Press Release – TV3’s ‘The Nation’

Trade Negotiations Minister Tim Groser says there are complexities in following Australia’s lead and introducing plain packaging for tobacco products. Government Not in a Hurry on Plain Packaging

‘THE NATION’

TIM GROSER ‘MEETS THE PRESS

With RACHEL SMALLEY – ALEX TARRANT & JOHN HARTEVELT

Trade Negotiations Minister Tim Groser says there are complexities in following Australia’s lead and introducing plain packaging for tobacco products.

Speaking this weekend on TV3’s “The Nation” he said that the Government consulting the public on plain packaging “and I don’t want to get ahead of the public consultation process.”

Asked if that meant New Zealand might wait until legal challenges in Australia were finished, he said: “It’s an option on the table which we’re consulting with now.

“The Maori Party has taken political leadership on this. 

“We’re strongly supporting them but we’ll listen to different views. 

“I think it’s getting a bit ahead of the play here because there are some complexities around this.”

He said there was an argument that plain packaging could remove the tobacco companies’ intellectual property.

“We need to listen carefully, especially to other companies that would be very concerned if we were setting a precedent on this,” he said.

“That might actually go against our own interests. 

“We know what the real target is, but we need to consult the public and then we’ll need to have some very careful decisions to make sure that if we are going to  move forward with legislation in this area, is properly designed to deal with those legitimate concerns. 

“I’m thinking really outside tobacco I should say.”   Key’s Suggestion Won’t Mean we get a Carbon Tax

Trade Negotiations Minister Tim Groser says that New Zealand would not agree to a carbon tax if it followed Prime Minister’s John Key’s suggestion of harmonising its climate change policies with Australia.

Speaking this weekend on TV3’s “The Nation” he said: “This government will not replace the ETS with a carbon tax and I would be very surprised if our opposition had different views on that.”

He said New Zealand’s previous Labour Government had tried to model its emissions trading scheme on both the European ETS and Australia’s original proposal which was very similar to ours.

“Then the Australian political debate matured, and Australia replaced it with a carbon tax, which is a totally different system,” he said.

“However, the current plan is that we’ve changed into a trading scheme in 2015, so if that’s the case then the possibility of doing what the Prime Minister has said is absolutely on the table.”

Rachel This week the government stepped back from its carbon tax commitment, revealing that agriculture and industry would wait longer before paying higher prices under our Emissions Trading Scheme. The government has hinted that our ETS could one day be harmonised with Australia’s, a much more expensive scheme than ours. I’m joined by our Meet the Press team, AlexTarrant from Interest.co.nz and John Hartevelt, political reporter of Fairfax Media. Also let’s welcome our guest, Climate Change Minister Tim Groser. Thank you for coming in. Let me start firstly Minister by asking, you know New Zealand is the only country outside of the EU with an Emissions Trading Scheme. Why are we out on a limb on this?

Tim Groser – Climate Change Minister Well I don’t think we’re out on a limb. Various countries are trying to get something together in a coherent way, and Australia introduced a carbon tax what six days ago after a huge amount of political to-ing and fro-ing, but we are trying to calibrate our response in accordance with what we perceive to be, in a reasonable position, and I think we’re in a reasonable position.

AlexTarrant – Interest.co.nz Well if we’re not out on a limb then surely we should be on the same limb as Europe. Why aren’t we making our scheme as comprehensive as them. Why are you keeping certain sectors out of the scheme?

Tim Well our scheme is actually more comprehensive than the EU ETS, Our scheme covers first of all when we get the legislation through the parliament, if it’s done, we will be covering all of the Kyoto six gases. Secondly, European scheme omits nearly 60% of European GDP. It covers about the same proportion of their emissions as ours. So I think on any reasonable comparison we’re doing fine.

Alex But why not make it more comprehensive. This week you’ve decided to keep agriculture out of the scheme, methane emissions out of the scheme until at least 2015. So why aren’t we making it more comprehensive when we’ve got this whole clean green image for New Zealand? What’s stopping you there?

Tim Well let’s come back to agriculture specifically because I think it’s worthwhile having a bit of a discussion on it, but in general terms we just thought, look we were elected on the basis that New Zealanders expected us to do our fair share. We think we’re doing our fair share. We did not think this was the right time to be putting new costs on households and on businesses that employ them.

