Hon DAVID PARKER (Minister of Energy) : I move, That the Biofuel Bill be now read a second time. Let me first extend my thanks to the Local Government and Environment Committee. The committee worked hard and gave full consideration to the important matters raised in public submissions. The Biofuel Bill introduces a biofuel sales obligation and makes other legislative changes to provide for biofuels in the New Zealand market. The obligation will provide for greenhouse gas reductions in the transport sector, and will also reduce our dependence on oil. Since the bill was introduced to the House last year those objectives have become all the more important.

Since that time the sustainability of biofuels has also come under significant scrutiny. The select committee made a number of recommendations to sharpen the focus of the bill on the sustainability of biofuels. That is provided by the principles of sustainability contained in new section 34GA(3) in new Part 3A, which is inserted by clause 9 of the bill. Principle 1 states: “Sustainable biofuels emit significantly less greenhouse gas over their life cycle than obligation engine fuel.” This principle ensures that biofuels will provide a genuine contribution to greenhouse gas reductions. In the first instance, the bill requires a minimum reduction of 35 percent. Principle 2 refers to food production and states: “Sustainable biofuels do not compete with food production and are not grown on land of high value for food production.” That principle recognises the concern that where biofuel crops are directly substituted for food production, that can increase food prices by decreasing food supply. Where food supply is maintained or even enhanced, however, that is not a concern. So by-products from food production—like tallow for bio-diesel and rotational oilseed crops—are expressly set out as meeting that test. The third principle states: “The production of sustainable biofuels does not reduce indigenous biodiversity or adversely affect land with high conservation value.” That principle addresses concerns that increasing biofuel production can have negative impacts on the physical environment and, in particular, on biodiversity and precious ecosystems.

From the beginning of the biofuel sales obligations, companies will be required to report on the sustainability of the biofuels they supply, and under new section 34GA the Minister of Energy “must recommend the making of an Order in Council … as soon as practicable” requiring biofuels that are sold towards the biofuel obligation to be consistent with the principles of sustainability. Under new section 34GA(4), if no recommendation has been made by 30 June 2009 the Minister of Energy must report to this House and explain why a recommendation has not been made, outline any alternative methods of ensuring qualifying biofuels are sustainable, and indicate when the associated recommendations will be made.

The second major change relates to the proportion of biofuel that oil companies will be obliged to sell. The obligation now begins at 0.5 percent of total sales on an energy equivalence basis, rising in 0.5 percent increments annually to reach 2.5 percent by 2012.

As a consequence of the time taken to carefully consider the bill, the commencement date has been changed to 1 October 2008. That reduces the period of the first obligation from 9 months to 3 months. There is no impact on subsequent periods.

Once again, I thank the select committee for the work it has done on the bill, and I commend the bill to the House.

Hon Dr NICK SMITH (National—Nelson) : This is not just poor public policy—it is awful. Why on earth would we want to impose substantial additional costs on the household users of fuel, at the very time when all the international evidence is that biofuels have a very dubious environmental benefit? The Parliamentary Commissioner for the Environment did not just say this bill should be amended; she told the Local Government and Environment Committee that it should be dropped. She even went further than that and said this bill will damage New Zealand’s clean, green reputation.

Just a month or two ago an article in Time magazine, “The Clean Energy Scam”, said that although it is hyped as an eco-friendly fuel, ethanol increases global warming, destroys forests, and inflates food prices. So why on earth are we subsidising it? New Zealand’s very well-respected former Minister for the Environment, Simon Upton, wrote in the Dominion Post “the road to hell is paved with biofuels”. We have the 400-page report from the British House of Commons that asks the question “Are biofuels sustainable?” and overwhelmingly concludes that they are not; we have the report from the OECD Biofuels: Is the Cure Worse Than the Disease?; we have pleas from the World Food Programme; we have Oxfam submitting to the committee and pleading with this Parliament not to go down this track; and we even have the United Nations Secretary-General calling on nations to halt the passing of these sorts of laws because they are a hoax.

There are two fundamental flaws in this bill. The first is that despite all that the Minister says about the sustainability standards, those standards do not come into effect until well after the compulsory requirement comes into place. If one ever wanted to have a bill where the cart is being put before the horse, we have it here in black and white. On 1 October, in just 27 days’ time, it will be compulsory for fuel sold in New Zealand to have a component of biofuel in it. But the sustainability standard to ensure that that does any good is at least 9 months away, and I put it to this House that it will be many years more than that. You see, the European Union, which has been debating these same issues, has been trying to establish a standard for sustainability for 2 years, and it has not been able to get there. So why does this Clark-Peters Government suddenly believe that it can instantly get there—that it can somehow get through those issues? Even the Government’s own officials said it would take at least until 2011 to come up with a proper sustainability standard. So I ask the House why we are to have a compulsory requirement—a nanny State, “they know all” approach—before there is any sort of sustainability standard.

The second key flaw is this: ethanol is provided with an exemption from excise tax. That means ethanol is being given a huge tax advantage over bio-diesel. We asked Government members, we asked the Minister, and we asked officials why they wanted to screw the scrum so hard in favour of ethanol over bio-diesel. The answer was blank. They said they would look at that issue some time in the future. Well, why on earth would we want to provide an incentive to import ethanol from Brazil, when there are very good reports that show that that product arises from and helps to drive the destruction of Amazonian forests? Why would we want to compel that? Why would we want to provide a tax incentive for that over, for instance, biofuels that are produced in New Zealand by converting agricultural by-products, such as waste fat from the meat industry, to biofuel?

