missing two columns for 2020 and 2030 which the Minister did not table earlier in the week show a very hefty additional cost to taxpayers. By 2030 that is estimated to be an additional $2 billion a year. That is serious money. Even discounting it back in today’s money— 
Hon Trevor Mallard 
: $2 billion a year? 
CHARLES CHAUVEL 
: No $2 billion in total and after 2030 it is half a billion dollars a year in every year thereafter. We are talking about the cost of the accident compensation scheme or the prison system about one-third of the education budget or the entire cost of the police service being given away each year to polluters and we will be paying for it as taxpayers.  
This is neither environmentally nor fiscally sustainable and it will have to be rolled back. Polluters like Methanex and Rio Tinto will be laughing all the way to the bank. To use the example of Methanex it will get a billion dollars over 10 years to increase its emissions by 5 percent. That is basically the effect of the amendments that have been tabled today. This is just madness; it is utter madness.  
There are another couple of matters that I want to turn to. If we look at the explanatory note of the bill we see Treasury says the alignment with Australia which this legislation attempts to make is very bad public policy. Treasury points out that Australia does not even have a scheme. 
Hon Dr Nick Smith 
: It does not say that. 
CHARLES CHAUVEL 
: The Minister is shouting out. If he looks at page 12 of the explanatory note of the bill that he has just put on the Table of the House he will see that Treasury asks in essence why on earth somebody would try to harmonise with a country that does not even have a scheme and might not even have a scheme if the legislation there does not get up in the Senate in November and that it asks why on earth public policy would proceed on that basis.  
We were also told by the Minister last night in the briefing he offered to us that a Treaty clause is to be inserted in the final version of the legislation. But this amendment will not be introduced by the Maori Party until the Committee of the whole House stage which therefore means that the Finance and Expenditure Committee will not consider it and the public will have no opportunity to submit on it. The other alleged concessions to the Maori Party that we have heard about will not be included in the bill but will be done by way of variations to Government policy later on.  
Labour will have no option but to roll back these amendments when next in office. National could have had a deal with Labour if it had negotiated in good faith that would have endured and would have given ongoing certainty over climate change policy. Instead we are seeing fiscally irresponsible legislation that will harm not help the environment. This is a day of shame: shame for the National Government shame for the Maori Party and a shame for New Zealand.  
CRAIG FOSS (National—Tukituki) 
: 
 I am proud to stand up and speak in the debate on the first reading of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. I congratulate the Minister for Climate Change Issues the Hon Dr Nick Smith on bringing together an emissions trading bill for the shape and structure of the New Zealand economy in the current times. It matches our profile and our ambitions to be an environmentally and socially aware and conscious nation balanced out with the economic challenges that are facing the structure of our economy.  
First I will acknowledge members of the Emissions Trading Scheme Review Committee especially the chairman the Hon Peter Dunne who did a great job. I am not sure whether he regrets that this bill if it passes its first reading will be going to the Finance and Expenditure Committee as opposed to another committee with which I am sure he would have been involved. I will be interested to find out his view on that. I also thank the member who spoke previously Charles Chauvel for his endorsement and vote of confidence in the abilities of the Finance and Expenditure Committee to rapidly process this bill through the various stages that it needs to traverse. I acknowledge and I am very interested in the fact that he carved out entirely all the environmental considerations around what is contained in this bill noting that we have had two very large select committees considering this particular issue. They were totally focused on the economic matters in and around this bill and on the impact or otherwise that this changed bill will bring to our economy.  
I am sure that once members go through the numbers look at the potential job losses under the previous scheme and examine the improvements that this new bill will bring to the existing scheme they will be pleased to see them particularly in these hard and recessionary times. It surprises me somewhat even discounting some of the rhetoric from members opposite that the word “jobs” has not appeared once in any of their speeches on this matter. This improved bill is entirely about preserving New Zealand jobs. It is as simple as that. The term “leakage” is used often and for the benefit of those who are listening that refers to the leakage of jobs—that is this Government is all about trying to keep New Zealand jobs in New Zealand and to improve and grow the industries that contain them.  
If we take some of the comments made by other members to the logical extreme we realise that the easy route is to allocate New Zealand units based on 90 percent of the 2005 level of emissions as in the previous scheme to some of the large emitters. The price of carbon would go up those businesses would close down and jobs would go the emitters would get a free windfall gain of absolute billions and New Zealand would be left where? Unemployment would rocket and our current account would absolutely deteriorate. There is a lot of highbrow economics around this stuff but the bottom line is that New Zealand families and jobs are now in a better place because of the improved emissions trading scheme bill that Dr Nick Smith has put before us today. I look forward to working through this bill with the members on the Finance and Expenditure Committee. I will be quite intrigued about the various power plays as to which members will appear because I am sure that the Hon David Cunliffe will want to have part of this action as a senior Labour member on that committee.  
A point that seems to be constantly lost on other members particularly the member who spoke previously is that the policy intent of the National Government in the improved emissions trading scheme was put before the electorate last year. Last year the public of New Zealand voted against the scheme as described by the previous speaker. They voted for an amended scheme that balanced out our economic future our opportunities and our concerns about climate change and the environment. The word “balance” is the absolute key. The election-result deniers who are in speaking on this matter perhaps need to remember that they put all of their arguments which we are now hearing again today before the electorate last year and the electorate rejected them. The five or six key principles that this new improved amended bill is based upon were before the electorate. Nothing here is new.  
With regard to the point that the previous speaker made about his having only just received this bill I note from memory that when Labour was in Government its bill came in under urgency. At the time the National Opposition had maybe half a day’s notice if that but the difference is that we put aside the politics and voted for it.  
This bill is all about minimising the risk to the New Zealand economy and balancing out our objectives in order to be part of a global concern. As an exporting nation it is very very important that we get this right economically with regard to the perception of the customers for our export products around the world. I will reiterate for  
Hansard 
 that I am a very very proud New Zealander and I would wear a “Proud to be a New Zealander” T-shirt anywhere in the world with or without this bill. My pride in New Zealand goes beyond that.  
There was a very good article in the  
New Zealand Herald 
 this morning by Brian Fallow. There is a lot of politics around this stuff but I think that what is missing out there is the point that so much of this emissions trading scheme has actually been agreed to across much of the House. In fact I am surprised that there has not been more celebration of the fact that at least the majority of members in the House have come to the point where yes they are arguing over some key detail. We can focus on that positive aspect for the sake of our economy and our environment. I will pick out the point that Mr Fallow noted. It is very important because it shows how close the two proposals—this improved scheme and the existing scheme—are around the 90 percent emission levels in 2005. I will quote the article just quickly: “If a large emitter’s emissions per unit of output in 2005 was bang on the average for its industry in this part of the world its allocation of free units would be the same under both models.”—that is it would be exactly the same—“If it is below par it would be worse off if it is above-average it would be better off.”  
Therein lies the starting point. Labour members now seem to be suddenly rejecting the benefits of the market-based price mechanism which the previous Government brought in because this amended bill the new bill applies it across the economy. We are an open-market trading economy at the whim of the international markets so the moment that someone tries to fix something for the long term or to decide which industries should be in New Zealand—and because industries are foreign owned apparently they are bad and ugly so I say that Labour members should front up to employees and their families and tell them that they work for a bad and ugly international employer. They should just see what those people say.  
I look forward to this bill going to the Finance and Expenditure Committee. I look forward to good solid progress and cooperation as we consider the bill in the committee. I enjoy that committee. I am the chair of that committee and I look forward to hearing contributions on very tight and specific points about this new bill noting that so much of this information has been reviewed the arguments have been litigated in two select committees and many times in the House so I am quite sure that it will be a very quick seamless and focused process. Thank you. 
Hon DAVID PARKER (Labour) 
: 
 This debate on the Climate Change Response (Moderated Emissions Trading) Amendment Bill is an argument about good economic management and fundamental economic principles of economic management. I know that there are parties in this House that do not think that climate change is a problem and that we should therefore not be in the Kyoto Protocol and should not price emissions. That is not the argument we are having today. The argument is about how an emissions trading scheme should be designed.  