Alex Okay so why not cut the CMM if you’re worried about the costs faced by businesses and households?

Tim That’s what the climate change sceptics wanted us to do. They use these arguments to say we should go back …

Alex Well we’re at 0.2% of global emissions, so why not cut it, it would be an effective tax break in a time of economic pain.

Tim Because we said we should do our fair share, that doesn’t mean doing nothing. So basically to put it in simple terms we said let’s not try put a foot on the accelerator, nor try and back the ETS truck up the drive again, which is what the sceptics wanted us to do. So we’ve got I think a very offensable position.

John Hartevelt – Fairfax Press Gallery So do we still count as fast followers Minister?

Tim It depends what you’re measuring John. I think that if you look at first of all the core point about share, is are we going to meet the one international obligation that we’ve set, and the answer is according to the scientists who advise us – yes, we will. Many countries will not, and the large majority of emitters under Kyoto, well they weren’t covered by Kyoto, including the United States and the entire developing world. So I think we’re absolutely on track.

Alex On this issuer about certainty, how can businesses be certain when a few months ago you say that large emitters will move from paying a two for one scheme, so they emit two tonnes of carbon and only pay for one tonne of that. You said you’d phase them in from 2013 to 2015. Some of them started buying up credits to do that. How can they be certain about five year plans, and business planning when you come out two months later, three months later and say oh actually you know we’re not gonna do that, you remove all reference to it?

Tim I think we had 359 submissions, we looked at them very closely. The large majority of companies said could you please just maintain the settings as they are. So I think in a sense we have given them some degree of certainty. But you know we can’t give them complete certainty because the carbon price can still move around.

Alex Yeah but if there is certainty, but you can’t put any dates on when this might change again. You did have dates, that was certainty. Businesses are now having to dump carbon credits because you’ve just pulled the rug out from under them this week.

Tim Well there’s such a thing as certain death too. Sometimes certainty isn’t always to be welcomed. What we said is we’ll maintain the settings as they are for a few more years, and like any normal government policy, we’ll review it and change it if the circumstances convince the government of the day to do that.

Alex Well Phil O’Reilly from Business New Zealand wants certainty. He said the frequent reviewing of the scheme’s design also loads uncertainty costs on to New Zealand businesses. They’re sitting there not knowing what’s going to happen in two or three years’ time with what could be one of the biggest costs facing them. How do you expect them to make investment decisions on that?

Tim Well I think what we’ve given Phil and Business New Zealand is certainty that the current regime on its current speed limit will apply for the next three years, and that’s reasonable. What we’ve also done, is cos we’re very conscious of what we call “review” fatigue, is we’ve decided, instead of having one review on agriculture in 2014, and then a general review on the rest of it in 2016, we’ve brought the general review back one year to 2015 and put agriculture into that. So you know there is some degree of stability I think in the policy settings now.

John I just wonder Minister with all the complexity and the constant struggle with the business, if you ever have a moment where you step back and think as an economic purist and a classic liberal, perhaps it would have been easier if we just had have had a carbon tax.

Tim I know the argument for it, but I think we’ve settled as a country the two major political parties have agreed number one that we’re going to take this seriously. Number two they’ve agreed that the policy of choice is an ETS and we’re having an arm wrestle in a democracy about the speed limit, and I think that is a reasonable position for a country to be in compared with some countries not far from us.

Rachel Labour was going to introduce agriculture into the ETS in 2013. What if it’s a Labour led government in 2014? What direction does that give farmers? They’re gonna wonder what on earth is about to happen. You’re saying it’s not gonna be reviewed until 2015. What would Labour do if they got in government, and if agriculture is so important to our economy, why use it as a political football?

Tim I don’t think we’re using it as a political football, I think what the Labour Party does, if they convince New Zealanders to put them in government it’s a matter for them to decide not for me to comment on. But let’s talk about agriculture, they have got directions. First of all just a few things about agriculture. Number one is that not a single country in the world is putting any type of carbon price on biological emissions. Number two we do include processed agriculture in the ETS. Number three, no country’s doing more to advance science understandings on this than New Zealand. So we set up when we were in government the Global Research Alliance on agriculture emissions. We networked 32, 33 countries into a science consortium, trying to come up with sustainable solutions, and we also require at the processor level, reporting on all emissions from agriculture. So actually in my opinion we’re doing more than any country on agriculture.