You see, with this bill we are adding very substantial costs. If we can believe the Minister, he says there is no cost for consumers arising from this bill, because they would use biofuels anyway and these fuels are inexpensive. Well, I simply ask the Minister why he needs to compel their use. If it is economic, people will use them anyway. The idea that there is no cost for the consumer is about as straightforward as Winston Peters saying he has never received a donation from Mr Owen Glenn. The submissions heard by the select committee were that the oil companies say this requirement is likely to cost 7c per litre, and the officials said the cost would be about 2c a litre. Let us take the mid-range figure of 4c a litre; that is an extra $240 million a year. Why on earth, in the middle of a recession, would we want to impose extra costs of $240 million a year around biofuels, when there is an overwhelming international consensus that they are not the right way forward?

I put this to the House. We know that the biggest challenge New Zealand faces is around agricultural emissions, particularly from methane and nitrous oxide. We are spending $3 million a year on research in those areas, and the Biofuel Bill proposes to bank $240 million a year in terms of the cost to road users. I say to the Minister that this bill has got it awfully wrong. How can the Minister and Government members claim there is no cost to the consumer? If there is no cost, why do we need a law that compels people to comply with it?

This bill represents another botched climate change policy. For 9 years we have seen emissions go up at record rates. We have seen huge growth in electricity emissions. We have seen more coal-produced electricity being used than at any time in New Zealand’s history. We have seen the Projects to Reduce Emissions policy fall over. We have seen the negotiated greenhouse agreement policy fall over. We remember the promise of the billion-dollar surplus from Kyoto, and how it fell to pickle. We remember the policy announced on animal emissions levies. We have seen one botch-up after another, for 9 years, around climate change policy, but I have to say this Biofuel Bill is the very worst of them.

I challenge members opposite: why are they ignoring the Parliamentary Commissioner for the Environment, whom they themselves supported? They appointed Jan Wright to that role. Her evidence to the select committee was absolutely damning, in terms of this bill. This bill represents the Government jumping on the bandwagon, just as the wheels are falling off. At the very least, there should be no compulsion to use biofuels until the actual biofuel standards are put into place. The idea in this legislation that we are going to impose on the fuel sector the cost of introducing infrastructure, without knowing what the sustainability standards are, is seriously flawed.

This bill should not proceed. We should heed the warnings of the United Nations, the World Food Programme, the Parliamentary Commissioner for the Environment, and every one of the other submitters who have made it plain that this is flawed legislation. Biofuels do have a role to play in respect of the challenge of climate change, but this compulsory legislation will impose costs for little environmental benefit, and, what is worse still, it runs the serious risk of contributing to deforestation and some of the huge difficulties that the world is facing, as we speak, in respect of food prices and their impact on the poorest people of the world.

I can only conclude with the contribution from Oxfam, which said that in order to fuel our cars, we are going to take food from the mouths of the poor.

MOANA MACKEY (Labour) : I am tending to get a sense of déjà vu. Here we are, with another major climate change bill in the House, the Biofuel Bill, and we have had another speech from the National Party, which claims to support any kind of legislation or policy that reduces greenhouse gases, yet all we got was a speech full of excuses about why National could not vote for another climate change policy brought up by this Government. I say to the Hon Dr Nick Smith, who is a member of the Local Government and Environment Committee, which I chair, that I wonder why he did not listen to the Parliamentary Commissioner for the Environment on the Climate Change (Emissions Trading and Renewable Preference) Bill, which she said absolutely must go ahead, and why he is now accusing the Government of not listening to her on the Biofuel Bill. I suspect it is yet another story of what is good for the National Party being no good for anyone else.

I say to the Hon Dr Nick Smith that obviously he has been very well influenced by the huge business lobby against biofuel and against this legislation. Obviously, he has been lobbied. I wonder whether any donations have gone into the Waitemata Trust from people who oppose this legislation. The select committee worked incredibly hard on this bill. We worked hard on it because we know the climate change issue is a reality for New Zealand, that this measure is doable for New Zealand, that some of it is very low-hanging fruit, and that if we put a bit of time and energy into sustainability standards and into making it clear which biofuels would qualify and which would not, we could do this. We are an agricultural and a horticultural nation. We have by-products from that. We have tallow, and we were told that China is already looking at lowering some of its trade barriers to American and Canadian tallow. We also have ethanol derived from whey, as a by-product of our dairy production.

We heard the submitters who came before the select committee. As always, they were from both sides. We had the oil companies on one side, who did not want to do it at all, and on the other side we had the biofuel producers, who wanted us to go miles in the other direction, because they have an interest, too. It was the role of the select committee to look down the line and find a good compromise: one that is good for New Zealand and good for the environment. What response did we get from the National Party? Its response was that the free market would provide. Well, the free market has been fantastic for the environment over the last 30 or 40 years, has it not? It has been wonderful! The fact is that until this bill came into the House and was being seriously looked at, Mobil Oil did not have biofuels. Before the bill is even passed in the House it has now said it will go down that path, and that is because of this legislation.

I thought it was astonishing that the Hon Dr Nick Smith said that because no one else has implemented this measure, New Zealand should never try to do it. The National Party believes that we should just accept that we are not as good as everyone else, that we cannot think for ourselves, and that we are not smart enough to come up with this kind of legislation. A group of European parliamentarians actually came here to speak to the Local Government and Environment Committee specifically to look at what we had done on this bill. The select committee worked hard. We worked long hours to try to come up with something that, indeed, the Europeans are also working on. In the Labour Party we say we will always try to do the best that we can, in the legislation in front of us, to benefit the people of New Zealand. The fact that Europe or America has not managed to do something is never an excuse for Labour members of Parliament to say we will not even try to do it, which is the excuse we had from the National Party.

I thank the officials who worked on this bill. When they walked into our select committee room for the first time we wondered whether they were interns, because they were so young and fresh-faced. But they were incredibly knowledgable and provided us with very timely advice. I was extremely impressed with the quality of their advice, and I thank them for it. I thank all the submitters who came along to the committee. They often faced very robust questioning, and I thank them for all the supplementary information they were able to provide, at very short notice, so that we could get on with our deliberation. I thank the members of the select committee. I thank the Green member Metiria Turei for all the work she did on the sustainability standards. I also thank the National members of the committee, who, despite declaring their hand pretty early on in the process and saying they were not going to vote for the bill, did stay and work hard with the committee in order to make sure we did all that we could do. I am sorry that they declared their hand as soon as they did. I believe that they might have been able to accept parts of the bill, but unfortunately they could not accept them because they had already stated they were going to vote against the bill before some of our deliberation had finished.

