Environment Minister Nick Smith and the Greens Co-Leader Russel Norman are both with us. Good morning. Are you going to adopt the Caygill recommendations?
NICK SMITH - Environment Minister
Well, there's some quite big numbers, as your introductory piece referred to, and we're going to have to weigh those up. This really comes down to a balance between people are under pressure with costs for things like fuel and power. We want to make progress on climate change relative to the rest of the world. We're a very small proportion of global emissions, and it's about getting that balance right. I think the report's done a good job.
PAUL Well, it's all about winning an election, isn't it? And going into an election with people not thinking that their power's going to go up or that they're going to pay more for fuel.
NICK That's right, but the key issue in the election is New Zealanders having confidence that we're a balanced government, that we understand that businesses and households are under pressure with costs, but also New Zealanders do have that essential element of greenness about their character and want to know that New Zealand's doing its fair share, and the government is committed to both those.
PAUL You're of the view it's a cop-out, Mr Norman.
RUSSEL NORMAN - Greens Co-Leader
Well, if we don't have a price on greenhouse emissions or we keep delaying it and delaying it, um, it means that our economy basically gets locked into a very carbon-intensive basis. I mean, there's been a lot of work done about this - about looking at the impact of carbon prices on economies - and what we find is that the longer you delay, the greater the adjustment cost. I mean, it's essentially like we're building some of our sectors, particularly the agricultural sector now, behind a subsidy wall. So we're subsiding it, and it means when the adjustment comes, it's going to be more painful.
PAUL And there's also a point I think you make that the only way to make people change and corporates change is to hit them in the pocket.
RUSSEL That's right. I mean, I think that's right. Price signals do work. That's why this government and other governments are using price signals in order to make behavioural changes. The longer we delay it, the harder the adjustment becomes, and, of course, greenhouse emissions will change.
PAUL You've got Europe on its knees at the moment. We've got fears of another global meltdown, you know. It's hard at the end of the world-
RUSSEL So you want to borrow another half a billion dollars at a time? Cos that's what it means - the taxpayer has to come up with another half a billion dollars, which we're going to have to borrow from overseas.
NICK The part that Russel Norman and even with your own piece talking about the corporates paying the bill - if we're talking about the costs of the Emissions Trading Scheme, 88% of that falls on households. This is not an argument about corporates. If you put a cost on the price of petrol, it is New Zealanders who pay for that.
PAUL I understand. So we're talking about getting carbon emissions down at that point.
NICK Oh, yes, we are.
PAUL But I understand there's a cost. The ETS means a cost on the households at a very tough time.
RUSSEL The agricultural sector, right? 47%. That's the sector that's the most protected currently.
NICK And that's the second point-
PAUL Yeah, but it's hardly the end of the world. All he's doing is delaying things a little bit.
RUSSEL But remember 2015. Under the current proposal, it's only 10% of emissions come in at that point. Under the recommendations, it would be only 5%. It takes another 70 years or so before agriculture's fully in the system. 70 years before it's fully in the system. This is a huge subsidy.
NICK There's two points that are being missed in the debate around agriculture that are crucial. The first is if we look at the extent to which emissions have gone up, agriculture is the least. Electricity emissions are up 130%. Transport are up 70%. Agriculture is actually only up 15%. The second is this-
PAUL Can I, before you go on, Nick-? Can you answer that, because Caygill does point out in his report, really, to what farmers who have cows can do about emissions.
RUSSEL Yeah, he does. He says a couple of things. He says there are some limits, but then he goes through and talks about that options on the table, which are quite significant. And then if you read the Monetary Policy Statement from the Reserve Bank earlier this week, what they say is commodity prices are high and are going to continue to be high. So if you're talking about the capacity or the ability of the industry to handle paying for their greenhouse emissions, actually they can handle it right now. Commodity prices are high. They're going to continue to be high.
PAUL Second point.
NICK Yeah. Look, you need to think globally about this issue, not locally. That agricultural production that occurs in New Zealand is to basically feed the world. We use a very small proportion of that. Now, if we simply drive by putting a cost on agricultural emissions in New Zealand, agricultural growth into Uruguay and to other parts of the world, sure, we might feel good in New Zealand, but actually we're making things worse globally because many of those countries are less efficient - ie: produce even more emissions. And so you've got to take that global perspective. Whacking costs on the New Zealand aluminium steel industry, the dairy industry or the like that only sees the growth appear elsewhere is a losers' game, and this government won't be part of it.
