Parker DavidHon DAVID PARKER (Minister for the Environment): I rise in support of this bill. I want to respond to some of the comments that were made by the ACT member Simon Court. He said he would prefer an emissions trading scheme (ETS) that had no floor price no ceiling price linked to international markets. We used to have one and the ACT Party voted against it. That's how the ETS was originally designed at a time when Kyoto was still alive. We had a market that was attached to international markets. Now why that went wrong and why we're not ready yet to re-enter international markets was there was a huge oversupply of units in the world market caused by the fact that the US did not ratify the Kyoto Protocol and their allowances for their emissions were still in the international system. That was followed by the collapse of the Kyoto Protocol itself and the failure of the successive protocol to set international limits to world emissions. What that meant was that the remaining Kyoto-compliant units that were surplus in the system—sometimes called Russian or Ukrainian hot air—had nowhere to go except the New Zealand ETS because every other functional ETS in the world banned them from their system.Now the National Party cynically allowed that to continue because it was a rules-based market. But the rules should have been changed given that change in reality because for a price-based mechanism to cause the economy to adopt choosing the lowest-cost pathway to reducing emissions you have to have an effective price. The price went to close to nothing. The price went to close to nothing and therefore the ETS was nothing but a sham. Therefore what this new Government had to do—in fairness Paula Bennett stopped the Russian hot air units coming in but then they put a price floor in without a cap which is very unequal. So we've now got to the point where we know that we cannot rely upon international markets because they're not mature enough.We also know that if we expose the New Zealand market to those units the price in New Zealand will be very low and it won't change our emissions profile. That's what the ambition of emissions pricing is to do: expose through that market—and it is a rules-based market—the lowest price mitigation that you can do. You want to do most of it at home because otherwise what you would end up doing is send cheques overseas and still have the future challenge of reducing New Zealand's emissions. So you'd get to the periods when we made promises and we still wouldn't have reduced our emissions.So these suite of changes that have been made to the ETS in response to the collapse of the Kyoto Protocol and the oversupply of units internationally have been absolutely the right thing to do. It's right that we have a confidential reserve in an auction. It's really no different to the confidential reserve that the seller of just about any item at auction uses to protect their interests. There are additional protections that the select committee have put in place which I think are good and that's the involvement of the Minister of Finance which others have explained. Accordingly I think it's clear that this is desirable.The final point I will make is that there was an error in drafting. We've acknowledged that at the first reading. The Minister has acknowledged that. During the election cycle when the House had risen I was one of those who was contacted by people who are active participants in this market and they recommended to me—and I won't name the person but I trust their judgment in these matters. They said it was very important for the stability of the pricing mechanism and the long-term effectiveness of the emissions pricing regime that we had a confidential reserve. There are a relatively small number of large participants in this market. It would have been open to collusion between those people in a way that could have disrupted the market. That is not in the long-term interests of New Zealand's emissions reduction market because that's what this is meant to be. Accordingly I recommend this bill to the House.