The Hon Dr Nick Smith raised a number of important points in his speech, and one of them was about the issue of the relative tax treatment of fuels. We tried very hard to work out whether that was something we could address. I believe that we genuinely agreed that it needed to be addressed properly, not as a tag-along to the Biofuel Bill. We stated clearly in the commentary on the bill that we believed as a committee that the treatment of ethanol as a fuel that has zero excise duty should end in 2012. We stated that in the commentary in order to send a clear signal. The National Party also believed, as we did, that a number of people had expected that that tax treatment would continue until 2012, and had made investment decisions based on that. So it would have been unfair of us to change that, and, if we had changed it, we would have needed to grandparent that zero excise duty for companies such as Gull Petroleum, which had believed that it would continue. We clearly stated in the bill that we thought not just biofuel but also other forms of fuel, such as compressed natural gas and liquefied petroleum gas, and electric cars should be dealt with in terms of the relative tax treatment of fuels for environmental purposes.

Before I finish I just want to touch on the issue of price. It is very, very difficult for us to guess what the price impact of this legislation may be, because there are many different variables. We do not know how the oil companies will implement their biofuel requirement. For example—

Hon Dr Nick Smith: You should know.

MOANA MACKEY: I say to Dr Smith that we do not know because they are private companies, and we have left the bill very, very flexible because we believe that that is the best thing. We know that overall by 2012, of the total fuel sold in New Zealand, there will be a 2.5 percent biofuel component, and we have left it up to the people who sell that fuel to decide how they are going to get there. If we had not done that, Dr Smith would be yelling at us and saying this was a case of nanny State telling private companies what to do. We have said to the companies that they can decide on how to do it themselves. They can do it through the pumps across the whole country or just in Auckland, just in Wellington, or just in Christchurch, or they can sell 100 percent direct to customers, so that it does not even have to go through a service station—they can get their reduction in that way. All of this will—

Hon Dr Nick Smith: How much will this cost the consumers?

MOANA MACKEY: Well, interestingly enough, Gull Petroleum, which already includes biofuel in its product, is cheaper than the rest of the oil companies. It is cheaper than the rest of the oil companies, and it already sells an ethanol blend. So for Dr Smith to stand up and say fuel will be 7c a litre more expensive, which is what the oil companies said it would be, is wrong. Another oil company said it would be 4c a litre dearer, but our officials told us that if they looked at recouping the entire cost of the infrastructure upgrades that may be required by oil companies, using the oil companies’ figures the cost would come out as being no more than 0.2c to 0.4c a litre more expensive, and it might even be cheaper, than it is now, I tell Dr Smith.

Hon Dr Nick Smith: Why make it compulsory?

MOANA MACKEY: Oh, because the free market has worked really well up till now, I tell Dr Smith. I know the National Party just thinks the invisible hand of the market will deliver for the environment, will deliver for poor people, will deliver for the hospital system, and will deliver for the education system. Dr Smith can just sit back and say he does not have to do anything, because the invisible hand of the market is doing it all for him. That makes it really easy to be a National Minister. But I am afraid that on this side of the House, Labour members believe in actually taking action against climate change, rather than sitting in an office as Dr Smith does, thinking of as many excuses as he can to vote against every single piece of climate change legislation that comes before this House.

Well, Dr Smith should be ashamed of himself, because he knows—he was on the select committee with us—that what he is saying is not true. Yet he will go out there and try to terrify the people of New Zealand. Dr Smith apparently knows what the exchange rate will do, what the price of oil will be, and what the price of ethanol will be—all the things that will be relevant to the overall price of biofuel production in New Zealand. But Dr Smith does not know that. Apparently Dr Smith is saying that the National Party will never support a biofuel obligation unless it can be certain about the international price of oil, unless it knows what the exchange rate will be, and unless it knows exactly how the oil companies will implement that obligation. I say to Dr Smith that those are excuses, excuses, excuses—again, again, again! The people of New Zealand can see through that.

This is a good bill. I thank the select committee for all its hard work.

JOHN CARTER (National—Northland) : I will start off by saying that if anybody listened very closely to that last contribution from the member who has just resumed her seat, he or she would not have heard anything positive in regard to supporting this Biofuel Bill. One of the things we would have expected from the Government, and particularly from the chair of the Local Government and Environment Committee, Moana Mackey, is that they would have offered a whole lot of reasons—good, valid reasons—why this Parliament and this country should be supporting this legislation. But if people listened really closely to every word she said, they would have heard that it was all about attacking Dr Smith for what he said, attacking the fuel companies for what they said, and attacking other people for not saying the things the Government thought they should say. Therefore, there was nothing positive, at all, that would have persuaded anybody to want to support this bill. I would have thought that that member, at least, would come up with one or two reasons why this country should be embracing this sort of legislation. Unfortunately, there was nothing at all positive in her speech.

The second point is that the whole reason this legislation is before the House is that the Prime Minister got out ahead of the game and decided to grab the hose from a fuel pump and put it into a car, and try to get a photo opportunity, while saying to everybody “And this is what this Government is going to do. We’re going to do all this stuff, introduce biofuels, and make everything better.” But the Prime Minister did not even know where to put the nozzle. Actually, it was all about a photo opportunity, but suddenly officials and Government members all had to get in behind and support her, because she had gone out saying that this was what was going to happen.

Unfortunately, what had not happened—and this is the problem with this legislation and, indeed, with the Government’s approach to this whole issue—was the Government doing its homework. We just need to look at commentary from all over the place—from everybody. What does the OECD Round Table on Sustainable Development say about biofuels? It says that they are unproven; it says that it is not certain about them. It does not know whether this is the way we should move forward.