I will not respond to the Hon Dr Nick Smith’s accusations about process. Suffice it to say that the paper trail in respect of process is on the web. If people go to the Red Alert website they can look at it. The comments that Dr Smith made are not correct. 
There were four outstanding issues of significance between Labour and National. We have offered to compromise on all of them but not to go the whole extent on the fourth issue. The first one was the date for entry of sectors. Because the Government has delayed so long in practice we cannot bring in stationary energy on 1 January next year.  
Hon Dr Nick Smith 
: You never could! 
Hon DAVID PARKER 
: I disagree. So we agreed— 
Hon Dr Nick Smith 
: Officials say you never could. 
Hon DAVID PARKER 
: The member has had his turn. We agreed to extend that date to the middle of June and we also agreed to the Government bringing transport forward to that same date noting that it brings forward the date of costs for consumers of transport contrary to some of the claims made by National. We do not understand the reason behind delaying agriculture any further. Already New Zealand faces the cost of increasing greenhouse gas emissions in agriculture. We have to count them under the Kyoto Protocol so why is the Government not sending an economic signal that reflects that reality? None the less we said even on that issue that it is politically important to the Government. It won the election so we would compromise on that issue too. So there was not an unsolvable problem there.  
In respect of price caps if we are to trust the markets then we should not have price caps. If we are to trust the markets and we want the emissions trading scheme to work we should not have price caps. Again we said that the longer the price cap is and the lower the price cap is the bigger the problem is; if it is not too long and it is not too low we could probably go there too. I do not think that would be the best outcome but we could compromise on that. I am not convinced that the so-called halving of electricity cost works because of course we do not change the price of electricity in the long run. It is driven by the marginal costs of new supply which are unaffected by the discount given to electricity wholesalers. None the less we said that we could live with that.  
We were then left with the biggest issue which was free allocations. This is where the analysis by the Government has been so poor. The Government has not yet justified its transitional measures. It says it is trying to have a transition that moves to the full pricing of emissions over time yet during that period it will let people increase the amount of free emissions. 
Hon Dr Nick Smith 
: What did the New Zealand Institute of Economic Research say? 
Hon DAVID PARKER 
: The New Zealand Institute of Economic Research had a report that was flawed in a number of areas. For a start as it said in its own report it had not properly factored into its report the effect of increasing dairy land prices and other marginal land prices on forestry. It said that in the end it was a line call on the basis of its analysis. We asked Treasury officials about this. We asked them whether they relied upon a general equilibrium model that produces a line call to overturn settled economic theory. Of course the answer is that they do not.  
The reality here is that New Zealand faces the cost of increases in emissions. During a period when other countries are not pricing emissions there is a very real risk that industries that are exposed to competition from those countries will not be able to compete and during that transitional period New Zealand would therefore lose businesses that in the long term should be sustained here. That is why there should be a generous free allocation to major emitting industries that face competition like that. It does not mean that it is in New Zealand’s economic interests to let that cost grow. It does not follow that one should do that.  
There are some similarities between this policy and tariff reduction policy. Arguments are still had to this day in New Zealand about when Sir Roger Douglas and others deregulated the New Zealand economy and exposed the New Zealand economy to competition from other countries. We phased out tariffs. I actually agree with that move; we should have phased out tariffs. The question is whether we should have done it a wee bit slower than we did. I actually think that is a fair question. We clearly should have done it but no one thinks—whether or not it should have been slightly slower than the pace that we did it at—that we should have increased protection during the phase-out of tariffs. That is what this bill does. It increases the protection of the agricultural sector to allow it to increase its emissions above its current levels of emissions and taxpayers have to pay for it. That leads to the misallocation of economic resources— 
Hon Dr Nick Smith 
: Not true! 
Hon DAVID PARKER 
: I tell Dr Smith that it is. If it were not true he would be able to agree to a cap on the free allocation in the agricultural sector. He has said—at least in the short term—that the cap on the allocation in the industrial sector would have been able to be agreed to by his Government because his new allocation methodology in industry would not reach that cap anyway. I accept him at his word. We will go through the numbers on that. But in respect of agriculture we know that the Government and the industry already say they are at the world’s best practice. Therefore farmers will not have to do anything more than increase their output in order to get more free allocation. That makes New Zealand poorer not wealthier. It sends the wrong economic signal. We will not have a change in land use away from higher emissions behaviour towards lower emissions behaviour.  
The agricultural sector accounts for one-half of our emissions. This is economic mismanagement by the current Government. You know it was a National Government that previously visited supplementary minimum prices on New Zealand. That was poor policy from a prior National Government and it actually took a Labour Government—with the help of Sir Roger Douglas David Lange and others—to remove what were improper supplementary minimum prices. This measure is actually smaller; it is not nearly as significant as supplementary minimum prices were. 
Hon Dr Nick Smith 
: That is ridiculous. 
Hon DAVID PARKER 
: But it is. It is a subsidy for increased emissions in the agricultural sector. It is exactly the same in principle; there is no difference. That is why we cannot agree that we should have an uncapped free allocation in agriculture.  
I want to move to a couple of other issues. 
Hon Dr Nick Smith 
: But you can for industry. 
Hon DAVID PARKER 
: No we cannot. We should not have an uncapped free allocation for industry either. The reality is as the Minister says that so long as the rate of allocation under an intensity basis in industry is reasonably strict we do not actually reach the cap. It becomes a semantic argument. But it is not a semantic argument in agriculture and as a consequence we will not see the hectares of land that we need planted out in trees to absorb carbon because it is a low-cost way of reducing our emissions and we will not see the reductions in agriculture emissions that we should see by encouraging emitters towards lower emissions behaviour. Quite apart from the environmental outcome we will get poorer as a country as a consequence of this change to the allocation methodology rather then richer. That is bad policy.  
It is not about jobs as the Minister says it is. We all agree that there should be generous free allocations so that we do not cause enterprises to leave. But the means of production in agriculture are fixed. It is land. It is processing equipment. It is livestock. No one will pick them up and take them away. The question is whether we want to see that sector expanding in a way that does not internalise the cost of its emissions. It will still expand in areas where it is profitable to do so if it is facing marginal costs of emissions but it will not expand where it is not profitable to expand when the marginal costs of emissions are included. That is what an emissions trading scheme is meant to do. The current scheme which the Government seems determined to push through will actually make New Zealand poorer not richer. Quite apart from the environmental consequences we will become poorer not richer. 
Hon Dr Nick Smith 
: You are far too pure! 
Hon DAVID PARKER 
: I am not being pure. I am saying we can have intensity-based allocation. I am just saying that during the transitional phase if we want emissions to come down we should not pay for them to go up—beyond a cap. We can allocate on an intensity basis up to that cap. It is not as good as our historical base in terms of the marginal pricing signal it sends to the emitter but it can be done.  
Lastly this Government is breaching another very important point of principle. Treaty settlements are full and final. Treaty settlement assets become assets that are subject to the laws of this land. The National Government deal with the Maori Party says that that is no longer the case and that it will do a special deal for Ngai Tahu in respect of assets it received. The Government of the day did nothing wrong. It did not misrepresent the position. 
Hon Dr Nick Smith 
: Not true! 
Hon DAVID PARKER 
: Yet a specific line says National will address the issues on the value of pre-1990 forests that went to Maori under Treaty settlements.  
JEANETTE FITZSIMONS (Green) 
: 
 The emissions trading scheme proposed in the Climate Change Response (Moderated Emissions Trading) Amendment Bill is the sort of emissions trading scheme one has when one still thinks that climate change is a hoax. Nothing in the bill is about reducing carbon emissions in order to protect the climate. Nothing in the bill is about protecting the climate. The existing law puts a price on carbon emissions although quite lightly and quite late; this bill weakens that price considerably.  
