JEANETTE FITZSIMONS (Green) to the Minister for Climate Change Issues: What analysis, if any, has the Government done to determine the extent of cost-effective climate change emissions reductions that could be achieved within the New Zealand economy by 2020?
Hon Dr NICK SMITH (Minister for Climate Change Issues) : Significant work has been done on mitigation options by the Ministry for the Environment, the Ministry of Economic Development, the Ministry of Agriculture and Forestry, and the Energy Efficiency and Conservation Authority. This advice confirms that New Zealand has mitigation options, but they are more limited and more expensive than those of most countries, because half of our emissions come from agriculture and there is a high proportion of renewable electricity. I urge caution to those who say reducing emissions is easy, and I draw the House's attention to the very significant increase in emissions that has occurred over the past decade.
Jeanette Fitzsimons: Has the Minister seen the Green Party's plan for New Zealand to reduce domestic emissions by 36.2 million tonnes by 2020; if so, does he now accept that a 30 to 40 percent reduction target is achievable at modest cost and is vastly preferable to enduring dangerous climate change?
Hon Dr NICK SMITH: No, I have not had the opportunity to see the detail of the Green Party announcement. But I would note—and it was released only at 1 o'clock today, I understand—that during the period that that member was the Government spokesperson on energy efficiency, emissions grew very rapidly.
Nikki Kaye: What advice has the Minister received on the statement by those who are promoting a 40 percent reduction in emissions by 2020 that a 100 percent renewable electricity supply is easily achievable by 2020?
Hon Dr NICK SMITH: I am advised that that would require, first, the writing-off of $4.5 billion of thermal generation assets. It would also require $11 billion for the replacement capacity of 2,500 megawatts, and $2 billion for additional renewable peaking stations needed to ensure security of supply in a dry year. This amounts to a total capital cost of $17.5 billion, excluding the additional transmission investment that would be required, and this would amount to a 30 percent increase in the power price for all consumers. Going 100 percent renewable would also require the equivalent of another seven Clyde Dams to be built by 2020. I do not describe $17.5 billion, a 30 percent power price increase, and seven Clyde Dams as being easy.
Jeanette Fitzsimons: Has the Minister seen the Green Party's plan to cut the emissions from energy by 5.25 megatons, which I sent over to his office this morning and which does not include 100 percent renewable electricity, but includes replacing the Huntly coal-fired power station with geothermal, wind, and interruptible load, as modelled by the Electricity Commission; if so, does he accept that this is achievable and vastly preferable to enduring dangerous climate change?
Hon Dr NICK SMITH: As I said, I have not seen the Green Party proposals, but I would note that over the last 18 years New Zealand's emissions from electricity have grown by 130 percent. And if—
Hon David Parker: Are they going down now?
Hon Dr NICK SMITH: The member who interjects was actually the Ministerduring the period in which there was a very steep increase in emissions.
Hon David Cunliffe: Are they going down now?
Hon Dr NICK SMITH: The member asks "Are they going down now?". No. Over the period of the last Labour administration, thermal emissions grew hugely and there was a threefold increase in the amount of coal burnt to generate electricity.
Charles Chauvel: Does the Minister think that the recent New Zealand Institute of Economic Research and Infometrics modelling on possible targets overestimates the cost of the different emissions targets, given that it assumes no increase in forestry plantings, given that New Zealand business will face the full price of carbon when overseas companies will not, and given that the modelling uses different carbon prices for different emissions targets; and what other advice has he sought about how to remedy these emissions, so that the Government has an accurate picture of the real cost of a bold target?
Hon Dr NICK SMITH: Firstly, I do acknowledge that any sort of economic modelling is incredibly difficult—for instance, trying to make a pick about the amount of trees that might be planted. At the time when the Kyoto Protocol was signed, we were planting over 70,000 hectares per year, and nobody projected the huge drop-off in plantings that occurred after that. In terms of the analysis that shows there would be an increase in the carbon price with more ambitious targets, I think that applies reasonable common sense—that is, if the global community, in the negotiations in Copenhagen, goes for an ambitious target, it is reasonable to expect that will result in a higher carbon price. No economic analysis will be perfect, but I assure the member that the Government is getting advice that is as wide and as accurate as possible in making this important decision for New Zealand.