The United Kingdom’s House of Commons Environmental Audit Committee report says that we should hang on a minute; we should just take our time on this—that it has been around for a while but we are still not sure whether it is the right way to go. The G8 conference of legislators said the same thing. The United Kingdom’s chief scientist, the World Food and Agriculture Organization, the Royal Society, the World Bank, and the Secretary-General of the United Nations have all said that there are some real problems about this stuff. It is a difficult way in which to approach a fuel issue. All these authorities are saying that there are real question marks over this issue, yet this Government has decided to proceed.

I draw the House’s attention to two other people who have made comment. The first is the Parliamentary Commissioner for the Environment. One would have thought that if anybody was going to get out there and say “Yep! We are on the right track; this is the way to go. This legislation is going to hit it on the nail.”, then it would have been the commissioner, but she did not. I will read to the House a couple of the statements she has made, which I think are absolutely important for us to take into account: “International concern about the sustainability of biofuels and their true environmental and economic impacts has heated up considerably in recent months—which signals a need for caution.” Biofuels are seen as a way of achieving both lower carbon dioxideemissions and energy security, but Dr Wright does not believe that the mechanisms allowed for in the bill will deliver those two goals. There is the Parliamentary Commissioner for the Environment saying that this legislation is on the wrong track. “Biofuels appear to be carbon-neutral, because plants absorb carbon dioxide (CO2) as they grow, and this is equal to the CO2 emitted when the fuel is burned. However this does not account for the CO2emitted during cultivation and processing into fuel. Lifecycle assessments of a wide range of biofuels shows large variation in CO2emissions across fuels and, in some cases, across countries,” says Dr Wright. “Ethanol from corn in the US, for example, is a very poor performer, with total CO2emissions close to those of diesel.”

Well, we have to say to ourselves that if the Parliamentary Commissioner for the Environment is asking those sorts of questions on this legislation, then surely this Parliament should sit up and take notice. She has said that she is very uncertain about this Parliament and this nation proceeding with this legislation.

I also draw the House’s attention to a report of the Ministry of Economic Development, its briefing paper to the Local Government and Environment Committee. I have to say that it was astonishing to start reading through this paper that that committee put before this House. These are the Government’s own advisers talking about this, and they are talking about the principle of sustainable biofuels: “After reviewing a number of potential principles provided by officials, and suggestions from within the Committee, there does not yet appear to be a consensus opinion. In this sense debate in the Committee has reflected international deliberations on biofuel sustainability. While one might know it when one sees it, sustainability is difficult to define. … At its meeting on Thursday 29 May, the Committee asked officials to provide advice on how principles can provide the best possible direction to the making of biofuel sustainability requirements.” They went on to say that they do not know. They are not sure. They cannot convince us, actually, that it can happen. And these are the Minister’s own officials who are telling the committee that. This paper, if it has not come to the attention of the House, needs to come to its attention.

The next thing people should be concerned about is the issue of impact on food. We all know that we have a major issue around the world about food security. It will be one of the major factors of debate as we move forward, around the world, in the next 20 or 30 years. After the Second World War we had food supplies that without producing any more food would have lasted more than a year. We would have been able to feed ourselves. Currently, the food supply is measured in days, not months. What is now starting to happen, which I think is an absolute disgrace, is that some countries in Europe are asking countries in Africa to grow and export food to countries in Europe that will turn it into biofuels, while the people in those very same southern African countries are starving. Quite honestly, that is an absolute disgrace and it should not be allowed to happen.

Finally, I come to the point that Dr Nick Smith made in his address, which is the issue of price. The previous member to speak, Moana Mackey, talked about the fact that there is debate and argument about whether there will be a cost. What she was not able to tell us was that there would not be. She said that there was some disagreement. She said the Government did not know whether it would be 7c or 1.5c, and that it was not sure what it was. She said that different streams of advice gave the Government different levels of increased costs. But what she did not say, and could not say, was that there would be less cost. We all know that this legislation will impose more costs on this country; it will put more costs on to travellers in this country. The fact is that, whether or not we like it, this sort of legislation, with the infrastructure needed to provide it, will unquestionably cost the transport sector in this country a lot of dollars. So when members of this Government stand there and say: “Yep, we are going to move forward.”, when all the evidence is against it, including the advice of the Parliamentary Commissioner for the Environment and its own advisers, and when so many of the submitters have said that we should not do it, then I say to this House that we have to take note.

PETER BROWN (Deputy Leader—NZ First) : When this Biofuel Bill emerged and was introduced in the House some time ago, we had significant concerns. I could perhaps go even further and say that we had major concerns. Those concerns were strengthened when we read the submission from the Parliamentary Commissioner for the Environment. She summarised at the end of her submission to the Local Government and Environment Committee, and recommended that the bill did not proceed.

Our concerns revolved around a number of issues. First and foremost, we did not see why New Zealand should be a world leader in the adoption of biofuels, but apparently we are not. Biofuels have already been adopted in the USA, Brazil, Canada, most European countries, Australia, China, India, and Thailand. All those countries apparently use biofuels.

The second concern we had was the possibly adverse effect on car engines and the cost for motorists. We thought that motorists might well have to have their car engines modified at some expense, but we were informed that modifications would not be necessary for petrol or diesel vehicles using low-level biofuel blends. Petrol engines tuned correctly for use with ordinary petrol would not normally exhibit any problems when using bio-ethanol petrol blends of up to 3 percent. So that knocked that concern on the head. We were concerned that bio-diesel in a diesel-powered vehicle would clog and not flow properly, but we were told that that concern was needless. One organisation involved in producing bio-diesel told us that tests had been done on it, and it had not been found to alter what the organisation called the cold-flow properties of the original mineral. In other words, that was a concern we did not need to have.

