A missed opportunity: The Government ran out of work for the House yesterday, only to return this afternoon, under urgency, to allow Nick Smith to introduce the ETS amendment for a first time. If it had taken time to work with Labour in good faith on an enduring compromise, none of this would have been necessary;

Holding back the bill: We saw the bill for the first time as Nick Smith began reading his speech, despite the fact that it was apparently sitting in the Bills office from 9am this morning.

Holding back the official advice: the Government will not release the officials’ advice and the cabinet papers concerning the cost of the revised scheme: although we asked for this urgently under the Official Information Act on 15 September, it is clear that it will not be made available until after the statutory time limit (and then probably with redactions that we will have to take to the Ombudsman), well into the select committee process. This from a party that parades its fiscal rectitude while introducing changes to the NZ economy that it hails as “equivalent in magnitude to the GST”, while the public are denied the right to see the detailed costings of the scheme. Given Nick Smith’s propensity to quote very selectively from documents, we can’t take him at his word on the effect of the bill – we have to see this material;

Paying for polluters: Labour’s ETS put a price on the emission of the greenhouse gasses that New Zealand has to account for under the Kyoto Protocol. In order to continue to emit such gasses, different sectors of the economy on a phased-in basis would receive a defined level of free credits to continue to pollute for a defined period of time. If they wanted to pollute over that level, they could buy a limited number of credits to do so. The revenue from the purchase of these credits would go towards funding measures to move our economy to a lower polluting basis (home insulation, transition to electric vehicles, etc). Under the amendments proposed by National and the Maori Party, emitters:

(1) Get a much longer period of transitional subsidy to continue to pollute (last week, David Carter thought a further 90 years);

(2) Are allocated ongoing rights to pollute on a ‘intensity’ basis, without a cap on emissions, meaning that they are incentivised to continue to emit greenhouse gasses (the Australians at least will have a cap, so National aren’t actually harmonising when it doesn’t suit them);

(3) Have the dates on which they enter the scheme pushed out by up to 2 years.

Also, thresholds for allocation are lowered so that many more businesses will receive allocations under the Scheme, and there is no commitment to recycle revenue into complementary measures. The billion dollar requirement to require a home insulation scheme that we legislated for is repealed. Meaning that scheme continues only as long as ministers want it to.

National will borrow and cut to pay those polluters: according to the full Treasury chart at p 33 of the explanatory note to the Bill (and not the doctored one Smith tabled on earlier this week) the numbers suggest that between now and 2013, equates to a more expensive scheme to the tune of around half a billion dollars. Between 2013 and 2017 it is calculated to cost between 67m and $1bn less (the range in those numbers tells you something). From 2020, however, it costs taxpayers over $200m more in total. By 2030, additional costs are over $2bn, and every year thereafter, $500m. Smith has said that the post-2030 costs involve so many assumptions that the figures are unreliable, but the signal is being sent to emitters that we are willing to borrow to subsidise them for a long time to come.

It is interesting that this Government has made a great deal out of what we are told will be a decade of deficits ahead of us. The Government is caught in a policy trap: it will have to decide either to cut social services and funding to areas like education, police, health and corrections, or borrow at an astronomical rate, or both. This hypocrisy is the most shocking consequence of this bill.

Harmonising with an Australian scheme that does not exist: the Treasury’s regulatory impact assessment (p12 of the explanatory note) advises that the amendments, as far as they allow for harmonization with Australia, are bad policy, since Australia does not yet have a settled Scheme in law and may not manage to have one, meaning that we are essentially harmonising with something that may never exist;

What is missing in the bill: there will be a Treaty clause in the final Act, but this will not be introduced by the Maori Party till the Committee of the Whole House, meaning that the select committee (and therefore the public) will be denied an opportunity to submit on it. Other alleged or actual concessions to the Maori Party will not be included in the Bill but will be by way of variation to Government policy.

Final thoughts: The amendments will cost the taxpayer greatly in the long run, in terms of a large ongoing subsidy to big emitters. And they mean that the ETS will not encourage a lessening of greenhouse gas emissions in New Zealand, because they don’t incentivise new forest plantings, and they don’t cap emissions from industry or agriculture. And after 2030 when we have all paid $2bn to let this happen, we’ll be socked for an additional half a billion a year, every year, to let it keep happening.

Labour has no choice but to roll back these amendments when next in office. National, by failing to negotiate with Labour in good faith, and then doing a shabby deal with the Maori Party that has no good economic or environmental consequences, has denied New Zealand ongoing certainty over climate change policy. Emitters would be unwise to make long range plans on the basis of the amending legislation.

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