PAUL Right, and so what the punters- Because you're leaving agriculture out till 2019, the punter is going to be paying- the housewife in Pakuranga - not to be sexist - but the mother in Pakuranga is going to have to pay for the farmer who's polluting. $280 million a year, so it's more than half-
RUSSEL That's right. All taxpayers, in fact, are going to have to cover the emissions.
NICK That point's not correct, and let me tell you why. It is true to the end of 2012 because we have a Kyoto deal that makes the obligation quite plain. There is unlikely - and all of the advice I've had from foreign affairs and my colleague Tim Groser that looks after the international negotiations - is there is unlikely to be a deal beyond 2013. So this notion that somehow, you know, the housewife and others are paying-
PAUL Can I answer-? This is a bit deceptive, because one of the things Caygill says is that it is a myth that New Zealand is going out alone, is going out too far.
NICK I agree with that.
RUSSEL That's right.
PAUL And, in fact, I notice from the Caygill report that some United States states have emission trading schemes, some Canadian provinces have one, Japan has one, China looks like introducing a nationwide scheme by 2015.
RUSSEL That's right.
PAUL And so we've got to be there.
RUSSEL And we have to be there, and when you think about-
PAUL And you're copping out.
NICK We're not. Quite the opposite.
RUSSEL If you think about the economic implications. Just think about it. If you think there's going to be a price on carbon, and it's going to increase over time, then the sooner you act, the better. If you think, which is what Nick seems to be suggesting here, that there won't be price on carbon somewhere further down the track, then you subsidise your way through in the short term, and you hope it'll all go away. It's not going away. There will be a price on carbon internationally. It will only increase over the course of this century. If the New Zealand economy is going to prosper, it needs to be efficient in the use of carbon.
NICK I reject this notion, Paul, that somehow New Zealand has copped out. While you have pointed out that there are either plans or limited emission trading schemes in other parts of the world, this government has made plain consistently that our objective is New Zealand doing its fair share. This report confirms that we are. If we take, for instance, the New Zealand Aluminium Smelter in Bluff, it is the only one in the world that pays any face at all for carbon pricing, and that comes back to the issue of balance. Ban Ki-Moon, the head of the UN, was only in New Zealand two weeks ago, and he commended New Zealand for its leadership and actually how much it's making progress.
PAUL Well, actually, the other thing that the Caygill report says is we're actually about average. We're about average. But then you get that group of businesspeople - I don't know how they make this calculation - pure advantage, and they say that the green growth is worth $6 trillion a year. Now, we need to be part of that action.
RUSSEL That's right. It's not balance; we need ambition.
RUSSEL Instead of having balance, instead of having 'let's drag our heels and hope that no one notices us', what about some ambition so that we take advantage of the global economic opportunities provided by the green economic-?
PAUL Sorry, when I see a press release, an adulatory press release from Federated Farmers, I know you've got the farmers' vote.
NICK Well, the farmers- Actually, right now New Zealand needs its agricultural sector more than any other. If you look at the meltdown that's occurring in the European economies, New Zealand should not be shy of saying agriculture is important to this country, and we're not going to knee-cap it in some sort of exercise of putting it on some sort of green altar. We want to be pragmatic-
PAUL But you're not. You're doing average, is what Caygill says.
NICK That's right, and we've been quite upfront about that.
PAUL And you're going to do less.
NICK Well, actually, it's not about doing less; it's about how fast we go forward.
RUSSEL But, Nick, if you keep delaying every time, people will lose confidence in it.
NICK Let me give you two key areas. Under the previous government, New Zealand's emissions went up 23%. Since we've been in government, they've gone down by 4%. We have planted 11 million-
PAUL Down by 4% to what?
NICK By 4%. Our emissions are down.
RUSSEL Ok, Nick, but let me just-
NICK We are planting trees faster than we ever have. We've got conversions over into renewable electricity at a faster rate than any time in more than two decades.