We were concerned that productive land in New Zealand would be used to grow crops to make ethanol. I am told that the select committee modified the bill to ensure that that would not happen. So that was another concern knocked on the head.

We were told that the new infrastructure costs would add significantly to the cost of a litre of petrol or diesel. But we were told that the select committee had looked at this issue at quite some length—that is as I understand it; we were not represented on the select committee—and the figures bandied around to us were anywhere between 4c to 7c a litre. But as the member who resumed his seat some time ago said—and I think that this is in the select committee’s report—it is estimated that the cost will be somewhere between 0.2c to 0.4c a litre, and it might be even less than that. Biofuels might even reduce the cost of fuel. That was another concern knocked on its head.

Finally, we had the concern that John Carter raised—that somewhere overseas, in Africa or wherever, people are growing crops to produce ethanol for the world market. That matter is of concern, but it is happening anyway. It will happen whether or not New Zealand buys into this.

We have looked at these issues as comprehensively as we have been able to, and we believe that this bill should proceed. We note that the select committee recommended that the percentage of ethanol in petrol should be 0.5 percent. It will reduce from 0.53 percent this year to 0.5 percent, and then go up in increasing increments of 0.5 percent for the next 4 years to reach a figure of 2.5 percent in 2012. That is a reduction on what the original bill said; I think the percentage had been 3.4 percent in 2012. So we think, all in all, that this bill has taken the concerns into consideration and has addressed them. New Zealand First will support the bill.

JEANETTE FITZSIMONS (Co-Leader—Green) : The whole world is on a mission to move its transport systems off fossil fuels and on to renewable sources of energy, and we do not have a lot of time to do it because this is driven by two things. It is driven, firstly, by rising oil prices, which indicate that oil production has probably already peaked and will continue to decline, and that prices will rise from hereon, and it is driven, secondly, by climate change, where transport is a major contributor. In New Zealand, 44 percent of our carbon dioxide emissions are from transport, and we have to get that level down.

Biofuels can make a small contribution to this. Nobody here is claiming that biofuels can be the whole answer; in fact, no one thing will be the whole answer. The future will be a jigsaw of sensible, effective, sustainable technologies that fit together in order to give us some mobility in a climate and oil - constrained world. So we need to build capacity for the biofuels that New Zealand can produce sustainably.

How would we make that happen? I will read to members from a letter I received last month: “Following the passage of the Biofuel Bill into law we expect to shortly thereafter announce our intention to initiate the construction of our planned bio-diesel production plant at a site close to our present pilot plant. The initial capacity will be 20 million litres annually, but we intend to double that capacity within a year or two. Our plant is designed to process 100 percent New Zealand - sourced tallow, which is recognised as the most environmentally sustainable feedstock … leading, if you include the rendering plant as well, to a greenhouse gas reduction of 68 percent.”

If one listens to National members, one would ask the question: why will those producers not do that unless the bill is passed? There are answers. Those producers will not do it without this bill being enacted because, first of all, they would be exposed to competition from unsustainable imports of cheap bio-diesel—which comes from palm oil grown in South-east Asia, where people have cleared the rainforest to do it—and we have to put some standards in place or no one will be prepared to produce sustainable biofuel in New Zealand. That is the first point.

The second point is that everybody has been talking today about what this measure will cost. The fact is that the cost of oil is just hovering around a threshold at the moment, where for some of the time bio-diesel is no more expensive than oil and for some of the time it is. We know that at $140 a barrel for oil, bio-diesel does not add to the cost of diesel; at $105 a barrel, it does, somewhat. So without legislation, without an obligation, and by leaving it to the market, there is a stop-go policy of cheap imports that come in when the oil price goes high, and that do not come in when the oil price goes low. It builds no capacity in New Zealand—it does not.

People talk about infrastructure; the National Party loves to talk about infrastructure. Part of the infrastructure that we need is the capacity to make, blend, and distribute small quantities of biofuel to eke out our petroleum, and this is the way we will get it. We need to build that industry here. We have resources. We have tallow as the obvious main one. We have some whey, and that is already being turned into ethanol for some purposes. We have other agricultural and food wastes. We have oilseed rape, which can be grown in rotation with other crops, thereby improving the general productivity of the rotational crops, and that is happening on a small scale now. In the future we will have algae, which are capable of producing bio-diesel while growing on sewage ponds. What could be more sustainable than that? We will also have wood wastes turned into ethanol, or potentially into bio-diesel. The quantities that the bill obliges on the industry are carefully scaled to match what can be produced locally from local resources. That is their purpose. We actually reduced quantities a bit from what they were when the bill was introduced, just to make sure that we were not overwhelmed by imports.

It is very easy to stand here in the House and mislead people who are listening in, by saying what a terrible thing biofuels are, how this bill will lead to world hunger, and how it will lead to lack of biodiversity. The Green Party was the first to raise these issues. At the very beginning, before the bill was even introduced to the House or mooted, we told the Government that we would not support its proposed Biofuel Bill—and we had not even seen it at that stage—unless it had a sustainability clause in it. We made it absolutely clear that, firstly, it had to make serious carbon reductions compared with petroleum, and of course corn from ethanol clearly does not do that. Secondly, it had to not compete with food production, because in the unequal market world that we have, where the stomachs of the poor have to compete with the SUVs of the rich, the stomachs of the poor have no chance of winning that battle. So that had to be ruled out. Thirdly, we had to rule out bio-diesel that compromised biodiversity by clearing rain forests, and so forth. It was a high test, and the Government accepted that challenge.

If we do not pass this bill, we will end up in New Zealand with imported biofuels that do all of those evil things. There is nothing at the moment to stop bio-diesel from South East Asian rainforest clearance coming into New Zealand. There is nothing at the moment to stop biofuels grown on land that used to grow food for the poor from coming into New Zealand. There is nothing even to stop the US’s outrageous ethanol from corn from coming into New Zealand. That is what this bill does, and for National members to stand there and say they are on the side of sustainability but they want to preserve the status quo, where all of these biofuels that are destroying people’s food and biodiversity can come into New Zealand unhindered, is absolutely outrageous.

