It might surprise you to hear a Green begin the debate on climate change, water and land use by saying that if we applied some sound economics a lot of the problem would go away. It's common to hear people say that economics is the enemy of the environment. That's wrong — it's bad economics that is the enemy of the environment and in NZ we have only ever had bad economics. We have never applied sound economics to our natural resources or the disposal of wastes. While I agree that there are values in life more important than dollars, and our society doesn't recognise them enough, paradoxically we can go a long way to recognising those values if we apply sound economics correctly. A big problem in the New Zealand economy is subsidies. We subsidise trucks, we subsidise cars, we subsidise electricity users, we subsidise commercial fishing, we subsidise mining, we subsidise those who make a lot of rubbish and especially we subsidise dairy farming in Canterbury. Who pays for those subsidies? Taxpayers pay because those industries get publicly owned resources for free, ratepayers pay higher rates to cover the costs of waste to landfill and everyone pays because the real cost is dirty air, dirty rivers, toxic substances in our food, lack of transport choices and a changing climate. In 2012, under the Kyoto protocol, if our emissions of climate changing gases are greater than they were in 1990 — which they undoubtedly will be, as they are currently 25% above this target — NZ will have to pay to reduce emissions in other countries so that the effect on world climate is the same as if we had dealt with our own emissions here. We have had two major studies in NZ, the Land Transport Pricing study in 1998 and the Surface Transport Costs and Charges study a few years later which show that when you include not just the road or rail surface but also all the health, pollution, policing and noise costs to society no form of transport pays its full costs. However, while rail pays over 80% trucks pay only 56%. So we get a lot more freight moved on trucks and less moved by rail than is economically efficient. Who pays this cost? To the extent that the state pays to clean up pollution and crashes and erect noise barriers, taxpayers do, regardless of whether they ride a bike or walk or use a car. To the extent that no-one pays to clean up the effects, the whole of society pays for a reduced quality of life — but the people who make the decisions about sending their goods by truck because it is cheaper to them probably don't live along the motorways. When the Fisheries Quota Management System came into being in 1983 to ration fish stocks in the hope of protecting them from collapse — with doubtful or at least mixed success — resource rentals for fish were phased out. Who owns the fish in the sea? To the extent that anyone does, all NZers own the fish in our Exclusive Economic Zone. But we gave a property right in perpetuity to fishing companies who pay nothing to NZ society for the fish, they pay only the cost of catching them. Nor do they have to pay anything for the non-target species they destroy in the process — such as the devastating effects of bottom trawling on a plethora of amazing, threatened and in many cases still undiscovered corals, sponges, crustaceans and other life forms. The Government has signed a deal with Exxon Mobil, funder of many of the world's climate change deniers, and with OMV, to prospect, explore and mine for oil and gas in the Great South Basin. Aside from the huge environmental risks of that enterprise, including oil spills which could never be cleaned up in those conditions and for which they pay only insurance, it appears from the limited amount on the public record that the royalties to NZers will be less than demanded by many other countries for deep water mining. And so to water and Canterbury in a changing climate. The Intergovernmental Panel on Climate change which issues 5 yearly reports on the latest science of climate change and its causes and impacts has reported this year that the greatest impacts world wide will be on fresh water resources. Already there are dozens of countries which do not have enough water resources within their own boundaries for the needs of their people, and who pipe it in from neighbouring countries. As the world warms there will be far less ice in the glaciers that feed the rivers and provide the drinking water of most of the world's people. Already the great glaciers of the Himalayas have shrunk alarmingly — 40% of the world's people, in India and China, rely on these for their water. The IPCC sees diminishing fresh water resources as so serious that it is issuing a special report in conjunction with its 5 yearly assessment report this year on the impact of climate change on water resources. That is due out before Christmas this year. Water could become a major source of international conflict, more important even than oil. NZ has always regarded itself as immune from water woes, to the extent that when the RMA was written, as recently as 1991, it made no provision for mandatory water management plans. Canterbury is now well aware that water is a scarce resource but we still give it away to commercial users on a first come, first serve basis. The IPCC prediction for NZ is that the west coast will get more rain and the east coast, particularly Canterbury, will get less. To some extent we may already be seeing that happen. It certainly felt like that to Hawkes Bay earlier this year. That will affect flow rates in rivers and ground water levels. Add to that the effect of less ice in the glaciers which feed our rivers and we may see a seasonal change in water availability too. So what is the correct response? The actual response has been massive investment in irrigated dairy farming, relying on water that might not be there in the future, or that will be there only at the expense of the health of rivers and the quality of drinking water for the community. We have some bizarre things going on right now in the rush to secure for subsidised private use what water there will be in the future. We have a proposal by Central Plains Water to take water from two rivers to flood a productive valley where farming doesn't need irrigating, in order to store water for 60,000 ha of dry land so it can be converted from dryland sheep and crop farming to intensive dairying. We have court cases underway, and one is about to start its hearings tomorrow. CPW is fighting off challenges from the Malvern Hills community which will have to live under the dam or whose land is being taken for the dam; and