RUSSEL The problem is this, right - if you keep delaying it, everyone's going to lose confidence that they're finally going to face a price, right? And what they're going to say is, 'Instead of investing in technology to reduce our emissions, we're going to invest in lobbying the government to keep our subsidies, because that's much more effective and gets a better return.'
PAUL But, you see, Nick, we've got a-
RUSSEL If they lose confidence in your ability to deliver a price, that's what will happen.
PAUL Haven't we got a grave situation, though? So, emissions are still going up willy-nilly. Still going up.
NICK No, they're coming down. The last two years, they have gone down. And, Paul, let me make something plain-
PAUL No, they've going down 4%. We're still at - what - 19%, up per year. Now, we're aiming, aren't we, for 50% reduction by 2050.
NICK That's correct. That's the government's policy.
PAUL How are we going to do that?
NICK Well, let's take the electricity sector.
PAUL Because you're rocketing up-
NICK Let's take the electricity sector, which is a sector in which this government's made very real progress. In the last 12 months, there has been 1300 megawatts of new capacity consented. That is five times the average for the last decade. Half of that previously was from thermal generation. Now, it is true they are long-term investments. They government wants those players that have got those wind, those hydro, those geothermal projects to proceed, but they take three years to build. And that's where the Caygill report quite properly says, 'Actually, it's the direction of the carbon price, rather than the exact time that has an impact on those people making those investments.'
RUSSEL And that's electricity. In transport, however, you're going in completely the opposite direction, where you're throwing billions of dollars at new motorways instead of investing in the public transport infrastructure, which is what we need to do. And you said earlier.
NICK We're investing-
RUSSEL Hang on. No, no. You've spoken for heaps, Nick. You said earlier, and quite rightly, that transport's a problem, right? I agree with you. And so if you want to give the right signals around transport, do you throw all of the money at the motorway system?
NICK We're not throwing all the money.
RUSSEL You're throwing $7 at motorways for every $1 at public transport infrastructure-
NICK We're putting $1 billion into electrifying Auckland rail.
RUSSEL And you're putting $20 billion over the next 10 years into new motorways projects.
PAUL Ok, we can discuss billions and trillions forever, but in the end, Russel Norman, David Caygill really is saying, and I think possibly Nick Smith believes this too, is that in these difficult times with Europe on the point of melting down again, uh, we just need to lift the burden a little bit and delay things just a little bit. Um, ETS would mean more at the pump. ETS would mean bigger electric bills and so forth. It's harder for poor people. This is the thing.
RUSSEL Let me respond to that on two levels. One is the fiscal implications, right? At a time when it's hard to raise money internationally, we're saying the taxpayer's got to come up with another half to three quarters of a billion dollars to subsidise pollution, right, because that's what we're saying. We're moving the pressure from the polluters on to the taxpayer. So we've got to come up with all that extra money. Second point - the evidence is overwhelming that if you want to have an economy that performs well in a carbon-constrained world, the sooner you put a price signal in, the better the long-term outcomes and the lower cost of adjustment.
NICK And we've introduced that price signal. The real debate is about how tough it will be. Can I just go back to the transport issue? A billion bucks on electrification of Auckland rail, incentives for electric cars, and the real key part where we might differ from the Green Party is congested traffic is the worst possible for emissions. That is when it really goes through the roof, and that is why we make no apologies about wanting to have efficient motorways where traffic is moving smoothly.
RUSSEL Public transport removes congestion, Nick.
PAUL Can I just ask you, given what the minister's likely to announce, given his reaction to the Caygill report, could you work with National, do you think? Could the Greens work with National? Should National retain the treasury benches?
RUSSEL We work with National now, even though we vote against on confidence and supply, right? We have this memorandum of understanding. We've done the Heat Smart programme. Home insulation - fantastic programme.
NICK It's been very good. It's been a good partnership.
RUSSEL It is. It's been a great programme. And assuming that National are the government after the election, whatever happens on confidence and supply, we can work with them in terms of memorandum on understanding where we have common ground. I think that's what people expect from MMP parties is that they work together constructively where there's common ground. If the issue is of confidence and supply, as we said, it's highly unlikely.
PAUL I note that Mr Smith has the greener tie of the two. (ALL LAUGH) I thank you both very much for joining us. Nick Smith, the Environment Minister, and Co-Leader of the Greens, Russel Norman.