Smith Nick: Urgent Debates — Emissions Trading Scheme—Government Announcement 
Smith Nick: Urgent Debates — Emissions Trading Scheme—Government Announcement 
[Volume:642;Page:12103] 
Hon Dr NICK SMITH (National—Nelson) 
: 
 National broadly supports the Government’s announcements today on an emissions trading system. They strongly replicate what we had stated in terms of the benefits of an emissions trading system in our discussion document  
A Bluegreen Vision for New Zealand 
 which we released a bit over a year ago. 
Four major debates have been going on around the issue of climate change. One of the first of those is that an economic instrument is a better way for Parliament and the Government to send the right signal to New Zealanders than a whole lot of regulatory options or the Government necessarily choosing any particular technology whether it be electric cars forestry or all the range of alternative responses there are to climate change. So I think there is a broad consensus that an economic initiative that sends a price signal should be the primary policy tool in responding to the challenge of climate change. 
The second debate is the one between a carbon tax and an emissions trading system. In Cabinet in March 1999 National had a very intense debate and decided that an emissions trading system was the best of the economic instruments in terms of a way forward. Around this issue the big challenge is that everybody likes the idea of reducing emissions but nobody wants to pay. So the challenge is to come up with a system that will get the maximum benefit at the least cost. The reason National has consistently supported an emissions trading system is that we believe it is the way in which at the least cost—but it is a cost—we can get the most environmental gains. 
In 2000 the current Government decided it preferred a carbon tax over an emissions trading system and that remained Government policy through until 2006. We now have a position where Labour has said it too now backs an emissions trading system and I think that is an important step forward and shows a convergence between National and Labour over policy in that area. 
The third key debate has been around the issue of forestry. The forestry argument is incredibly important to New Zealand. If we want to look at how sensitive New Zealand’s Kyoto balance is around the issue of forestry I note that the projected deficit for New Zealand through until 2012 is 40 million tonnes and 34 million tonnes of that is in respect of deforestation. We have consistently argued that the best way in which we can get landowners to plant trees is to give them a clear business signal that they will get the benefits of those carbon credits. That was the view that Simon Upton advised in Kyoto that New Zealand would take—that we would allocate those carbon credits and debits to the landowner. That was a position we held and in fact Labour confirmed it in June 2000. We were very disappointed that Cabinet in July 2002 reversed that decision. We do believe it has contributed to a loss of confidence in the forest sector in recent years that has seen quite significant loss of forests. 
It is a very significant decision by the Government today to allocate those Kyoto credits to the forest owners. Let us not pretend—it is not a free lunch. Those forest owners will also get the debits. The reason National believes it is right and proper to allocate both the credits and the debits to the forest industry is that landowners will be provided with the incentive to do the right thing by climate change: to retain forests and to plant new forests. National believes it is a substantive step forward that on this key issue of forestry we also have a convergence of views. 
There is a fourth issue that has been equally difficult and it is that for New Zealand the most challenging of the sectors is the agricultural sector. I am sure Labour MPs will have been lobbied as hard as National MPs have been as to why the energy sector might be exempted or the agricultural sector might be exempted or the transport sector might be exempted. There has been a pretty intense debate. Again I think there has been a sensible convergence towards the acknowledgment of the fact that if an emissions trading system is to work it needs to include all sectors and it needs to include all gases. There has been and will be some debate around the question of what the right order is. Again the level of consensus that has developed is surprising. I think everybody accepts that the challenge for the agricultural sector which is so vital to the New Zealand economy is probably the hardest in regard to the issue of climate change. So we support the Government’s decision that the agricultural sector should be the last to enter an emissions trading system. 
I think that the debate between the transport sector and the energy sector is a pretty difficult game. We said in our blue-green paper that the energy sector should go first. The Government has decided that the transport sector should go first by a year. We are not going to argue over that. My view is that it is a pretty balanced call. There is a difference but I would not want to exaggerate its importance. 
I think it is also important to reflect that the tough decisions are still down the track. It is very easy for us in Parliament to have an academic argument about emissions trading being a good idea but the rubber hits the road when the consumer hits the price. I think that the decision by the Government to defer beyond 2008 and the next general election is so that another Government takes the heat about what those price impacts will be on consumers as they fill up their cars at petrol stations and as they receive their power bills. 
Also there are very difficult decisions to be made about industries like the steel industry the cement industry and the aluminium industry which are affected by international competitiveness. The Government has said that there may be some compromise and some deal with them. Again those decisions have been deferred on to the next Government. So the hard decisions are to be made further down the track. 
I think it is also important to reflect this afternoon on New Zealand’s actual record of emissions because it is not one of which we can be proud. Since 1999 emissions have gone from 69 million tonnes a year to 77 million tonnes a year. That increase of 8 million tonnes a year in our greenhouse gas emissions represents an increase of 12 percent. The figures released today by the Government show that a 20 percent increase in greenhouse gas emissions will have occurred over the 9 years of this Government. Those figures are the eighteenth worst in the OECD in terms of percentage growth. Those figures are substantially worse than our major trading partners. Looking at that growing surge of greenhouse gas emissions should motivate all of us to be determined to try to implement measures that will constrain them. 
National also would want to reflect on the differing and interesting definition of “carbon neutrality”. I think the Government has been a little inventive in this area. The Government is effectively saying it wants carbon neutrality but it would exclude agriculture. In a funny sort of way—and I do not want to be political about this—I do not think we are too far apart on this issue. National has said that it wants a 50 percent reduction in emissions by 2050 based on 1990 figures which is actually about a 65 percent reduction. Labour is saying with its announcement today that it wants to be carbon neutral—if we can call it that—excluding agriculture which is 50 percent of emissions by 2040. Well it is within a bull’s roar and we should not judge the outcome in terms of claiming what emissions might be. I do believe though that calling that “carbon neutral’’ and excluding half our gases does not seem completely correct. 
The one key area where there remains some difference between National and Labour and an area in which New Zealand needs to make progress—and I would challenge the Government on it—is around renewable energies. The real challenge with the Resource Management Act is how long it is taking for renewable energies to be able to be introduced whether it be hydro geothermal or wind generation. If we really are going to make progress we need to have a far more concise process for dealing with consents. We need only look at the options of the West Wind project in this city to see how dragged out those proposals have been. Again National says this is a good starting point. There has been a convergence of views. We believe that an emissions trading system is the right way forward for New Zealand in terms of the important issue of greenhouse gas emissions and climate change.