I heard the argument that the officials did not know how to write a sustainability clause. Well, I do not actually believe that, but the fact is that the Greens have written it for them. And it is a good one. Let us look at what it says. It establishes the principles of sustainable biofuels. First of all, they emit significantly less greenhouse gas over their life cycle than obligation engine fuel—that is, petroleum. Secondly, they do not compete with food production and are not grown on land of high value for food production. That is a high test. Thirdly, the production of sustainable biofuels does not reduce indigenous biodiversity or adversely affect land with high conservation value. Those principles are as clear as one can get. There will be regulations under the bill to give effect to that clause, and I have no doubt at all that in 9 months our officials can write those regulations and get them through.

National members know that the scare stories they have been telling in the House today cannot happen in New Zealand under this legislation. They are pretending otherwise, and I think that that is a wicked thing to do. The core message is that some biofuels are very bad indeed, and we will not have them in New Zealand. Some biofuels are good, and we will get them to happen. Is that actually too hard for people to understand?

I totally agree with the Parliamentary Commissioner for the Environment, who says that the first step we should be taking is to reduce our use of transport fuel—to use our cars less and to use rail and public transport, and cycling and walking, more, and not just to ask what we shall put in the tank. She was right. She gave that advice to the select committee, and I applaud her for doing so. That is why the Green Party continues to campaign on all of those transport alternatives. But when she gave advice that the bill should not proceed because of sustainability issues, she did not know that the Green Party had set these conditions. She had not seen any of the drafting that we were doing with the Minister and then in the select committee. She was commenting on the bill as introduced, which had a placeholder clause on sustainability that I said in my first reading speech was merely a placeholder clause.

So this bill is a no-brainer. It is a small start to getting a sustainable fuel industry going in New Zealand, under very, very strict conditions, and the whole House ought to be supporting it.

Dr PITA SHARPLES (Co-Leader—Māori Party) : In the Māori Party we live by the belief that our people are our greatest wealth. In thinking of the Biofuel Bill our thoughts inevitably turn to the late Mountford Te Mana o Te Rangi Retemeyer. Monte was one of those men whose footprints are everywhere. Deeply committed to the marae of Maketū, Parawera, Āruka, and Te Korahā, he also had time to be chairman of the Waikato District Māori Council, vice-chair of Tainui-Kawhia Forestry Incorporation, director of Protac Investments, trustee for Aramiro Ahu Whenua Trust, chairman of the Kawhia Moana Harbour Committee, chairman of the Parawera Maori Culture Group, and to be involved with schools, councils, prisons, and, in fact, every aspect of community life.

But it was Monte Retemeyer’s role as chairman of the major Waikato-based incorporation Taharoa C Block that has particularly inspired me. Taharoa C Block is a multimillion-dollar incorporation, with about 1,500 shareholders, set up under Te Ture Whenua Maori Act 1993. So when Taharoa C Block presented to the Local Government and Environment Committee on the Biofuel Bill, its submission bears the legacy of Monte Retemeyer. It is a submission that is worth listening to. Taharoa C Block told the select committee that the bill has the potential to make an important contribution to combating climate change. That is advice that it is well equipped to give. Taharoa C Block is in a partnership arrangement with Te Rūnanga o Ngāi Tahu, focusing on Māori-owned land as the context for exploring the potential of developing a sustainable biofuel supply. If anyone knows much about the quality of some of our Māori-owned land, it would be evident that most of that land is pretty marginal for food production. So it will be of great interest to see how that project fares.

The project, funded by the Foundation for Research, Science and Technology to the tune of $4 million, involves a partnership with fuel company Chevron Oil as a principal industry partner. It involves growing plants for bio-diesel feedstock that do not require the use of valuable agricultural land. Taharoa C Block in the north and Te Rūnanga o Ngāi Tahu in the south will provide the technical input and the field trial management that are needed to get the project going. The focus is to apply a variety of ecological and agronomical engineering methods to the production of affordable, low-impact fuels that are also ethically sound.

It all sounds a bit too good to be true, but Te Rūnanga o Ngāi Tahu, alongside Taharoa C Block, sees the value of being involved in an entirely new and sustainable industry that opens up opportunities for grassroots Māori landowners in Te Wai Pounamu, the South Island. It is not as though either entity is a newcomer to innovation. Taharoa C Block has already been exploring other sources of renewable energy through its wind power generation and energy crops. Both organisations have been concerned that the environment must not be damaged in the process and, just as important as that, they are keen to ensure that they are not putting in more energy than comes out.

That hits at perhaps the greatest issue with biofuel production. The simple reason for biofuel market failure is the rising cost of fossil fuels—crude oil and natural gas—and the pervasive impact those fuels have on the entire economy, including biofuel production. It is all a question of balance. Modern agriculture is an industrialised system, and large-scale biofuel production is dependent on it.

But as the Māori Party has consistently presented to the House, it is essential that when we focus efforts in one area we do not compromise another area. Environment and Conservation Organisations of New Zealand Inc.—a natural alliance of some 65 groups with a concern for the environment—presented such concerns to the select committee. It warned the committee that it is essential that the development of biofuels does not cause a further loss of biodiversity or result in increased greenhouse emissions. It was able to share with the committee developments from the European Union, which has announced that it may ban imports of certain biofuels that are produced unsustainably.

If we go further down the biofuels track, it is essential that New Zealand does not accept biofuels from sources that exacerbate the destruction of rainforests or result in a net increase in greenhouse emissions. The Parliamentary Commissioner for the Environment, Dr Jan Wright, as has already been said in this House, described the international context of the debate around the sustainability of biofuels, which has, in her words, “heated up immensely”. She urged that this bill not proceed, being particularly concerned about the impacts of importing biofuels while turning a blind eye to the hugely damaging environmental impacts that are occurring in countries like Indonesia and Malaysia, which have been referred to earlier. Dr Wright’s key concern was that importing biofuels would be inconsistent with our clean, green image. So we return to Taharoa C Block and Te Rūnanga o Ngāi Tahu for our motivation.