The key goal of emissions trading must be to put New Zealand on a path towards a low-carbon economy where growth and prosperity happen in those areas with low emissions. That is where we need to be in the future in order to be a prosperous country. That is not what this emissions trading scheme will do. The bill is virtually a carbon copy of the Australian bill which has been rejected twice by the Australian Senate and which may never pass into law there but is apparently good enough for us. By aligning with the non-Australian scheme we are prevented from aligning with the EU which rules out aligning with countries with intensity allocations— 
Hon Dr Nick Smith 
: They’re changing to intensity. 
JEANETTE FITZSIMONS 
: —with a cap—and it prevents us from aligning with where the US and Japan are going. But apparently it is only the little South Sea bubble of climate deniers in the world that we want to be part of. We need to think carefully about whether a scheme that is designed for an economy where farming is a minor source of emissions forestry is not a big player and the issue is mainly coal steel and heavy industry is the best for our economy which is very different from that. 
In “cap and trade” schemes whether for pollution or for fish quotas the “cap” protects the resource or the environment and the “trade” allocates rights efficiently. The proposed emissions trading scheme is not a “cap and trade” scheme because there is no cap. Therefore there is no protection of the climate. Emissions are allowed to—actually they are encouraged to—go on climbing forever. The existing scheme says to polluters that it will help them stay in business competing with firms and countries with no price on carbon but if they want to grow their emissions beyond where they are now then they must factor in the full price of carbon. The proposed moderated scheme says to polluters that if they want to grow their emissions then the taxpayer will pick up 90 percent of the cost of those new emissions for them and the subsidy will reduce only very slowly over three generations. 
The most extreme example of how that will work is Methanex which turns our limited and precious natural gas resource into methanol in two plants in Taranaki. Methanex substantially downsized its operations in 2004-05 as the Maui gasfield was running out and new gas was expensive. Shortly after it became known that the Government would allocate free credits on the basis of total production Methanex announced that it would expand production to the maximum possible in both its plants—2.33 million tonnes of methanol which is six times what it was in 2005 and two and a half times what it is now. If the bill becomes law the taxpayer will pick up the cost of 90 percent of those emissions as well as the cost of its existing operation. Assuming that the carbon price is as the Minister for Climate Change Issues expects—$25 a tonne until 2012 and $50 thereafter—the taxpayer subsidy to just that one company will be around $1 billion over 10 years. 
There is an interesting question here of whether this industry growth along with the new carbon-intensive start-ups that will happen will grow New Zealand’s emissions beyond the number of credits we have been allocated by the initial Kyoto Protocol. Given that agriculture is part of the scheme we may well find ourselves with a deficit.  
The Minister claims that he is putting in place transitional measures to help ease emitters into having to pay for their emissions. I say to the Minister that the transition does not start now; it began in 1992. That was when New Zealand first committed in an international treaty to reducing our emissions and protecting our forest sinks. If no one noticed that in 1992 they should at least have noticed it in 1997 when we negotiated a reduction target at Kyoto in 2001 when we ratified that reduction in 2002 when the Government of the day announced a carbon charge or in 2007 when legislation was introduced for our existing emissions trading scheme. How much notice do businesses need that a carbon price must be factored in to their investment decision-making?  
Some businesses have already factored it in. Contact Energy has put aside its consented gas-fired plant at Otahuhu and turned to geothermal and wind energy. Many people have bought more efficient cars and appliances and have started to take account of their carbon footprint. But the proposed emissions trading scheme is designed to favour those who have done nothing.  
We have had 17 years of transition. How many more years do we need? The Kyoto Protocol set up a transitional period for the world; it was to run from 1997 to 2008 when countries would first be accountable for their commitments to reducing emissions. That was almost a decade of transition and as of nearly 2 years ago the internationally agreed transition period ended and New Zealand has been accountable for all its emissions over 1990 levels.  
There is a real actual dollar cost to the economy. It is much larger than it needs to be because virtually nothing has been done to reduce emissions cost-effectively over that decade. The question as it has always been is who pays the cost—the polluter or the taxpayer? The table in the explanatory note of the bill sets out the costs. In 2030 it is about $2 billion a year and from thereon it phases out very slowly for a couple more generations. It is true as the Minister said that 2030 is a long way away but he is also fond of telling us that climate change is a long-term issue and that we should not worry if no progress is made on reducing emissions for a long time. He cannot have it both ways.  
Under the bill the taxpayer will give Methanex around $1 billion over 10 years. What about the other players? Well the total cost to the taxpayer of exempting agriculture for the first 5 years of the first Kyoto period at $25 a tonne is around $700 million. A further 2 years at $50 a tonne is $281 million. So adding them together by the time agriculture enters the scheme farmers will already have received a taxpayer subsidy of close to $1 billion. After that the subsidy accumulates to $1.2 billion to $1.3 billion depending on how fast agriculture grows. 
When the previous emissions trading scheme legislation was reported back to the House there was a note in the select committee’s commentary from Nick Smith that National wanted to explore bringing in nitrous oxide earlier than 2013 in order to encourage better farming practices. The Government has not done that; instead it has delayed bringing in nitrous oxide and methane by a further 2 years. Subsidising farming in that way will raise land prices. That is where the value gets capitalised making it harder for foresters to purchase land in order to plant trees. It is a slap in the face for every New Zealander who has bought a smaller car moved closer to work so they can cycle or catch the bus put in a solar water heater or bought an efficient wood stove. They expected a return on that investment and it has just been halved. They got a higher tax bill as well.  
Every business that has taken carbon prices into account in its investments decisions replaced its coal-fired boiler with wood waste or a smart boiler with lower power use or done a complete lighting retrofit across its offices will find that its return on investment has just been halved. Every forester with trees planted since 1990 has just seen its local market collapse and the price it can get capped at $25. Local polluters now need to buy only half the units they thought they were going to need and they can get them from the Government at $25. Professor Euan Mason of the School of Forestry has said that this will dampen any enthusiasm for planting more forest in the next few years so New Zealand’s emissions will rise further.  
I cannot see what the Maori Party gets out of this deal. There is absolutely nothing in the legislation. The 90 percent fishing subsidy was already National policy. The forestry conditions have not changed. There will be a Treaty clause which we have not seen. The nicest thing I can say is that the Maori Party has been conned. It has been promised a commitment to be inside some talks and to sit around the table. Well we went down that road once or twice in the past few years and it was not worthwhile.  
In conclusion the one good thing we can say about the bill is that the legislation will not last. It will not endure. New Zealand cannot bankrupt itself in supporting transnational corporations. 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 Normally our leader Rodney Hide would take a call on this subject but I will make one or two points. My first point is that ACT will not be voting for the Climate Change Response (Moderated Emissions Trading) Amendment Bill. It is fair to say that one or two of the ideas that were put before the Minister for Climate Change Issues and were I think rejected by him would have been reasonably attractive to us and we could have supported them. I think it is well known that we would support a low carbon tax because it is possible with a carbon tax to get the economic incentives right in a way that is not possible under the bill. But it also seems to me that this particular bill and the deal-making that went on around it is of the worst kind.  
It seems to me that politicians around the world have been attracted to the emissions trading scheme because it does not look or sound like a tax. Moreover politicians can hand out the credits in a politically advantageous way and I suggest that that is what is likely to happen under the legislation.  
Already we hear that the emissions trading scheme legislation will include a Treaty of Waitangi clause which means that Treaty settlements will be looked at afresh that iwi fishing interests will be allocated carbon credits and that there is pressure to increase some welfare benefits. As it turns out National has the support of the Maori Party only for the bill to be referred to the select committee. It is obvious who has the leverage here.  
The Government is congratulating itself on the delayed entry and gradual transition that is envisaged for different sectors. But the direction of policy is a crucial signal to investors. That is the important factor not the precise date. A gradual transition does not help much as far as jobs and investment are concerned. The destination is the problem and the signal to businesses is loud and clear: they should invest elsewhere.  
