Court Simon; Shaw JamesSIMON COURT (ACT): Minister in this current arrangement where we've separated church and State it's not up to me to anoint a Minister with powers beyond that provided for. It may well have been said in jest Minister; in fact it was said in jest.But it is true that there are many people in New Zealand who do believe that the powers that the zero carbon Act gives the Minister are essentially God-like powers where the Minister can pick and choose which industries succeed or fail which businesses survive or not. Even under the zero carbon Act if some of the plans suggested or proposals suggested by the Climate Change Commission—if the Minister was to act on them some of us who rely on gas heating might find that we no longer have hot showers. But Minister I'm sure you wouldn't do that—not even to punish a member of the ACT Party at 10.45 p.m. on a Wednesday night. Minister I'm really interested because the allocation to industries has a cost. And so if the carbon price is 50 bucks or 100 bucks a ton whatever it is and the current arrangement allows for the Government to allocate so many hundreds or thousands or hundreds of thousands of tons of carbon to an industry or a sector that comes at a cost to the Government. I understand Minister that cost is projected potentially to balloon out to the billions. It's a massive liability potentially. But whether it balloons out or whether it's just a massive cost how does the Government propose to fund this now and in the future?Hon JAMES SHAW (Minister of Climate Change): So when the Government creates a New Zealand Unit (NZU) inside the emissions trading scheme it carries that as a liability on its books. So it's not something that we purchase; it is something that is created but in an accounting sense it does appear as a liability on the books. In 2021 which is the last year that we've got fully verified data for—because there is a time lag—we gave away about 6.6 million units under the industrial allocation programme. Now a fairly conservative estimate is that getting a more accurate picture as we are through this bill could reduce the amount that we hand out by about 800000 units which if you assumed a carbon price of $60 which is what it is today is about a $50 million paper loss on the Government's accounts.The way to think about it is actually less in terms of the cash component of that and more about an NZU as a licence to pollute—to put a ton of pollution into the atmosphere—then we're literally handing out something in the vicinity of 800000 tons of pollution or rights to pollute tons of pollution that aren't grounded in reality right? That means that there's a slackness in the emissions trading scheme. I know that member and that member's party are great believers in the emissions trading scheme and that it needs to be built on really solid foundations. So I'm sure it would distress the member to know that we are essentially we estimate overallocating 800000 tons worth of pollution permits that are unnecessary and that make it more difficult for all of our industries to decarbonise as a result.SIMON COURT (ACT): Oh thank you for your insights Minister. So if I'm to take it from your reply this is an accounting charge and that no taxpayer currently—I just need you to confirm this for me if you could—no taxpayer in the future will have to pay for these allocations. Is that correct?Hon JAMES SHAW (Minister of Climate Change): The more that we allocate for free the less we can auction. So it carries a loss in that sense right? Rather than a taxpayer buying a unit it's revenue that's forgone through the auctioning system.There is a scenario in the future which is that if we succeed and the country decarbonises then demand for New Zealand Units will obviously decline alongside that. But if we've guaranteed that we're going to be handing out pollution permits as we have in perpetuity—albeit at a declining rate—then there will be a point at which those lines intersect where demand actually drops lower than the amount that we're dishing out for industrial allocation.At that point the Government would actually have to purchase units in order to supply them into the market in industrial allocation. That would be quite an absurd situation if it got to that point—which is that the Government would literally by buying probably forestry offsets to back freely allocated units. We're a very very long way away from that scenario at the moment but to answer the question accurately there is a scenario in which that could occur in the future but we are a long way from that point right now.