The critical question, then, is to assess how well the bill will deliver on the two goals of reducing carbon dioxide emissions and increasing the security of our supply of transport energy. The select committee has recommended the Minister issue, through two very comprehensive Orders in Council, requirements to specify that biofuels must not contravene sustainability principle 2 regarding competition with food production or greenhouse gas emissions. The select committee has suggested that the bill will be enhanced by including a methodology to assess life-cycle greenhouse gas emissions from engine fuels. It also recommends the establishment of a methodology to assess the effects of the production of a biofuel on food production and for assessing whether those effects amount to competition.

There are other elements to this bill that we are pleased to see included. The select committee has recommended the insertion of a mechanism for recognising particular land, including land outside New Zealand, as having high value for food production or conservation. It has also introduced a methodology for assessing the effects of the product of a biofuel on indigenous biodiversity and on land that is of high conservation value. Those are all new initiatives that help us to have confidence that biofuels can be offered tentative support. We are, however, always conscious that on their own, biofuels will make only a small contribution to reducing emissions and to contributing positively to reducing the price of oil and addressing the supply problems of the future. As oil prices rise, the contribution to energy costs of biofuels will lessen.

Some will argue that the use of bio-diesels will not result in any fuel price increases, and we are all of the view that the issue still remains of finding new ways to reduce energy consumption by living differently. Conventional economics cannot fix that problem; industrial capitalism as promoted by our major parties, including policies based on building more roads, will not lead into a low-energy future. How we utilise our natural resources in a sustainable, environmentally considerate manner is critical in ensuring that all New Zealanders have access to affordable energy resources in a world where shortages will mean escalating prices.

Finally, I say there are many and varied ways of looking at new ways to reduce energy consumption. We in the Māori Party promote the further development of cheap, free, regular, reliable, and frequent public transport, of telecommuting, of fully connected off-road tracks, and of walkways. We have supported improvements to the rail infrastructure in order for it to deliver a better service, and thereby reduce the number of cars on the road. Ultimately it is up to us to play our part in reducing our dependence upon over 500,000 everyday oil-based items, by developing strategies to reuse, recycle, repair, respect, and replace items, and to trade locally. It is up to us to tread carefully in the footprints left by people such as Mountford Te Mana o Te Rangi Retemeyer.

We will support this bill, as we support us all, in order for people to live differently, to reduce their carbon dioxide emissions, and to look for other sources of energy supply. Thank you.

Hon PETER DUNNE (Leader—United Future) : It surprises me greatly, and I suspect it will astound the Greens even more, to be able to say that we find ourselves in virtually total agreement with the comments that Jeanette Fitzsimons made a little earlier about the Biofuel Bill. This bill is not a silver bullet, but it is a small step forward, and we believe it is a useful step forward that deserves to be supported.

I was interested in the quotation that Jeanette Fitzsimons read, because it reminded me of a number of meetings I have had of late with people and companies that are interested in having a domestic biofuel industry. The message she quoted was very similar to the message they had been giving me in those meetings. It was, essentially, that there was a need for some certainty; some significant investment decisions were pending based on the fate of this bill. There was certainly a need to get this matter resolved, and there was also an issue to ensure that a domestic industry based around our capacity to use tallow was able to be secured and that provisions would be put in place to prevent the potential importation into New Zealand of product from unsustainable sources.

A number of those matters have been mentioned already. The concern being raised at that time was the absence in this bill as introduced of a mechanism that would prevent the importation of product that was adverse to the sustainability interests that biofuels are ostensibly about promoting, and that that would not make it possible to develop a competitive industry in this country.

I was interested, too, because it had bothered me to hear earlier references to the fact that the Parliamentary Commissioner for the Environment was opposed to this bill, to hear of the sequence of the Parliamentary Commissioner’s report and the subsequent amendment to the bill regarding the introduction of a sustainability clause. I think that makes sense and it puts the Parliamentary Commissioner’s comments into their proper perspective.

Because of the introduction of those provisions, which make it clear that issues relating to the food supply, biodiversity protection, and the likely importation of some quite dangerous product into New Zealand would be addressed and that we could look with some confidence to what was available domestically, we took the view that this bill was worth supporting more than it was worth opposing. We had not made the call to oppose it, but we were getting to the stage of thinking that some of its measures would not be as environmentally desirable as they had been portrayed, and that, therefore, this might be one of those things that look good on paper but was unworkable in practice.

The bill that has emerged—and I acknowledge the discussions we were able to have with the Minister at critical stages—I think addresses the concerns that reasonable people have about the way in which this measure is being advanced. Therefore, it is appropriate to support its further passage. Those reasonable views are not some wild-eyed exposition of the fact that biofuels are a saviour to us all, or that the advent of these products would move us away completely from our dependence on oil-based products or other alternatives. But there is a recognition of the possibility that a market niche could be developed in New Zealand, particularly given the level of tallow in this country, to give us some alternative and to perhaps just spread out a little more the range of products available. This has to be handled in a sensitive way and also with a degree of precision, so that key investment decisions can be made.

The message I distinctly recall receiving from a number of the potential investors—and I note that one has already gone by the wayside—was that unless Parliament proceeded to send the signal in relatively good time, this would simply be theoretical, and there would be no capacity to develop a domestically based industry. As a result of that we would be totally reliant on an imported product, with all of the implications that have been discussed in other addresses this afternoon.

On that basis I think this bill is a prudent step forward and is one worth supporting. It is not perfect in every respect. Some issues will need to be resolved as the regime it introduces unfolds. There is clearly an issue about the fact that the bill takes effect in October, but there is a window until July of next year when the sustainability standard comes into force. That is a practical step, as I understand it, to get over the fact that certain transitional steps are under way.