The business sector and investors know very well that the Government is putting in place a mechanism that a future Labour-Green Government could use to massively penalise various energy-intensive industries. For farmers the future costs are not far off and the inevitable consequence is that those costs will be capitalised into farm prices. That will mean lower farm prices than would otherwise be the case. For existing farmers the emissions trading scheme means a wealth loss and reduced future income together with massive uncertainty. For marginal businesses that will not face the emissions trading scheme costs in other countries the signal is very clearly to redirect investment to those other countries.  
It seems to me too that the problem with this process is that it has not been particularly transparent. Some of the advice in relation to the emissions reduction targets—particularly from Treasury—has not I believe been effectively answered by the Government. Treasury is saying that the Minister’s proposals assume a best-case scenario and do not adequately recognise a number of the associated risks.  
Specific concerns are that the Minister is setting a target that in Treasury’s words imposes higher costs on New Zealand compared with our trading partners does not have an unconditional target as a possible fall-back position includes forest credits that are uncertain and have a future liability puts too much emphasis on the current Kyoto Protocol targets and does not adequately consider international financing commitments.  
The Minister may well know more than Treasury does—I accept that that might be the case—but the point I want to make is that if we are going to have a process like this then it should be transparent. Surely the people of this country are entitled to know why the Minister rejected Treasury’s advice. Does the Minister not agree that his proposal will cost another $12 billion to $16 billion over a 9-year period? Is Treasury wrong or is the Minister saying that Treasury is right but that we should bear that cost? Is it true that as Treasury is saying we are imposing a higher cost on New Zealand companies than on our trading partners? If that is the case it should be made public.  
If the Minister wants public acceptance of the scheme he would be wise to go through the sort of process that the Labour Government of the 1980s did with GST. We put out a white paper and submissions were invited from the public. We had a committee which was headed by a National Party candidate from 1984 in order to give it transparency and we took recommendations and gave a response. The problem I have with the Minister is that I think he is going through a process where there is not an awful lot of transparency or accountability. I wonder how many of National’s Cabinet and caucus actually understand precisely what the Minister is doing. 
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
 Tena koe Mr Deputy Speaker kia ora ano tatau katoa i tenei ra. A i te ahiahi nei i poroporoakihia a Ta Hauata Morihana engari no na tatanei kua rongo ake kua hinga a Tikirau Stevens raua ko James Ritchie. No reira koia nei te poroporoaki ki tera kahui a te tokotoru kua hinga i te rangi tonu nei. Waiho ratau kia moe anei tatau e hui nei i tenei ahiahi. Kia ora tatau.  
[An interpretation in English was given to the House.] 
[ 
Thank you Mr Deputy Speaker and greetings again to us all today. Earlier this afternoon we paid a tribute to Sir Howard Morrison but word has just arrived that Tikirau Stevens and James Ritchie have died. This tribute then to that cluster of three who died today. Leave them there to rest while we meet here this afternoon. Greetings to us 
.] 
I rise to take a call on the first reading of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. While we debate the bill in the House today we know that a high-level summit on climate change is meeting in New York bringing together over 100 heads of State and Government in the biggest ever gathering of political leadership. In addressing the summit the United Nations Secretary-General Ban Ki-moon prepared the ground for the United Nations climate change conference to be held in Copenhagen in December in just 74 days’ time. His words are worth repeating for the record. He said: “Failure to reach broad agreement in Copenhagen would be morally inexcusable economically short-sighted and politically unwise.” Those words tell us that we need to get our act together and fast.  
Climate change affects us all and we all have a part to play in encouraging environmentally responsible choices. The Maori Party has consistently raised our call for an emissions trading scheme to be effective fair and transparent. It must be effective in the way in which it reduces emissions to enable Kyoto targets to be met. It must be fair in that all sectors should be included units should be allocated fairly between and within sectors and no sectors should receive more free units than necessary or face disproportionate costs. It must be transparent in that all allocations including free unit allocations to industry and other sectors should be incorporated in the legislation.  
Our explicit support for the first reading of the bill is predicated on the basis of the preservation of our environment and the need to invest in ensuring that the finite resources of Papatuanuku are safeguarded. We do not support subsidisation of the nation’s largest polluters at the cost of householders and small to medium sized businesses. The over-representation of Maori in lower socio-economic areas when coupled with the concentration of iwi interests in the primary sector—forestry agriculture and fisheries—has always meant that the emissions trading scheme is very high on our agenda.  
The bill states that the key purpose of an emissions trading scheme is to enable New Zealand to comply with obligations at the least cost to the economy while providing certainty for economic growth. To be meaningful in its application we suggest that its purpose must also be to transform the economy in a way that takes account of our social and environmental well-being. How should that transformation take place? As a starting point the bill must include some form of statutory provision for the Treaty relationship. We have spoken passionately about the need to protect the property rights of iwi and the citizen interests of Maori. We have taken as our lead the recommendation to the Government from the Climate Change Iwi Leadership Group. That recommendation was that “the obligations of the Crown to Maori including those under the Treaty of Waitangi not be compromised by the New Zealand emissions trading scheme.” 
We acknowledge the support of the Government for an amendment to the bill to include a specific reference to Te Tiriti o Waitangi and we will be working with officials and Crown Law to draft an appropriate amendment. In recognition of the Treaty relationship we will ensure that Maori do not bear a disproportionate share of the burden. We are committed to ensuring that a full array of assistance measures be considered and targeted at rural communities lower-income households and other members of our community who are likely to be more vulnerable to the impacts of climate change. Those individuals are likely to be less able to meet the costs involved.  
The Maori Party has been concerned throughout the process that households and small businesses will face disproportionate costs under an emissions trading scheme. On reading the bill we note that the Household Fund will be disestablished. What is not in the bill but is a key priority for the Maori Party is specific detail around the mitigation of the impacts of the emissions trading scheme at a household level. The Maori Party seeks an extension of the Government’s energy efficiency assistance scheme specifically targeted at low-income households. That is not currently provided for in the bill but we are working with the Government to ensure that there will be particular measures to support households that will simply not be able to sustain increased costs.  
The bill enables the planned increase in the cost of petrol and electricity as a result of the scheme to be halved from 7c per litre to 3.5c per litre for petrol and from a 10 percent increase to a 5 percent increase for electricity over the first 2 and a half year period of the emissions trading scheme. It is estimated that increases in household electricity and petrol costs will be $165 per year rather than $330 per year in the transition phase. We are pleased that specific provision is being made but we emphasise that the two-for-one deal along with the household insulation fund is not a sufficient mitigation of the impacts of the emissions trading scheme for lower-income families.  
Another set of issues that we promoted in the revision of the scheme was around afforestation and engagement in offsetting. We have come to the Government with some very specific proposals which have been outlined publicly. For the record we expected there to be some compensation for iwi who have forests that were returned in Treaty settlements prior to the emissions trading scheme and a commitment from the Government to work with those iwi and the Maori Party to find solutions. We expect that the Climate Change Iwi Leadership Group will play an ongoing role in international negotiations to allow for offsetting. We expect that the possibility of a Crown and iwi partnership will be scoped including exploration of the viability of accessing the Department of Conservation estate. Our commitment to iwi has been that we will do all that we can to create a robust afforestation policy which would include a commitment to iwi-Crown joint afforestation programmes. We have also identified the need for a biodiversity standard to prevent planting over regenerating indigenous forest. Another element of the ongoing work will be to review the rules of the Permanent Forest Sink Initiative to remove any unfair bias against landowners who under the current covenants have to take all of the risk.  
We are arguing for the inclusion of post-1989 indigenous forests and the publishing of accurate tables of the carbon sequestered in them. Although we are pleased that more unit allocation plans are included in the bill than are in the existing legislation the rules for unit allocation for the forestry and fisheries sectors are not in the bill because they are to be set by regulation. There are other matters outlined in the bill that warrant much fuller discussion including the proposed intensity-based allocation of units and the proposed price cap.  
