Climate Change (Emissions Trading and Renewable Preference) Bill - Second Reading

The Climate Change (Emissions Trading and Renewable Preference) Bill had its first reading 8½ months ago, on 12 December last year. During those 8 months that we have been considering it, the mass of arctic sea ice has shrunk still further, and this year looks like being a record low. Climate change does not wait while we dither. The Stern report shows that climate change is the most serious threat to the world economy—let alone our societies—and it will cost us far more money than action to limit it would cost. New Zealand stands to lose more than most as we are more dependent on agriculture, and therefore on climate, than other developed economies, and more of our population and infrastructure is by the sea.

The head of the Intergovernmental Panel on Climate Change Rajendra Pachauri, says we have only 2 to 3 years to turn the situation around and to start to put our emissions into decline. This bill does not reflect that urgency. I called in my first reading speech for the Government to sign up to keeping within the 2 degrees warming target that is widely recognised as being the limit to climate change that we can tolerate. It has not done so. I called for targets for greenhouse gas reductions within New Zealand to be put in the bill, and that is something the Greens have achieved.

We now have an amendment coming whereby the Minister must set targets for emissions reductions and gazette them. Initially these will be the targets already announced as part of the Energy Efficiency and Conservation Strategy, such as 90 percent renewable electricity and halving per capita transport emissions by 2040. The 5-yearly reviews of the emissions trading scheme will measure our progress against these targets, and no doubt further, more stringent ones will be set as the problem gets even worse. The Greens have always assessed this bill against the two criteria of effectiveness and fairness. Both effectiveness and fairness were further compromised by the Prime Minister’s announcement in May that phase-out of free allocations would be delayed for a further 5 years, and the entry of transport by 2 years.

We have been unable to reverse those changes, but we have secured others that improve both effectiveness and fairness, and the slow phase-out that is now in the bill can be reviewed at the 5-yearly reviews. I said in my first reading speech that we need to help people adapt to higher electricity prices with compensation payments and by insulating homes and providing clean heaters, so that when prices go up their bills can still go down. We are very proud that we have secured a fund of $1 billion to provide varying levels of subsidy depending on income for insulation, draft-stopping, pipe and cylinder lagging, efficient shower heads and lights, and clean heaters such as wooden pallet stoves and heat pumps.

The Minister has said that this is the largest energy efficiency programme the country has ever seen, and he is right. The detailed implication will be overseen by the board of the Energy Efficiency and Conservation Authority, which has many years of experience in running these programmes. My hope is that priority will be given in the early years to families with health problems that are exacerbated by cold and damp, to families where there are preschool children home all day, and to families where there are elderly people home all day. This will not just be fairer, to help families cope with their power bills and keep them healthier and happier, but it will also reduce emissions and make the emissions trading scheme a lot more effective than it might otherwise have been.

I also said in my first reading speech 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 we have addressed that issue too. There is an amendment coming whereby the allocation plans, following public consultation and their finalisation, will come to Parliament for scrutiny by a select committee for a month or so, at which stage anyone in the House can move a resolution, and the House can vote on whether the allocation plans should be rejected or approved. In case anybody thinks that industry will have a reason to lobby for delay, I say it is actually the other way around, because under the dates set in the Climate Change (Emissions Trading and Renewable Preference) Bill, emitters from industry will become liable for 100 percent of their emissions on the due date and, if they play games through the allocation process, their free allocation will not come in when it should.

I think that is a strong reason for everybody to cooperate on getting fair and transparent allocation plans. I have also said many times that we do not want to let this grandparenting of free credits lock the New Zealand economy into old technology. As the bill was introduced, if someone had come along with a new process that could make steel with only half as much carbon emissions per tonne, it could never be established in New Zealand, because it would have been competing with another business that was less efficient and 90 percent grandparented. We have fixed that with a special contestable innovation pool of credits, which comes out of the 90 percent cap, and where businesses can bid to show that they have innovative technology that will set New Zealand on a downward path—a course of economic transformation towards a low carbon economy.

I am proud of that change, and I believe that will do a lot to encourage people with new technology to set up their businesses in New Zealand. There are some more changes that we have achieved to improve the integrity of the allocations system. One is the coal question of Russian hot air. As the bill was introduced, credits owned by Eastern European countries, because their economy collapsed after 1990, are legitimate currency under the Kyoto Protocol. But they are likely to crash the price of carbon if they are widely available. The Government has agreed that, as bilateral deals are going on with a number of these countries to green their assigned amount units—in other words, to ensure the price they get for them is invested in genuine carbon reduction—Russian hot air is outside the scheme until it is greened, and then it can be brought in. I think that is a significant improvement.

We have also made it clear that although the pool of free credits is equal to 90 percent of 2005 emissions for trade-exposed industries, there is no requirement for all of it to be allocated, if that is not all necessary. In a further amendment, the Minister must consider the extent to which firms are trade exposed, so that, if a firm is trade exposed for only part of its production, it will not be grandparented free credits for the whole of its production. I said in the first reading debate that I would work to get coal-seam methane included, because that was a completely unacceptable subsidy to the coal industry, which officials were proposing would never be remedied. We did that in the Finance and Expenditure Committee and that is now in the reported-back version of the bill. Like the Parliamentary Commissioner for the Environment, the Cawthron Institute’s report, and many environmentalists, we were concerned that the incentive to plant pines for credits might be at the expense of important New Zealand biodiversity, such as regenerating native forest or tussock land.

We wanted conditions in the Act and we were told that this is a matter for the Resource Management Act. So the Resource Management Act will fix it! The Government has committed to a national policy statement on biodiversity under the Resource Management Act with a gazetted timetable to achieve that. That will give needed protection to important areas of biodiversity in New Zealand. We still believe that the free credits to agriculture represent a huge subsidy, given that it is completely exempt up until 2013. The Government will not shift on the 2013 date but we have achieved a gazetted target for reductions in emissions before 2013, which the Government commits to.

The most important thing for agriculture will be where the research money goes in the meantime. We do not think it should all be poured down the single chemical channel of nitrification inhibitors. There is agreement that the other sustainable solutions that can reduce nitrous oxide from soils will be pursued at least equally. One of the emails we received when we called for public input on our decision was from someone saying: “I’ve been working for some time to set up a business where I’m going to produce wood from waste wood fuels to replace coal. If there is no price on carbon, this business will fail.” We need a price on carbon so that innovative solutions like this can be adopted throughout the country. The biggest risk is that we think this bill has fixed climate change. It has not. There is a great deal more we need to do, and the Green Party is committed to doing it. Thank you.