The challenge I think the House faces, and why we come down on the side of supporting the bill, is that we either make a stand on this issue at this time, given the interest there is and the capacity in the New Zealand economy to make some movement, or we effectively give it away as an option for this country. On that basis we made the call to support this bill. We think that it is the right decision, and we believe that although there may well need to be adjustments as the bill takes effect in order to put in place a more viable long-term regime, it is important to make a start at this point. That is why we are voting for the bill.

NICKY WAGNER (National) : Of course we all like the idea of biofuels. All New Zealanders are keen to see a cleaner and greener New Zealand. The vast majority of the public are concerned about climate change issues—we are concerned—but we do not really want to change our lifestyles, so we would be absolutely delighted if a simple change of fuel could solve some of these problems. If only life was so simple.

I have a question for the House. What do the OECD Round Table on Sustainable Development, the UK House of Commons Environmental Audit Committee report, the G8 conference of legislators, the UK’s chief scientist, the World Food Organisation, the UK Royal Society, the World Bank, and the United Nations Secretary-General all have in common? What do those august bodies have in common? They are all respected international organisations that comment on world issues and world policies. Several of them are specialist green organisations, and they, along with the New Zealand Parliamentary Commissioner for the Environment, have all expressed serious concerns about biofuels and any biofuel obligation.

But this Labour Government thinks it knows best. This Labour Government wants to ram through this Biofuel Bill, despite the reservations of all those world experts. The Labour Government thinks it knows best. The Labour Government wants to ram through the Biofuel Bill, despite the fact that it will add increasing costs to all New Zealanders and that the environmental return is very debatable.

There are serious costs to the introduction of biofuels. There is some debate over what those costs are. The chairperson of the Local Government and Environment Committee tells us that she does not know what they are. She does not really have much idea, but the bill will still be passed. There is debate over these costs, and the best estimates we have are somewhere between 1.5c a litre and 7c a litre. So even if we take a mid-point range, the cost of the biofuels obligation will result in an increase to the New Zealand public to the tune of about $240 million. New Zealanders might be prepared to pay that, because we know that they are keen to see the country being more clean and more green. They might be prepared to pay that, but only if they are sure there will be some benefit, and even the world’s experts cannot guarantee that.

When we are making decisions about new green initiatives, we need to prioritise the things that will give us the most bang for our buck. Members should consider other planned environmental spending. For example, there is solar water heating, and we are putting $4 million aside for that; maybe research into geothermal energy or even tidal energy, and we are putting away $1 million each for that; or perhaps research into how we can reduce greenhouse gases from animals, and we are putting $5 million into that. Members can compare that spending with the $240 million for biofuels—the spend for biofuels is huge. What could we achieve if we spent even half of that $240 million on doing some other environmental initiatives with a better pay-off?

In saying that, I also say that I support the development of biofuels. In my previous life as an Environment Canterbury councillor, I was involved with the trialling of biofuels on the Christchurch City bus fleet. We undertook a trial that proved both tallow and reused oil-based biofuels would work very well in the city fleet. In fact, they worked so well that one company, Leopard Coachlines, decided to use biofuels permanently. It decided to use a 5 percent blend. Then came the problem, the problem we are all foreseeing with this Biofuel Bill: the availability of feedstock became the issue. We all talk about tallow today, which is sold on the international market. The increased global demand for tallow has meant that the cost of tallow feedstock has become prohibitive for biofuel manufacturing and for this bus company. The bus company was caught between a rock and hard place.

One of the aims of having a public transport system is to provide a more environmentally friendly method of getting people around the city. The more buses there are, the less congestion there is and the fewer harmful emissions there are. But if bus fares increase because of the use of a cleaner fuel, the service becomes less attractive, and the environment suffers. It was a difficult balance for the bus company to make, but in the end they are no longer using biofuels, and that is a real shame.

As the National spokesperson on waste, I am particularly interested in the new technologies being developed to manufacture biofuels from waste products—the so-called second-generation biofuels. Producing biofuels from waste is a fantastic idea, because one gets double the environmental benefit. It avoids the horrible downside of the world’s present focus on biofuels, which is that biofuels stock is being grown instead of food. It is a supply and demand problem, so any of the rules we put around this can only mitigate, not solve, the issue.

The fact that biofuels stock is being grown instead of food has sent food costs spiralling up and out of control. The horrible downside we have seen is starving people rioting across the world. The horrible downside means that wealthy car owners can have cleaner fuel, but desperate people, who could never even imagine owning a car let alone buying biofuels, are starving because they cannot afford food for themselves or for their families. We cannot allow our demands for biofuels to destroy other people’s lives.

The use of waste as a feedstock for biofuels is a great idea, because it cleans up the environment as well. During the last few months I have visited several biofuel manufacturing projects focusing on waste. One is in Blenheim. The Aquaflow plant is producing bio-diesel from algae growth in Blenheim’s sewage ponds—bio-diesel from nutrients that are polluting our environment, bio-diesel from a very plentiful waste product.

I have also seen projects that involve the digesting of dairy effluent from dairy sheds to provide a fuel source. We all know that the effective management of dairy effluent is essential if we are to be able to control the nitrate levels in ground water and streams, so producing biofuels from dairy effluent is a further environmental bonus. Other groups are working with wood waste, industrial waste, and green matter. The bottom line is that all these projects are a better use of resources than growing biofuel feedstock. All these projects have dual benefits—cleaner fuel but also the recovery of resources that would otherwise pollute the environment.

Right now we again have an environmental bill in this House that is on the right track, but it just has not been very well-thought-out. The basic idea is good, but although National supports the use of biofuels, we are also very aware of the pitfalls of this legislation. These are perverse environmental effects, unacceptably high costs, and international humanitarian ramifications.