Finally the urgency of the climate change crisis demands the development and implementation of an effective scheme that is not reliant on if or when the price of carbon increases to a sufficient level to incentivise change. The nation urgently needs to grapple with the notion of sustainability and the increasing challenge made by a changing climate system and impending peak oil to think and live differently. It was along those lines that we argued that the Maori Party should be actively engaged in ongoing dialogue on a broader environmental policy programme. We will also continue to urge that iwi be directly engaged in policy design and implementation as the emissions trading scheme develops.  
The Maori Party has open discussions with National; it is no secret. We intend to work hard to balance economic imperatives with environmental issues. This is the first reading debate on the bill; there is a lot to talk about and to nail down as we advance. We want to move positively forward and we intend to make our requirements very clear as we go to ensure that we can indeed live with the final product. In the expectation of our agreements being honoured the Maori Party supports the Climate Change Response (Moderated Emissions Trading) Amendment Bill at its first reading. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 Thank you for the opportunity to speak on the incredibly important Climate Change Response (Modified Emissions Trading) Amendment Bill. It is very much about ensuring that New Zealand’s response to greenhouse gas emissions better balances our environmental responsibilities with our economic opportunities and realities. This scheme balances it far better than Labour’s proposed scheme. The introduction of this bill comes prior to a vital world climate change meeting in Copenhagen and after a huge amount of work was done by the National Government its officials and a special select committee. The Emissions Trading Scheme Review Committee reviewed the previous Labour Government’s emissions trading scheme and related matters. The review was initiated by the coalition agreement between National and ACT. I acknowledge the huge amount of work put into this bill by the Hon Dr Nick Smith and his officials. I also acknowledge the amount of work put in by the chairman of the select committee the Hon Peter Dunne.  
I believe that the committee worked incredibly diligently particularly on the National side and the Maori Party side but I do acknowledge the special detailed knowledge of individuals like David Parker and Jeanette Fitzsimons. Although I do not agree with their views—I do not believe they have a realistic hold of the realities of the impact of their schemes on the New Zealand economy—I certainly admire greatly their detailed knowledge and their continual probing of the officials during the select committee process.  
In the committee report to Parliament there was a consensus apart from the ACT Party about the United Nations central and benchmark projections. The committee recommended two things: firstly that the Intergovernmental Panel on Climate Change’s projections and findings of the fourth assessment report underpin New Zealand’s future international policy negotiations and that is happening right as we speak. It was noted that there remain however uncertainties in the science but that these uncertainties should not be a reason to delay action by the international community.  
Secondly the committee recommended that New Zealand take action now to reduce its emissions and send a credible signal about future policy in order to protect our international reputation particularly in the area of trade and tourism. The committee accepted that human-induced climate change poses a global threat and that there is a need for a global mitigation effort. This amendment bill certainly fulfils those recommendations.  
It is a great pity that Labour was not prepared to reach a realistic consensus on this modified emissions trading scheme bill. I understand that National offered a compromise position but Labour refused it. There was certainly quite a different view from Charles Chauvel than from other people I have spoken to. But I have sensed right throughout the committee process that Labour was going to be very difficult to shift from its position on its Climate Change Response Act last year. I accept that there were two major issues and they were about allocation and the entry of agriculture into the scheme. But it seems to me that Labour has little appreciation of the severe effects that its heavy-handed approach could have on our economy and therefore on our ability to afford dealing with climate change. The agriculture sector will welcome the extension of its involvement from 2013 to 2015 and this change will also help align New Zealand with the Australian scheme.  
However what neither Labour nor the Greens seems to appreciate is that agriculture is the backbone of New Zealand’s economy. They do not appreciate that it supplies us and the world with much-needed protein in a very cost-efficient way that sectors like the dairy industry have a combined debt right now of $20 billion to $30 billion and that the Labour scheme would mean that many hundreds if not thousands of New Zealand farmers would be put out of business. Although Labour and the Greens wanted to lead the world in punishing our farmers the National Government wants New Zealand to lead the world in agricultural emissions research. In the last 48 hours it has been announced that both India and the USA are keen to join New Zealand’s centre of research excellence and to contribute financially to it. They realise that New Zealand has a real contribution to make in the reduction of agricultural emissions research. I am personally extremely pleased with these developments as I crafted much of National’s science manifesto last year which focused on the idea of New Zealand leading the world in agriculture emissions research.  
Lastly the bill’s introduction of an allocation intensity model without a cap will achieve a much more pragmatic balance for industries such as steel aluminium and cement. New Zealand Steel in the electorate of Hunua which I proudly represent employs 12000 people locally at an average wage of $90000 and 5000 to 6000 people around the country. It has been audited to have the world’s best practice efficiency and it co-generates something like 60 percent of its own energy. Under Labour’s scheme it may well have gone out of business meaning that New Zealand would become dependent on importing steel and that steel would probably be made in less efficient mills around the world thus leaking more greenhouse gases into the atmosphere and making world greenhouse pollution even worse. That is the very principle that Labour has failed to understand either in its negotiations or its previous scheme.  
Under this amending bill our vital energy-intensive trade-exposed industries are incentivised to become more efficient thus contributing to a lower carbon world economy. This amendment bill positions New Zealand very credibly in the international scene to combat climate change. It clearly balances our environmental responsibilities with the economic realities and opportunities facing New Zealand right now. 
MOANA MACKEY (Labour) 
: 
 I would say that I am happy to stand and take a call but I am actually not at all happy to stand and take a call on this Climate Change Response (Moderated Emissions Trading) Amendment Bill. I am not sure whether I am disappointed and angry more about the way that the Government has conducted the negotiations on this issue or about the product that we are now debating.  
I think one of the saddest things about today and about this legislation is that the Minister for Climate Change Issues Dr Nick Smith who is in charge of the bill was once the great proud beacon of the Bluegreens. This National Minister once stood up and talked proudly about his passion for the environment. He talked proudly about the work he was doing within National to ensure that environmental legislation with integrity was bought in. Now this Minister will be for ever remembered as a sell-out. He will be remembered as someone who brought into this House terrible flawed legislation that does nothing except transfer the cost from polluters— 
Hon Dr Nick Smith 
: A month ago you were in my office agreeing with it. 
MOANA MACKEY 
: I say to Dr Nick Smith that I will get to that; he should not worry. The bill does nothing but transfer the cost from polluters to taxpayers. Nothing could be more telling than the fact that the Minister did not even talk about the environment in his speech. He did not even talk about reducing greenhouse gas emissions. 
Hon Dr Nick Smith 
: Yes I did. 
MOANA MACKEY 
: No he did not. All that the Minister could talk about was his hollow justifications for why his blue-green credentials have been completely destroyed. I think that is sad. Once upon a time Dr Nick Smith was seen as someone who was genuinely trying to bring a change to National.  
When we were in negotiations towards the beginning of this year Dr Smith told us that the entry date for the agricultural sector was not a bottom line for him and that if it was the bottom line for us then that was fine. Then he went back to his caucus and his caucus reined him in. David Carter had been going around telling Federated Farmers that the agricultural sector would never come in and the Government would be able to delay it and delay it. My local Federated Farmers branch told me that. When Dr Smith told us in those negotiations that the agricultural sector was not a bottom line and that he was happy for it to come in in 2013 I thought: “I bet he has not talked to his caucus about that.” and that is exactly what had happened.  
One of the really flawed parts of this process is that members have not even read this bill. We got it seconds after the Minister started his speech. How in God’s name are we expected to give speeches on such important legislation when the bill has been sitting in the Bills Office all day today? The Government would not release it so that the Opposition and the public could take the time to scrutinise it before members were debating it. Charles Chauvel went to a briefing last night where members were not even shown the bill. They were given a copy of a draft; the bill was not even finished. We are being told that some clauses will be introduced during the Committee of the whole House stage. Even the Finance and Expenditure Committee will not have the chance to look at those clauses. I think that this is an absolute travesty.  
