Climate Change (Emissions Trading and Renewable Preference) Bill — First Reading
The time for debate about whether human-induced warming is occurring is over. A few sceptics remain, but their arguments have been rebutted repeatedly by the Intergovernmental Panel on Climate Change. Sceptics claim that changes in solar activity are causing the warming—sunspots. The Intergovernmental Panel on Climate Change has systematically investigated and debunked that idea. Sceptics say that warming has stopped and that the world has cooled since 1998, but that is an example of how statistics can be used to justify a lie. The year 1998 was a standout year. It was much warmer than any previous year, and the years since have not been so warm, but they have still all been warmer than the years before 1998. If we remove that one anomalous year, then the warming trend continues smoothly.
So there has been enough talk; it is time to take action. If we had taken action when the Kyoto Protocol was first negotiated in 1997, on the basis of some pretty certain science, then our task today would have been much easier. But like most of the world, we wasted those 10 years, saying “After you.”, and “No, no, after you.”, while the world burned. Although New Zealand’s emissions are small on a per capita basis, they are 4½ times worse than China’s, despite our renewable hydro resources and despite all the coal we are selling to China that it burns and takes responsibility for. Our extraordinarily high emissions per person are a serious trade risk if we do not reduce them substantially by the time our trading partners demand clean trade. Compared with Europe our cars average fuel use of 11 litres per hundred kilometres, while theirs use 7 litres, and our car ownership is the highest in the world. Our homes are poorly insulated, our industry has bad-quality electric motors and compressed air systems that leak, and we have very little public transport. And that relates only to the half of our emissions that do not come from farming.
Addressing climate change has to use all the mechanisms at our disposal: public information, education, skills training, demonstration, benchmarking, regulation, and pricing. This bill is about pricing. It is designed to make fossil fuels and other causes of climate change relatively more expensive, and renewable energy, energy efficiency, and alternative farming technologies relatively cheaper. It is designed to change behaviour and that is how we must measure its success.
Since 1993, the Green Party has been advocating a carbon charge, with corresponding reductions on the bottom band of income tax. So we welcomed the Labour Government’s 2002 policy that among other things promoted a carbon charge. But because the Government did not say what it would do with the money, it lost the political battle and, frightened of even more tractors on the steps of Parliament, it abandoned the charge in 2005. That was 4 years wasted. We now have a second-best system of an emissions trading scheme, and economists and a number of business people have recently come out in support of the view that it is a second-best system. Too late, those who now regret their opposition to the very much simpler and fairer carbon charge, with lower compliance and administration costs and real revenue to recycle, must accept their role in killing the better scheme and accept the second-best. It is here, and we have to make it work.
That is why the Greens will support the bill’s first reading, but we will work very hard to improve it at the select committee. The first question is “Will this complex system reduce New Zealand’s greenhouse emissions?” The answer is—on its own, not very much. There is no requirement for any of the emissions reductions to be made in New Zealand. The intention here seems to be to purchase cheap Clean Development Mechanism credits from developing countries that have no caps on their emissions but that need funding from developed countries to improve their energy efficiency, build renewable energy, and expand their forests. So far, so good—that is how Kyoto works—except that there is now a lot of published evidence that many of those Clean Development Mechanism credits are poorly verified and are, in fact, fraudulent. We need to do a lot more at home rather than rely on those trades.
The Government estimates emissions trading will reduce transport emissions by 0.3 percent; the statistic disappears into the margin of error in any calculation. By comparison, setting fuel efficiency standards for vehicles entering the country, as now agreed to under the Energy Efficiency and Conservation Strategy, will save 25 percent of the fuel that those cars use. This system is claimed to be a world first that includes all sectors and all gases. In fact, it does neither. Half of our emissions are not covered at all until after the first Kyoto commitment period is over.
Agriculture, the major emitter of methane and nitrous oxide, is totally exempt until 2013. Dairying must be the most profitable sector of the New Zealand economy at present, as well as one of its dirtiest. It is the fastest growing source of methane and nitrous oxide emissions. It can well afford to pay for them, but it has been given a taxpayer subsidy for 5 more years, during which time it will grow, converting more and more forest area to dairying, and being aided and abetted by the Government’s own company, Landcorp, that actually does the conversions. It is not as if there is nothing farming can do. Nitrification inhibitors are now available to significantly cut nitrous oxide emissions, but where is the incentive to use them? This huge taxpayer subsidy of well over $1 billion is founded on an agreement in 2003 that the industry has not kept, despite what Mr Anderton just said about research funding. The industry has done nothing to voluntarily reduce its emissions.
Also exempt, but in this case forever, is the methane emitted from underground coal mines. New Zealand is accountable for it under Kyoto but, once again, in a substantial subsidy—this time to the coal industry—the taxpayer will pay for coal seam methane. Unlike a carbon charge, the emissions trading scheme produces no revenue for the Government to recycle in order to help the most disadvantaged become more energy efficient so they can cope better with the higher prices.
It is quite possible to have higher fuel and power prices but lower bills. If a person’s home is insulated and that person has better public transport and a more efficient car, then that person needs less energy. But any money provided for that—and there should be some—will again have to come from the taxpayer, because what little revenue the scheme does provide is all going to subsidise farmers.
Some weeks ago I warned that the Green Party is not of a mind to support legislation that leaves all the most critical decisions to regulation, over which Parliament has no scrutiny, and that is what this bill does. It is critical for the environmental integrity of the scheme that we do not allow Russian hot air—units resulting from the collapse of their industry—into our registry. But that decision is left to an Order in Council decision under new section 30G, as is any decision to link with other trading schemes overseas. Also without parliamentary scrutiny, the Minister has wide powers of exemption, may issue new New Zealand units and auction them, and must make allocation plans.
The hardest decisions of all—and I have been warning of these since the mid-1990s—are the decisions around the allocation of free credits to protect firms that are trade-exposed. The timing in this bill allows the Government to be comfortingly vague until after the election about who will qualify for free units, how many, and over what part of their emissions. The crunch decisions will be announced after the election in the form of allocation plans. We considered very carefully whether we could support such a delegation of powers by Parliament. The mitigating factors are that clear criteria are set in the bill and there will be a process of public submissions. We believe that that has taken care of enough of our concerns, and that it will be workable. However, we will work very hard, with many others who want a system with environmental integrity, to have agriculture enter earlier, to have coal seam methane captured, to exclude Russian assigned amount units based on hot air, and to persuade the Government to sign up to the internationally recognised critical goal of no more than two degrees warming and to a very substantial emissions reduction target within New Zealand in the post-2012 period.
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