Nikki Kaye: What proposals has the Minister seen for reducing emissions in agriculture that would enable New Zealand to achieve a 40 percent reduction in emissions by 2010?
Hon Dr NICK SMITH: I have seen proposals from those who promote a 40 percent reduction that agricultural emissions can be dramatically reduced through using a smart farming approach. These methods entail a one-third reduction in stock intensity, which would, of course, reduce emissions accordingly. However, the consequences of cutting by one-third our stock of sheep, cattle, and deer would cost New Zealanders approximately 50,000 jobs and $6 billion in export earnings, and would significantly reduce living standards for all New Zealanders. Such policy options for agriculture are not being considered. Our efforts as a Government are focussed on investing in the new technologies that will enable emissions reductions while maintaining our important agricultural economy.
Jeanette Fitzsimons: Does the Minister accept the research done by AgResearch and Dairy New Zealand that shows that if the milk payout price is less than $5.50, it is not profitable for farmers to increase their stocking intensity—in fact, they lose money—that the average for the last 10 years has been $5.20, which is where it is at the moment, and that it is expected to head downwards next year; and does he not think that farmers are actually becoming less profitable by increasing their stocking intensities to over 5 units in some cases, with a lot of bought-in inputs that they cannot pay for?
Hon Dr NICK SMITH: It is true that dairy farming has become less profitable as a consequence of declining prices for produce. The issue of the intensity of agriculture, in my view, is not the solution to our challenge around climate change. We have to find the technologies that will enable us to maintain the economic contribution that agriculture makes, while reducing the emissions. In my view, the sorts of proposals that are put forward by those promoting a 40 percent reduction in emissions and a huge drop by one-third in the intensity of our agriculture would have a devastating impact on the New Zealand economy.
David Garrett: What does the Ministry for the Environment forecast New Zealand's net emissions would be in 2020 under the do-nothing option and what does it forecast net emissions would be in 2020 under the emissions trading scheme as legislated, or does the Minister not know that?
Hon Dr NICK SMITH: Officials advise me that on a business-as-usual basis, in 2020 we would expect New Zealand's emissions to be 41 percent above 1990 levels. Currently we are about 23 percent above the 1990 levels, and I think that really brings home—
Hon David Parker: Quote the net figures!
Hon Dr NICK SMITH:—now the member opposite interjects, asking for the net figures. The difficulty is this: I am advised that in 2020 the contribution from forestry will be offset by the harvesting of trees. In other words, although we have banked on forestry offsetting our increase in emissions over the period of the Kyoto Protocol, we cannot count on that in 2020. That is why the member's question is quite relevant. Because our gross emissions are 24 percent above the 1990 levels, it will be a very difficult challenge for New Zealand to get back even to the 1990 levels.
Hon Rodney Hide: I raise a point of order, Mr Speaker. This is about the Minister addressing the question. There were two parts to the question. The Minister addressed the first part, which was what the emissions would be on the basis of the do-nothing option. Then a member from the other side interjected, and I think he got diverted into answering that question. He did not answer the second part. It may be that it was not his intention to answer it, but the second part was about how much the emissions trading scheme would reduce the net emissions by.
Mr SPEAKER: The honourable member knows that only one part of a question needs to be answered. If the honourable member wishes to provide the information to the House, that would be helpful.
Hon Dr NICK SMITH: I am very happy to oblige the member. In respect of the current emissions trading scheme, I do not have the number on me. It is contained in the regulatory impact statement on the original emissions trading scheme. One of the uncertainties, in respect of that, is the extent of the carbon price, because the higher the carbon price is, the more likely it is that the emissions in 2020 would be lower. However, the Government is working on a package of amendments to the emissions trading scheme to better balance the environmental and economic factors that need to be carefully considered.