I say to Craig Foss that it is not true that Labour introduced its emissions trading scheme legislation under urgency. Yet again National is rewriting history because the facts do not suit it. The facts do not back up what it is doing with this bill. I want Dr Nick Smith to release those Cabinet papers so that the public can know what the cost will be. I think that Dr Smith should release those Cabinet papers and explain to New Zealand taxpayers why he is telling them: “They pollute you pay.” because that is what Dr Smith is doing with this legislation.  
We have just had the report back of the Emissions Trading Scheme Review Committee. Everyone on the committee worked very hard but that committee was an utter waste of time. Dr Smith has no one to blame but himself for the fact that he has faffed around for nearly a year and now this legislation will be forced through in a few months. Those of us who were members on the committee did not even know what we were meant to be doing. We had terms of reference that covered everything. Apparently the committee was not meant to re-examine the science but it did and we spent a lot of time on that stuff. Just when we were starting to get down to debating some of the real issues and talking about how we could address them suddenly the Government members had obviously been told to hurry up and finish as they had to get it over and done with. The committee was shut down. That is reflected in the minority reports where we say that we cannot have confidence in the report because we did not even have a chance to talk about most of the issues. We were feeling our way around blindly because we had no legislation. The submitters did not know exactly what they were submitting on. They were just concerned that the process meant more and more delay.  
National members say that Labour was not prepared to compromise at all on our scheme. I ask Dr Paul Hutchison whether he has read the Labour Party minority report where we deliberately outlined all the areas where we thought that we could bridge the gap between National and Labour on the emissions trading scheme. We get it that we lost the election. We get it that National campaigned on changing the emissions trading scheme and we are fine with that. As long as the scheme continued to have environmental integrity we were happy to support it.  
Hon Steve Chadwick 
: That’s our bottom line. 
MOANA MACKEY 
: That is our bottom line: an economically sensible scheme with environmental integrity. Labour would have been happy to support such a scheme and I believe that we could have got there. I believe that we could have got there.  
I say to Dr Paul Hutchison who was in none of the negotiation meetings that we had but who seems to talk as though he knows exactly what went on that he has no idea of what went on. We had a very good meeting with the Minister in the week before the announcement of the deal with the Maori Party—a very good meeting. We discussed a lot of issues in extensive detail and we discussed how we could get past them as my colleague David Parker has said. We indicated the areas that we might be able to compromise on but we said that we needed to see the Treasury papers. We needed to see the officials’ advice we needed access to the officials and we needed to run some of those economic models past them to see what the cost to taxpayers and to the economy would be before we could say that yes we would absolutely agree to the scheme. The Hon Dr Nick Smith said that he understood that.  
So imagine my surprise when I got off a plane in Wellington on Monday and turned on my BlackBerry to find out that even though that very morning Labour had sent through the memorandum of understanding—where we thought we needed to go to from here—before Dr Smith went to Cabinet a deal had been done. Labour members were not told. Dr Smith did not even pick up the phone to call Charles Chauvel to tell him that it was all over. He did not even do that.  
Dr Nick Smith then went on the radio and made up a story that apparently he had given us a deadline which he had not and three Labour members who were at that meeting will say that he absolutely had not done that. Why would we have sent through the memorandum of understanding with the next steps to Dr Nick Smith if we had deliberately breached some kind of deadline? We had not. He then invented a story that he had had a conversation with David Parker which did not happen and then he reverted. It is unbelievable that a Minister of the Crown would act in that way.  
Labour wanted to work with National to get an enduring emissions trading scheme. We see that as being absolutely in the best interests of New Zealand. We were more than prepared to compromise. We thought that the discussions were ongoing. We were happy to be part of those discussions provided we had access to the officials and the advice. We told the Minister that and then he went out and announced another deal that has no environmental integrity whatsoever. 
Hon Member 
: Cobbled together. 
MOANA MACKEY 
: It has been cobbled together. The Minister has not even told us that the negotiations are over and now he has tried to accuse us of acting in bad faith. I think that the public will judge that comment from the Minister for what it is which is absolute absolute fiction.  
The Minister then tried to say that the difference between National and Labour is so small that we should just get over it and support his legislation. But Labour does not think that one of the biggest transfers of wealth from polluters to taxpayers is a small issue. We do not think that giving incentives for big polluters to go on polluting and in fact to increase their pollution is in the interests of the environment or the New Zealand taxpayer. If we go by what David Carter said he sees this stuff being phased out over 90 years. That is what we are looking at with this emissions trading scheme. For the Minister to say that he thinks we are being unreasonable because we do not think that Kiwi taxpayers should have to pay for increases in greenhouse gas emissions is absolutely ridiculous.  
But perhaps the most disappointing thing about this entire experience is the position of the Maori Party. Rahui Katene was a very very good member on the select committee. She was passionate about protecting the environment. She was adamant that the Maori Party would never ever support an intensity approach without a cap. The Maori Party said so in its minority report. It stated that it would never support an intensity approach without a cap. We had Craig Foss running around in the select committee. He was talking to the Maori Party chief of staff and trying to make sure that the Maori Party did not put its name to that statement in the report but it did. It stated that there should be no intensity approach without a cap.  
Te Ururoa Flavell gave a speech earlier. I wonder whether he even knows what he has signed up to. He said that he would not support something that would allow emissions to increase. Well I say to Mr Flavell that that is exactly what this legislation does. He said that he would not support a weakened emissions trading scheme. That is exactly what this legislation does.  
I do not know whether the Maori Party members have their heads in the sand whether Dr Smith has told them things that are not true or whether they have some sweetheart deal that they are not telling us about. I think that the taxpayers who will have to foot the bill for this scheme deserve to know because this is a weakened emissions trading scheme. This will increase our greenhouse gas emissions and that is not good for the environment. The people whom Mr Flavell talked about low-income New Zealanders will now have to foot the bill for the big polluters. They will now be allowed to continue to pollute with absolutely no restriction.  
HEKIA PARATA (National) 
: 
Tena koe Mr Deputy Speaker. Tuatahi e tu ana ki te tautoko i nga poroporoaki kua poroporoakihia ki a Ta Howard me tona whanau me taku hoa tata tona tamahine a Donna. Haere haere haere atu ra. A katahi ano au ka rongo kua hinga ano tetahi tangata no tera wahi ara ko ahorangi Hemi Ritchie. Na reira me tangi atu ahau hoki ki a raua tahi. Haere oti atu a oti atu. 
I wish first of all to join in the farewells to Sir Howard Morrison and to express my condolences to his family Lady Morrison and my long-term friend his only daughter Donna Morrison. I recently heard in the House tonight that Professor James Ritchie has also passed away and I extend my condolences to his family too.  
I stand in support of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. I stand alongside the Minister the Hon Dr Nick Smith and my colleagues in putting this bill before the House. As the Minister has stated this bill is about implementing for New Zealand a workable and affordable emissions trading scheme. It takes a responsible approach to the climate change problems caused by greenhouse gas emissions although it is also realistic about how much a small country like New Zealand can contribute. We said we would legislate for and implement a carefully balanced “all gases all sectors” emissions trading scheme. This bill does just that.  
The bill is also consistent with the recommendations of the Emissions Trading Scheme Review Committee. At this point I should like to acknowledge the chair of that committee the Hon Peter Dunne for his careful and well-balanced chairing of the committee and also the members of the committee. I do not share the sentiments of Opposition members that it was a waste of time. I thought that a lot of work was covered by the committee and I would like to share in Dr Hutchison’s acknowledgments of in particular the very detailed knowledge of the Hon David Carter and Jeanette Fitzsimons. The members of the committee including my colleague Rahui Katene brought a balanced perspective to the debate with a strong commitment to Papatuanuku as well as a real concern about jobs the immediate impacts on household costs and an understanding of the importance of primary industry to New Zealand’s economic future. This bill recognises these views.  
