Parker David: Third Readings — 
Text is incorporated into the Bound Volume 
Parker David: Third Readings — 
[Sitting date: 17 November 2009. Volume:659;Page:7715. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 I rise to speak to the third readings of the bills arising from the Settlements Systems Futures and Emissions Units Bill. Labour members will be supporting this legislation. It deals with mechanisms to ensure that we have the proper governance of trading in emissions rights in the future including as to futures. 
We cannot embark upon a discussion of that without considering what will be available to be traded in New Zealand. Those units in the main will be derived from Kyoto Protocol - compliant markets under the New Zealand emissions trading scheme and we cannot make reference to that without the consideration of the developments over recent weeks in New Zealand in respect of the New Zealand emissions trading scheme. 
I agree totally with the criticisms made by the ACT Party member John Boscawen of the process that was run recently in respect of the changes being made to the emissions trading scheme. It was a terrible process. I think that everyone but the Government members agreed that the process was poor no matter what their views are as to the substantive merits of the changes that were being proposed. Legislation that has very serious consequences for the New Zealand economy was being dealt with in a rushed way. 
No matter what side one sits on the substantive issues one should be critical and concerned that we live in a country that could handle those multibillion dollar effects in such a contemptuous way. 
This has been pushed through with inadequate time for people to properly engage in the detail. The most egregious examples of that were the attempts to limit the rights of submitters to properly participate in the process. There was a proposal at one stage to require all submitters to present their submissions in only 1 day. 
Jo Goodhew 
: People listening are going to get muddled and think you’re talking about the actual bill. 
Hon DAVID PARKER 
: That member might want to avoid the reality that as a consequence of what the Government has done the number of units that are able to be traded under the legislation arising from the Settlement Systems Futures and Emissions Units Bill is much reduced. But that is the reality so I am entitled to talk about it. 
The reality is that National tried to truncate the process and not allow submitters in respect of that major change the ability to talk to their written submissions. That was avoided only because the other parties including the Maori Party the ACT Party the Greens and Labour agreed that that was an abuse of the processes of the select committee. We stood our ground and made National listen to submissions. 
But that is but one part of the poor process. The regulatory impact statement that accompanied the bill recorded Treasury’s very grave concerns that the analysis that lay behind the bill was not adequate. The regulatory impact statement that accompanied the bill made it clear. The Cabinet paper that lead to the bill had that same regulatory impact statement but it additionally had a warning not just from Treasury but also from the Ministry of Economic Development that what was being proposed was wrong. 
The effect of the legislation has been to extend the period of transitional support to major emitting industries. I agree with Mr Boscawen that major emitting industries need some transitional support. If we do not give them free emission rights during that period of transition they would close up we would lose the jobs and we would lose the profitable contributions of those businesses to our economy. We might lose those industries forever. But with appropriate transitional support those industries might be viable long into the future for the benefit of our economy and indeed at no detriment to the world environment. 
But that does not mean that transitional support should exist forever and it does not mean that the transitional support should be tied to the rate of phase-out of transitional support in Australia the United States China or wherever. Those factors are relevant but New Zealand should do what is in New Zealand’s economic interests as well as what will achieve the environmental purpose of the scheme. 
There are examples that have been used by economists time and again including by the adviser to the committee Dr Suzi Kerr. She is currently a visiting professor at Stanford University. She is one of the world-renowned experts in emissions pricing. We are lucky to have her in New Zealand most of the time. She is a niece of Roger Kerr from the Business Roundtable. She normally works at the Motu Economic and Public Policy Research Trust. There is no doubt about her credentials. She is a very clever woman indeed as evidenced by the fact that she is lecturing on these very topics at Stanford University in the United States at the moment. 
Dr Kerr makes the very clear and easily understood point that what is economically efficient for the country is not necessarily what is in the interests of the emitter. Of course the emitters want more and more free emission rights for as long as possible. But that does not make economic sense for New Zealand and we had some examples of why that is such a nonsense. 
The Parliamentary Commissioner for the Environment—who is a an officer of this good House; an Officer of Parliament—came to the select committee and quoted a study that had been overseen by a group that included I think Treasury representatives. Anyway it was one of the leadership forum papers during a prior iteration of the emissions trading scheme. That report found that the amount of subsidy or if one does not like the word ‘subsidy’ the amount of contribution of free emission units to Rio Tinto in Bluff is the equivalent of $100000 per employee per annum. That is a very real cost. If those free emission rights were not given to them the Government would have the equivalent of $100000 per employee per annum. 
Hon Steven Joyce 
: Would you close it down? 
Hon DAVID PARKER 
: No I would not close it down. But nor would I buy into the myth that it will. What I am saying is that we should not phase out their free allocation at the rate of 1.3 percent per annum the effect of which I say to Mr Joyce is that even after 50 years more than 50 percent of their emissions will still be being paid for by taxpayers. 
The proper analysis when applied by economists like Suzi Kerr is to make comparisons with tariff policy. New Zealand reduced our tariffs ahead of our trading partners. Not many people in New Zealand think now that that was economically wrong for New Zealand even though we did it faster than most of our trading partners. 
We can have a big debate as to whether we should have done that over 5 years rather than over 1 year or over 10 years but no one says we should have done it over 50 years. No one says that by 2050 if we were phasing out tariffs we should still have tariff protection equivalent to 50 percent of where they were when we started to phase them out. 
The economic principles that underlie that argument are exactly the same as those that apply to emissions pricing. It is what the economists say and it is what Treasury says and they are correct. Instead the Government is giving such generous free allocations to the likes of Rio Tinto to the farming sector and to Methanex so that by 2050 still more than half of their emissions costs will be borne by taxpayers. 
Taxpayers will be paying for all their own emissions in respect of their fuel and electricity. Taxpayers—me other taxpayers all the individuals in New Zealand—will keep paying the full cost of their emissions for their transport and electricity. They will also be paying for more than 50 percent of the emissions by the major emitters because those major emitters will not have been phased out of their free allocation. It is wrong and as a consequence Government debt cumulates to $110 billion more by 2050 than would be the case under the status quo. 
One hundred and ten billion dollars is the equivalent of between 13 and 17 percent of GDP. The National Government is doing what Sir Robert Muldoon did previously. We have a current account deficit as well as growing Government debt and through this one measure alone the Government is visiting on future generations another $110 billion of Government debt. Treasury’s estimate—which the Government now rubbishes; the Government feels free to rubbish anything Treasury says if it disagrees with it—is that New Zealand’s Government debt will increase by between 13 and 17 percent of GDP. 
The error that that was not discovered until the last day of the select committee was not even enough to cause the Government to take a breath. It did not think that maybe it should look at the issue for another month and get to the bottom of it. The Government just pushed on remorselessly and it is visiting on New Zealand’s younger generation an unaffordable bill which will see wealth destruction in areas like farming which occurred when supplementary minimum prices were withdrawn because they were no longer affordable.