from rival dairy company Synlait. CPW itself is challenging Nagai Tahu's right to water in another case. Whatever happens, the lawyers will get rich. We have a great confusion between public and private interests, with two councils raising loans for the water project which will wholly benefit private landowners. Where is the responsibility of the councils to those who will lose their land under this scheme, and those whose drinking water may be compromised? We have an irrigation company being granted requiring authority status by government so they can use the powers of the Public Works Act to take land, not for a public work like the supply of drinking water, but for private profit. We have a mayor who is supporting the scheme accusing the Malvern Hills community group of being a corporate front. All this is being driven by the fact that the dairying industry is extraordinarily profitable just now and no other land use can compete for profitability with it. But the rest of NZ is actually paying those profits. The CPW irrigation scheme will allow the number of dairy cows on that 60,000 ha to double. Let's look at the effects of that. First, on the rivers. The natural flows in the Waimakariri and the Rakaia will be severely impacted, leading to reduced habitat for a number of wading birds and native fish, drying up of wetlands associated with the river, and reduced trout and salmon fishing. The additional cows will add large quantities of nitrates and bacterial contamination to the rivers, which will be less able to dilute it with their smaller flows and on the already polluted lowland streams flowing into Te Waihora/Lake Ellesmere. That's a big increase in water pollution which affects all other recreational and commercial and household uses of the rivers. Environment Waikato's research shows a direct correlation between stocking rates of cows and nitrate levels in streams. CPW's own reports, recently obtained by Malvern Hills Protection Society, show that there will be increased nitrate levels in ground water and that this will threaten drinking water quality. The irrigation company and the dairy farmers will make large profits out of this water and this waste disposal facility but they won't be asked to pay for either. They are completely free. These are the first great subsidies to dairying. Then, the centre pivot irrigators will substantially increase electricity demand. Canterbury is the only place in NZ where in some areas peak power demand is in summer, because the demands of irrigation are even larger than the normal demands of winter heating. Increased power demand will put pressure on NZ's efforts to reduce climate changing emissions from coal and gas power stations, or it will increase the pressure on rivers for more power stations. Evidence for that is the proposal by the Ashburton Community Water Trust — a partner with CPW in the irrigation project — for a new hydro scheme on the Ashburton river. Hydro power may be renewable and climate friendly but it has major environmental effects, again on the rivers which are already suffering. The farmers using the new irrigation will pay for their power of course, but they will pay the average price, not the marginal price caused by having to build new generation. The need for a clear run for centre pivot irrigators will also drive the clearance of the last trees and hedges on farms in the area, removing carbon sinks, shelter from winds and habitat for biodiversity. There is no charge for removing vegetation. In some parts of the country growth in dairying is driving deforestation of the forests we though would be earning us carbon credits, and so is adding to our Kyoto liabilities. Then there is climate change. The extra milk will have to be processed somewhere and is probably the reason for two new proposed dairy factories in the south island. They will probably run on coal because it is the cheapest fuel, increasing local air pollution and carbon dioxide emissions. There is still no charge on carbon, 14 years after the Green Party first called for carbon to be priced. The Government has announced there will be an emissions trading scheme with the details to be announced over the next month or two. However it seems unlikely that the price this imposes will be as high as the price taxpayers will have to pay in 2012 so there will still be a subsidy. Roughly half our climate change emissions come from methane and nitrous oxide from farming. Dairying is the largest part of that and by far the fastest growing. This is the final great subsidy. In 2012 NZ will be responsible for returning our greenhouse emissions to 1990 levels or paying another country to do so for us. As policy stands currently, taxpayers will pay that bill. The Greens believe our Kyoto bill should be paid by those who emit greenhouse gases. Ironically the dairy industry prides itself, and sells itself overseas, as being unsubsidised. Our market access is helped by this perception. But it isn't true. The industry is subsidised because -it gets publicly owned and scarce water in huge quantities, for free -it pays nothing for the degradation of water quality it causes for other users, and it is not regulated -it does not face the full cost it imposes on the electricity system -it does not face any charge for losses of biodiversity, landscape and shelter from removing trees to make way for irrigators -it is allowed to use the atmosphere which belongs to the people of the world as a free dumping ground for its methane and nitrous oxide, while others pick up the costs of sea level rise, loss of fresh water resources, increased tropical pests and diseases, and all the other effects of a changing climate -the state uses its regulatory powers to allow it to take land from other farmers who do not wish to sell One wonders whether dairy farmers and CPW have done their economic analysis assuming that water will stay free, pollution unregulated and greenhouse gas emissions unpriced? If so, they are likely to be wrong. My advertised topic promised you solutions as well as problems, so here goes. First we have to adopt sound economics. It is ironic that this is usually called green economics, or ecological economics, because conventional economics is skewed in favour of exploitation and against the public good. All public resources captured for private commercial use should be priced. Water used for all commercial purposes, not just dairying, but industry, commercial car washes, wool scouring, and all the rest, should be charged for. This should not include domestic water supply, or if it does, only above a