In the report of the Emissions Trading Scheme Review Committee four principles were identified in the chapter on Maori interests. The first was fairness and equity. It was that an emissions trading scheme must not disproportionately affect Maori either as iwi collective asset-holders or as individuals and householders. The changes we are making to the emissions trading scheme are about ensuring that the scheme is workable and affordable so that the New Zealand economy and Kiwi jobs are not put at risk which they would have been under Labour’s scheme. The changes halve the cost of the current emissions trading scheme for families and households for the next 3 years of the scheme— 
Hon Steve Chadwick 
: You’re just reading the lines. 
HEKIA PARATA 
: I say to Mrs Chadwick that I am not lying. The changes halve the costs of the current emissions trading scheme for families and households for the next 3 years of the scheme by reducing power price increases from 10 percent to 5 percent and by reducing fuel cost increases from 7c per litre to 3.5c per litre. Through the negotiation of the Maori Party a number of changes are in prospect to the bill.  
The second principle recorded by the committee related to the Treaty of Waitangi. It was that the property rights of iwi and the citizenship interests of individual Maori must be protected. Through the negotiation of the Maori Party a Treaty clause is to be included in the bill. There is recognition that iwi have issues in respect of the deforestation provisions and their specific Treaty settlements and there is a commitment from the Government to work with iwi and the Maori Party in order to find solutions for iwi that have had forests returned to them and that have had Treaty settlements. 
Hon Steve Chadwick 
: The tail wagging the dog. 
HEKIA PARATA 
: Na reira mehemea kei te whakarongo tera mema ka mohio a ia ko Ngai Tahu tetahi o nga iwi kei roto i tera wahanga. If the member would care to listen I tell her Ngai Tahu is one of the iwi included in that category.  
The third principle was about tangata whenua. It was that iwi are enduring shareholders in their land-based and natural resource assets in New Zealand and that they take a long-term multigenerational view. The changes ensure we do not destroy the backbone of our economy by jeopardising the key industries of agriculture and fishing. They defer the date that agriculture is brought into the scheme to the more realistic timetable of 2015 and improve the transitional support for the fishing industry. The changes encourage tree planting by creating internationally valuable credits for forest owners.  
The fourth principle incorporated in that report was about social and environmental concerns. It was that economic effects and benefits must be balanced against social and environmental effects and benefits. The Maori Party has negotiated a specific proposal to enhance the Government’s energy efficiency assistance including home heating and insulation for low-income households and there is potential for the Treaty partners to be jointly involved in afforestation programmes to deliver both climate change and biodiversity benefits.  
I should like to acknowledge the role that the Maori Party has played. Through its commitment to a long-term sustainable future for Aotearoa New Zealand that balances a complex range of issues the Maori Party has shown the kind of leadership that this House requires and respects. I commend this bill to the House. 
Hon SHANE JONES (Labour) 
: 
 Tena tatou katoa. I begin by broadcasting to every taxpayer that the Climate Change Response (Moderated Emissions Trading) Amendment Bill puts in place a scheme that they will go on paying for whilst at the same time the architects of the bill—the Government—give them daily weekly and monthly lectures that there is not enough money to go around. There is enough taxpayer largesse for the Government to reward the vested interests and the corporate forces that actually sustain its support base. This is a shocking and utter ravaging of our tax base.  
Hon Dr Nick Smith 
: It’s not true. Treasury says it’s not true. 
Hon SHANE JONES 
: There was a point when the Minister for Climate Change Issues was a credible voice for environmentalism in his own party. He was a strong speaker but now he is a weak man. His sardonic tone throughout this entire debate has soured what could have been a very strong win-win situation.  
I turn to what an earlier speaker David Parker said about the Treaty settlement process. Our country has international obligations which the Kyoto Protocol represents. Climate change obligations affect all New Zealanders; I say to National that despite its desire to partition Maori and Pakeha there are no differences Hone Harawira notwithstanding between a Maori emission and a Pakeha emission. This notion that the Government can cut a side deal for the Ngai Tahu tribe brings into incredible disrepute the whole Treaty settlement process. During the time Labour was in Government we had a very senior lawyer a QC who was—if memory serves me correctly—agreeable to the Ngai Tahu advisers as well. That QC went acre rood and perch through the entirety of their settlement and did not find a basis for reopening that settlement and giving them an opportunity for further lucre. At the same time people who have similar classes of assets will not get that privileged treatment. This is from the person and the party who railed about “iwi” and “Kiwi”—they are giving a sweetheart deal to one community in Maoridom— 
Hon Member 
: Only one. 
Hon SHANE JONES 
: One. They are foisting it on the rest of us and they will not release the advice or the papers as to why that tiny segment of Maoridom ought to get this privileged status. There is no reason whatsoever why they should shirk their international obligations and not stand side by side with the rest of us. An industry or a sector has to go through a transitional stage; our colleagues have already addressed that fact. Of course there was always going to be a transition. Of course there will always have to be offsetting features. But that is different from choosing one privileged group on the basis of its tribal claims process. The question is why the Maori Party continued to oppose the introduction of an emissions trading scheme that was intensity based but after a small degree of lobbying in the South Island it rolled over.  
It has yet to explain that this is a massive shift of burden and financial liability from corporate interests on to taxpayers. That is the sort of thing that happened in the 1960s and the 1970s and it was actually our party that reversed that very bad trend. Today despite all the camouflage and the rhetoric around climate change the Government is effecting the transfer of that burden. It has been aided and abetted by the Maori Party a group that stands up every week and reminds New Zealanders that Maori are hard-done-by. So what will that party do? It will cuddle up to the international investors who continue to threaten swagger and say that they will take their toys elsewhere if they do not get what they want. Who did those investors pick off? They picked off the Maori Party whose very members have made a reputation and have created their own status through exaggerating the Maori level of woe and economic plight. But perversely enough they have bought into a scheme that actually worsens the taxpayer’s ability to address the very things that they believe lie at the core of their identity: equity fairness justice special pleading secret deals and sell-outs. They will not be able to get away with it.  
At this stage naturally we look forward to the fact that the Maori Party members may change their minds at the Finance and Expenditure Committee because they have said that perhaps they will address those issues at the committee. We will campaign incessantly so that every single member knows that the Maori Party is the party that writes in the minority report that it opposes the bill because of its inequalities including the subsidisation of the nation’s largest polluters at the cost of households and small and medium sized businesses then turns round and shafts those very households. Members of the Maori Party may think that the people who read papers listen to the news and watch television do not understand. It is bad enough that those members do not understand it but the rest of them when we have finished our campaign spreading the facts—the gospel of truth—will know. They will know up and down the country.  
Throughout the entirety of this process we have had to put up with the Minister’s choleric disposition. He sells the notion that a market-based approach will effect a change in investment behaviour. He sells the notion that we can use an emissions trading scheme model whereby investment decisions will be given the signal that if people continue to invest in a particular way then the Government will impose further levies on them because it is not right that the entirety of the nation should bear the burden for the privileged status of a narrow range of shareholders. That is what the Minister started off by saying. But in actual fact one cannot have a market-based solution if one does not have a cap. Otherwise it is akin to changing the fisheries quota system and saying people can catch their quota but we will stop sustainability measures and remove the cap so that they can catch as much as they like and if they catch the last fish in the sea we will get the taxpayer to meet the cost of it. That is not only absurd it is actually very sad because it is an accurate reflection of one of the key principles underlying this Minister’s approach originally which was to go for a market system and not a tax. The Minister says he wants to be a party of light regulation yet he sets up a system that can do nothing other than impose the financial medium to long term costs on taxpayers thereby worsening their financial status over the medium to long term and doing absolutely nothing to move New Zealand investors towards a position where they represent less of a liability in terms of our international obligations. 