Jeanette Fitzsimons: Has the Minister seen the research from the forestry industry that shows that with a price on carbon of around $25 a tonne and policy certainty from the Government, it would plant $25,000 hectares a year of additional forests for the next 10 years, and that if it did that, this would completely cancel out the effect of the harvesting of the post-1990 forests and give us 10.9 million more tonnes of carbon stored by 2020?
Hon Dr NICK SMITH: The member is correct. The extent to which we plant trees has a huge impact on our capacity to be able to meet targets in 2020. The difficulty is that although it is true that foresters get credits at the time when they plant trees and those trees grow, they also receive a debit at the time of harvest. Some of the caution from forestry investors is that with the carbon price likely to rise over time, forestry is not necessarily as profitable as some of the analysis would show. One of the very important issues in the international climate change negotiations is for New Zealand to get recognition for the stored carbon from forest products, and that is why this Government gives that issue such priority in those international negotiations.
Charles Chauvel: Is it not highly misleading to the New Zealand public to claim that a bold target will cripple the economy, when the reports relied upon by the Ministry for the Environment and others show that under all scenarios GDP actually increases, and when those reports also fail to take into account any changes in behaviour to reduce emissions or any complementary Government measures that reduce emissions?
Hon Dr NICK SMITH: I think the underlying important issue is that reducing emissions is actually quite difficult for New Zealand. I simply say to the member opposite that if it is so easy, why is it that over the last 18 years we have seen such a dramatic increase? The Labour Party members opposite may say that the $14.5 billion per year that the New Zealand Institute of Economic Research - Infometrics analysis shows a minus 40 percent emissions reduction target would entail is insignificant. Members on this side of the House think it is significant, and that is why we intend to carefully balance, just as we campaigned on, this Government's climate change policies with our objectives for New Zealand to be more successful economically.
Jeanette Fitzsimons: Does the Minister accept that meeting a bold target is not just about sitting back and waiting for business-as-usual to do it for us, but actually needs some proactive Government actions; that if he caps the price of carbon, as the Australians are proposing, we can expect much higher emissions in 2020 than now; and that the design of the emissions trading scheme, if it is weakened, is going to make it harder to meet a target in the future?
Hon Dr NICK SMITH: The member is absolutely right to draw attention to the balance. The more ambitious the target is, the greater the cost is for New Zealanders. Where I would challenge the Green Party to be more upfront with New Zealanders is that if we want to promote a 40 percent reduction target—and remember we are already 24 percent ahead of 1990 emission levels—then the Green Party needs to be upfront about the sort of impact that achieving that would have on power prices, on petrol prices, and on jobs for people in sectors like the agricultural sector. All that I have seen from the Greens to date grossly underestimates what those costs would be for ordinary New Zealanders.
Dr Russel Norman: Does the Minister stand by his statement that it is too hard and too expensive for us to have a responsible target, in light of the fact that the Greens today have released a study that shows that New Zealand can meet that kind of target—a responsible target of 30 percent to 40 percent reductions—and not only is that the case but in the long term New Zealand has no choice but to do so, and that the real challenge to us as a nation is that our economy must become a low-carbon economy if we are to have a prosperous economy in the 21st century?
Hon Dr NICK SMITH: Firstly, I have never said what the member alleged; I have said that a minus 40 percent target, when we are starting at about plus 24 percent in relation to 1990 emission levels, is unrealistic. I simply put this to the member. During the course of the 1990s, New Zealand's emissions went up by 10 percent. During the course of this decade they are predicted to go up by another 14 percent. Do I think that over the course of the next 10 years we can do minus 64 percent? I think that is unrealistic, and I would remind the member that when his colleague Jeanette Fitzsimons was the spokesperson for the Government on energy efficiency, emissions went up.
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