Key on Emissions Trading Scheme

John Key devoted most of his speech at National’s LNI conference today to the legislation setting up an Emissions Trading Scheme (ETS). He made very clear on numerous occassions that he supports an ETS as the best response to the challenges of climate change:

It is to that end that we consider a well-designed, carefully balanced Emissions Trading Scheme (ETS) to be the best tool available for efficiently reducing emissions across the economy.

He then pointed out some issues with the current legislation:

• Submitters on the bill have had their speaking time cut drastically short.
• There’s been little transparency about the effects the ETS will have on already struggling Kiwi households.
  
• Officials have admitted that the Government will profit by between $6 billion and $22 billion from the tendering of emissions permits.
• No clear analysis of exactly how much the scheme will reduce emissions, and
• The scheme has been subject to last-minute changes, including the decision to push out the date for inclusion of the transport sector. This decision has flow-on effects that the Select Committee has been given no opportunity to analyse.

Now this legislation is incredibly complex. It took years for the EU to get their scheme worked out. In fact it is so complex that a lobbyist involved with the scheme remarked to me he figured there were only three MPs in Parliament who truly understood it. They were Jeanette Fitzsimons, Michael Cullen and Nick Smith. I inquired as to their view of the understanding of the Minister on charge of the legislation, David Parker, and they were adamant he is truly out of his depth. But they reassured me this was not a problem as he has been cut out of the decision making loop on it.

Labour has been racing towards a political deadline – the 2008 election – and has been prepared to cut corners to get there.

National is not prepared to cut those corners. Not when the financial security of Kiwis is at risk. Not when getting this wrong means exporting jobs, ratcheting up inflation, and viciously squeezing household budgets.

We believe that the current rushed timetable for the design of the ETS and the Select Committee process is reckless, given the importance of the issue. National thinks that this process, left unchecked, is likely to lead to an ETS that will meet neither New Zealand’s economic needs nor our environmental obligations. In particular, it could well have negative and unintended consequences.

So today, I am calling for a delay in the passage of this legislation.

The fact there is an election later this year is no reason to rush the scheme into law. Hell Labour signed up to Kyoto in 2000 and have had eight years to get policy on place. Just because they left it so long is no reason to sacrifice good decision making in a mad rush. And look at the last law pushed through with lots of last minute changes – the Electoral Finance Act.

Now some will say that Key is being populist or playing it safe by calling for a delay. Far from it – his move is in face very much against what is best for him politically. Assuming National wins the election, he will have prime responsibility for getting an ETS into law as soon as possible, and in a way which actually will reduce emissions but not drive industry offshore. There is no way the Greens and environment groups would allow National to do nothing, even if they wanted to.

It would in fact have been politically far easier to let the hapless David Parker rush through the legislation in June and July, and then Key could just blame the previous Government for it, as problems emerged. But by having it pass when he is Prime Minister, Key will be responsible for its implementation.

Let me state clearly: National has not given up on this legislation. We are committed to a well-considered, carefully balanced Emissions Trading Scheme for New Zealand.  We believe this bill can be amended and progressed to that end, and we believe it can be done in a timely fashion.  But the New Zealand Parliament must take the time needed to get it right. New Zealanders’ livelihoods depend on us taking that time.

I have no doubt there will be some mindless abuse which will probably try to paint this as something it is not. But talk to anyone involved with this legislation and you would know the folly of trying to have it reported back to Parliament next month. It is the biggest change to the NZ tax system in 20 years. It is incredibly complex and the current bill will have to be so amended that it is only common sense to allow affected parties a chance to resubmit on the amended law.

National believes that getting it right means adhering to the following principles:

1. The ETS must strike a balance between New Zealand’s environmental and economic interests. It should not attempt to make New Zealand a world leader on climate change. Kiwis simply can’t afford to pay the price for that particular experiment.
2. The ETS should be fiscally neutral rather than providing billions of dollars in windfall gains to the government accounts at the expense of businesses and consumers.  National does not think it’s responsible for government to use green initiatives to pad the Crown coffers while thinning out Kiwis’ wallets.
3. The ETS should be as closely aligned as possible with the planned Australian ETS, with common compliance regimes and tradability.  In my second speech as National Party Leader, I called for close co-operation with our biggest trading partner on this issue, and I continue to call for it.  Given the Australian timetable for developing an ETS, I believe it’s still possible.
4. The ETS should encourage the use of technologies that improve efficiency and reduce emissions intensity, rather than encourage an exodus of industries and their skilled staff to other countries.
5. The ETS needs to recognise the importance of small and medium enterprise to New Zealand and not discriminate against them in allocating emission permits.
6. The ETS should have the flexibility to respond to progress in international negotiations rather than setting a rigid schedule. This way, industry obligations can be kept in line with those of foreign competitors.

I think No 2 and No 3 are key. The ETS should not be a get rich scheme for Dr Cullen at the expense of consumers. But having it tied into the scheme of our largest trading partner is quite vital. No 5 is also important – big businesses should not get an unfair advantage over smaller businesses with the allocation of permits.

Key also touches on the proposed ban on new thermal power, and that as 75% of new power generation under Labour has been thermal, it is dangerous to assume one can suddenly go to 0% thermal for further generation. With the massive delays in getting RMA consent for renewable power projects, there would be a real risk of NZ having insufficient power in the future. The best thing one could do for the environment would be to reform the RMA so one can get renewable power projects built more easily. Until you do that, you can’t ban more thermal.

And finally Key touched on the biofuels legislation, which the Parliamentary Commission for the Environment said should be voted down. Key says:

The Parliamentary Commissioner for the Environment has spoken out against the Biofuels Bill, saying it will damage our clean, green image.

National is opposed to a mandatory biofuels obligation until there is a sustainability standard. This standard needs to deal with the lifecycle emissions savings, the effects on the food supply, and the biodiversity impacts.

New Zealanders want to ensure that their efforts to tackle climate change are doing more good than harm. Paying an extra 7 cents a litre for a flawed biofuels policy is not the way forward.  So National will not support the Biofuels Bill in its current form.

Even the Greens say the biofuels bill should not pass in its current form.

So a key speech on environmental issues, and good to see a commitment to getting the policy right, even though it would be politically expedient to let Labour pass a flawed ETS and then just blame them when it goes wrong.