The final point I will focus on is accountability. Dr Nick Smith has come to this House and circuitously imposed an indefinable liability on the balance sheet. He has introduced an enormously gruesome possibly unaffordable liability and he is not prepared to observe accountability provide the information and the papers or have a debate as to why this balance sheet should be so burdened with this new policy. I hope during the course of the select committee we get ample opportunity not so much to pin him personally—because he has now destroyed his own personal credibility as a blue-green member—but to hold the Government accountable so that it does not use climate change as a way of further adding weight to an already straining balance sheet. This is not climate change - friendly; this is a jack-up and a corporate takeover. Kia ora tatou katoa. 
Hon PETER DUNNE (Leader—United Future) 
: 
 The most significant events with regard to global climate change are not occurring in this Chamber despite the hot air that is being emitted this afternoon. The most significant events are actually taking place in New York with the acknowledgment from China and the United States about the commitment they have to make to resolve the consequences of human-induced climate change. It is in that context that we need to look at the adequacy of New Zealand’s response.  
We are responsible for some 0.2 percent of global emissions. We do need to play our part and we do need to respond but in my view we need to respond in proportion to our contribution to the overall problem. Around this Chamber there is a consensus that an emissions trading scheme— 
Hon Steve Chadwick 
: How inspiring—to sit in the middle! How inspiring! 
Hon PETER DUNNE 
: Oh dear! There is geyser from Rotorua that is petering out still trying to erupt. Around this Chamber there is a consensus that an emissions trading scheme is the most effective way for New Zealand to respond to the challenge of human-induced climate change. There is a consensus that the science is overwhelming in respect of the problem that we need to address. When we look at the select committee’s report—and I acknowledge the members of the committee for the work they have done—we see that there was a remarkable consensus on 32 of the 34 recommendations from that committee. The points of difference are these: whether we have an intensity-based approach and the timing of the introduction of agriculture into an emissions trading scheme.  
The bill that was passed by the previous Government in 2008 provided that agriculture enter the scheme in 2013. This bill proposes 2015. Given the fact that we have had a review as part of post-election agreements I think that the very logical compromise solution which I hope the select committee will explore was that 2014 was a reasonable date for that transition to take effect. I acknowledge that the issue of intensity is a little more complicated and that the feelings around that will be more deep-seated. But I do get annoyed when I hear the argument that somehow a massive transfer of obligation and cost is taking place. That transfer is inherent in any emissions trading regime. The question is the extent and the timing.  
When we boil it down we are not talking about the most effective way for New Zealand to respond because the clear consensus in this House is for an emissions trading scheme. We are debating essentially some of the finer points of detail of that scheme. While the world is arguing about its response—and increasingly nations talk about emissions trading as the way to go—it seems somewhat banal that in this country where the broad basis of a scheme is largely accepted we are arguing on two particular points and that that argument somehow threatens to derail the whole process.  
One of the things that was clear to the select committee was that those who came before us promoting the view we might describe as akin to that of the sceptics were very much in a minority. The vast mass of the population would accept the proposition that we have to play our part and we have to make a response. The issue then is the nature of that response. The issue then is whether this bill is adequate in that sense. Given the fact that the essential differences between the two major parties are now so small and so specific I find it incredible that they have been unable to date to work out an effective compromise between them. 
Moana Mackey 
: It’s not our fault. It was Nick Smith. 
Hon PETER DUNNE 
: It was not her fault the member says. I say to the country and to the House that if we are going to judge the success of climate change policy and New Zealand’s response by the political prejudices of particular parties we are adopting a very small-minded attitude indeed.  
The issue is actually bigger than the egos of anyone in this House and maybe the member opposite should realise that. When we are all gone the problem we have been part of causing will remain and the solutions we put in place today which may be altered from time to time will be those on which we are judged. We will not be judged on whether egos have been satisfied or whether prejudices have been met. We will be judged on the commitment that we as a Parliament are prepared to make. Given the lack of difference between parties this bill is a comprehensive and effective way forward and we should proceed to pass it. 
COLIN KING (National—Kaikoura) 
: 
 It is a privilege to speak in support of the Climate Change Response (Moderated Emissions Trading) Amendment Bill. In doing so I start off by saying that we should stop the politicking and as the Minister urged work collectively so that we can take this country forward in the best interests of all New Zealanders.  
I stand and speak here primarily as a former farmer and a former director of Meat and Wool New Zealand. Since 2000 Meat and Wool New Zealand has been part of the Pastoral Greenhouse Gas Research Consortium which has invested millions of dollars of farmers’ money into searching for solutions to find a way through the issue of methane emissions. Putting it very simply there is effectively no simple answer at the moment to the problem of mitigating methane emissions from animals. I make that point because I would like to develop that just a little bit further. It is a major challenge. It is also worth noting that the bill we have in front of us is the process through which we are introducing agriculture into an emissions trading scheme. We are a world leader in that and we want to remember that.  
The argument that farmers should be in an emissions trading scheme is on balance sound and reasonable. Let us consider some of the things that make it sound and reasonable. Agriculture is 50 percent of our emissions profile—give or take a little—so we must consider that we are the only country in the OECD in which agriculture makes such a high contribution to our GDP—20 percent. That effectively gives us the profile of a developing economy and developing economies at the moment do not have obligations under the Kyoto Protocol. New Zealand is a major exporter. In fact we export 85 percent of what we produce and in the case of dairy and lamb it is over 90 percent. So we have to work very hard towards finding a way through the impasse of the need to reduce our methane emissions as an agricultural nation. That is what the Government is endeavouring to do.  
Apart from this bill it is very important that we look at what this Government is doing to assist the major challenge confronting this country’s economy. Firstly and most sensibly the legislation is introducing agriculture fully into New Zealand’s climate change response by 2015. Secondly we have set up the Primary Growth Partnership which endeavours to advance $70 million worth of research funding to be matched dollar for dollar. Potentially that will grow to $170 million in a year to assist in that research. Thirdly the Minister of Agriculture is about to announce the centre of excellence that will focus on discovery science to reproduce and develop technologies so that farmers can mitigate methane emissions within agriculture. The fourth most important thing probably happened just yesterday in my view. It was the announcement by the Prime Minister that we will be doing our utmost to form a global alliance to establish and maximise the collective brainpower of the world’s top ruminant scientists to crack the dichotomy that exists presently. That is the dichotomy of a world that is grappling with climate change but that by 2050 will need to produce twice as much food as it does today.  
New Zealanders can take great confidence from a Government that has maturity and vision and that will allow agriculture to harvest its potential and in doing so reach the performance needed. However it would be remiss of me if I did not make the statement that agriculture will be in New Zealand’s climate change response by 2010 by virtue of the amount of electricity fossil fuels and transport that rural businesses use. I worked out that a 1000-cow dairy farm with irrigation will spend $170000 annually on electricity and that does not take into account fuel or transport. Given the isolated basis of those businesses everything those people do in the country will be affected and controlled by the New Zealand climate change response.  
This bill takes a balanced approach to introducing agriculture into climate change and my advice to all members in the House is as we have overcome every other problem let us go forward together united and focused on what is best for New Zealand. Thank you very much. 
A party vote was called for on the question  
That the Climate Change Response (Moderated Emissions Trading) Amendment Bill be now read a first time. 
Ayes 63 
New Zealand National 58; Maori Party 4; United Future 1. 
Noes 58 
New Zealand Labour 43; Green Party 9; ACT New Zealand 5; Progressive 1. 
Bill read a first time. 
Result corrected after originally being announced as Ayes 68 Noes 53. 
Hon Dr NICK SMITH (Minister for Climate Change Issues) 
: 
 I move  
That the Finance and Expenditure Committee 
 consider the Climate Change (Moderated Emissions Trading) Amendment Bill that the committee report finally to the House on or before 16 November 2009 and that the committee have the authority to meet at any time while the House is sitting except during oral questions and during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House and outside the Wellington area during a sitting of the House despite Standing Orders 187 189 and 190(1)(b) and (c) 
. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 63 
New Zealand National 58; Maori Party 4; United Future 1. 
Noes 58 
New Zealand Labour 43; Green Party 9; ACT New Zealand 5; Progressive 1. 
Motion agreed to.