basic allowance adequate for household needs. Everyone has a human right to enough water for drinking, cooking and personal hygiene — though not for swimming pools and dripping taps they never fix and hoses left running on the drive all night. You may have heard the Insight programme on RNZ this morning where the Parliamentary Commissioner for the Environment also expressed the view that water should be priced. We also need realistic resource rentals on fish, oil, minerals, and any other resource where one person's use precludes another person using it. Then we need charges on pollution. The most urgent is greenhouse gases — not just carbon dioxide but methane and nitrous oxide too. Climate change policy in NZ has for too long been held up by two sacred cows — one has horns and the other has wheels. Both should have to pay their way without subsidies, and under Green policies they will. The Greens have a bill in Parliament which is approaching its second reading which will put charges on all waste going to landfill, save rate payers the cost of disposal, and encourage and fund waste minimisation policies like reuse and recycling. Nandor has taken this round the country with such support from councils and even many in business that the Government is supporting it too. We need levies on toxic materials in proportion to their level of toxicity and persistence to encourage less toxic substitutes and fund the clean up of contaminated sites which are currently a cost to taxpayers and ratepayers. The purpose of all this is not to suggest that pollution is OK as long as you pay for it. We still need strong environmental planning and rules based on environmental sustainability. But until industry pays for its resources and its pollution we will get uneconomic, dirty development in NZ because there is no economic incentive to be clean. Andrew Ferrier of Fonterra said on RNZ this morning that our diary industry feeds 40m people and we have to weigh the environmental costs against the benefits of this. That's even more reason to make sure that those costs are part of the economic analysis by being priced into dairy production. Proper pricing of the environment has another great benefit. It enables us to shift taxation off productive things like wages, salaries, successful business enterprise, and replace the revenue with resource rents — a return to the public for the resources they own which are used by private interests. If you want tax cuts, this is the way to get them. We could well adopt the Alaskan approach where royalties from oil drilling are paid as a citizens dividend, equally to everyone. We could do that with royalties from minerals, oil, fish, and pollution taxes on toxics, waste and carbon. That would be the fairest way — a citizens' dividend. But at the very least these payments could reduce taxes and rates and fund much needed environmental restorations. As I said, charging for water does not remove the need for better planning policies. The two have to go hand in hand. There are a number of changes we could make to the RMA to get better resource use. The example of Central Plains Water underlines why we should remove the option of requiring authority status — possibly altogether, as an anachronistic remnant of times when the Ministry of Works was king. At the very least, only public authorities with essential public works should be able to invoke the public works act. Private irrigators, private tourist developers building monorails, and electricity generators, to name three who have recently got this status for works which clearly do not pass this test, should not qualify. A stronger water management regime under the RMA would start with a National Policy Statement on fresh water. It is a major failing of the RMA that we still have no national policy statements other than the mandatory one on coastal policy, despite this being a primary means of guidance for regional councils in their resource management functions. All governments since 1991 have been negligent in this regard. We also need a water management regime where regional councils must develop integrated water management plans for all their river systems. This would allow them to have rules in regional plans making changes of land use a controlled or even discretionary use of land where increases in stocking density could require mitigating action. This is not an attack on farmers. Many farmers are taking real steps to protect streams and rivers, use water efficiently, use fertiliser efficiently and control runoff through nutrient budgeting and nitrification inhibitors. But this steady improvement by some is totally overwhelmed by the increase in scale of the dairy industry which is predicted to grow by 2% a year for the next 5 years. In the end, this increase in scale will make dairying untenable for those farmers who are trying to improve their sustainability. Dairy farming is extremely profitable at present. Farmers are about to get an unprecedented windfall in the payout for milk solids which will amount to a quarter of a million dollars for the average farm and much more for the big ones. This is the time for dairying to shake off its subsidies so it can tell the world proudly that it stands on its own feet. This is the time for dairying (and other industries) to start paying for water, and paying the full cost to NZ of its greenhouse emissions. Green policy would initially have Fonterra take responsibility, on behalf of its farmers, for the increase in dairy emissions above 1990 levels in 2012, and purchase credits and remit them to government to cover the NZ taxpayer's debt at the end of the first Kyoto period. The dairy industry can afford this. It is a soft policy because it still does not charge them for all their emissions, only for the rise above 1990 levels. Eventually they will have to go beyond that, when we sign a stronger agreement internationally. This year's windfall should go into improving sustainability on all farms, rather than into growth. Then the dairy industry can hold its head up overseas and market itself as unsubsidised and fully accounting for the growth in its emissions. Green economics tells us that water, fossil fuels and the capacity of rivers and the atmosphere to absorb wastes are limited. Conventional economics spends a huge amount of huffing and puffing trying to deny this fundamental truth. The Government says it wants us to be a truly sustainable nation. If it means that, the place to start is with sound economics, green economics, where enterprises pay the full costs of their resource use and waste disposal. ENDS