John So why not give them a firm date as to when they might expect to be paying for some of their methane emissions, because they don’t know (a) what’s going to happen if Labour comes into power in 2014, (b) what a future National government might do. All they know is at least until 2015.

Rachel How can you plan for the long term?

Tim Well this comes to my point about certainty of death. I mean it’s one thing to say we want certainty.

John But certainty of business continuity.

Tim But what we want is for them to know what their emissions are. By the way our farmers have been reducing their emissions by an average of 1.3% every year for nearly two decades.

John So why not give them something to measure it against?

Tim Well that’s exactly what we’ve done. We’re introducing compulsory reporting for the emissions so they can track their emissions, but we don’t want to put our premier export industry at a competitive disadvantage when no one else is doing it.

Rachel The farmers have welcomed this move, but the carbon farmers haven’t though, they’ve been sold down the river. How do you incentivise now anyone who wants to supply New Zealand units into the New Zealand carbon market?

Tim We’re linking our scheme with the international price. The international price is overwhelmingly influenced by regulatory decisions of the European community, and we don’t want to de-link from the price. The whole point of the ETS is to link with an international price. Now yes it’s a very weak incentive at the current price, but look only 12 months ago the New Zealand carbon price was between three and four times what it is now. So what the future will hold depends primarily on decisions of European regulators.

Alex Well it’s quite hard getting European regulators to all agree, you have to get 27 member states to agree on that. So it looks like these low prices will be staying for quite a long time, and so how do you expect though people to invest in forestry blocks as this ETS is designed to make them?

Tim Well if any of us are that confident we should leave our current jobs and start to speculate in the futures market on carbon prices. But it’s not what I’m going to do, because only 12 months ago the price was three to four times as high it is now. So it depends on primarily the decisions of regulators, the political climate, and when Eurozone climbs out of a recession. There’s a lot of uncertainty around that carbon price now, at the current link yes it’s a low signal to invest in carbon markets.

John Are all the eggs on the agricultural issue, are they all in the Global Alliance basket? And is the Global Alliance basket not just a matter of hope?

Tim No I don’t think it’s a matter of hope I think well, I hope it delivers the solutions for dealing with a particularly enteric methane. There are some solutions out there in nitrous oxide, but it depends where you are in the country, your soil type and so on and so forth. But right now there’s nothing on the major gas enteric methane.

Rachel So you can see a day when animals emit significantly less methane?

Tim Put it this way, our Chief Scientist heading up the livestock research group of behalf of a number of countries, pointed out to me that there was a 50% variance between the most amount of enteric methane emitted, and the least, in the same breed of sheep, same animal feet, same management system. So what the scientists around the world, not just our guys are going to do is try and find out, there’ll be somewhere in the microbiology of the rumen the answer, and either – the holy grail would be a vaccine, or alternatively breed for higher protein, less emissions.

Alex And these scientists are saying we could have these within five years, these innovations. So why not give them a timeframe, so there can be a bit more certainty around when farming might – because I mean John Key has said he envisages agriculture fully under the ETS at some point. So why not give them a firm date, say Dairy NZ you’ve got five years to find these innovations. We’re gonna start charging you bit by bit from then. Why not give them some certainty around it cos they don’t know what’s going to happen after 2014 at the moment, or 2015 if National’s in.

Tim Well to do that you’d have to be betting that their scientists will come up with a credible solution in a fixed period of time. So what we said instead of fixing a date is said we will introduce biological emissions into the ETS when two conditions are met. One is when we think that there are credible abatement technologies, mitigation technologies out there in the market. There are some, but we don’t think that there’s any solution out there at the moment on the major one of enteric methane. And secondly when we think the international community is making rather more progress to deal with the core of the problem. And that’s very arguable right now.

Rachel I just want to touch on Australia. The Prime Minister says we might harmonise the scheme with Australia at some stage. Would we harmonise up to Australia, or would they harmonise down?

Tim Well this government will not replace the ETS with a carbon tax and I would be very surprised if our opposition had different views on that. The thing at the moment is this. The previous Labour government were trying to model this scheme which we’ve maintained in terms of its structure on both the European ETS and the original Australian scheme called the CPRS which was very similar to ours. Then the Australian political debate matured, and Australia replaced it with a carbon tax, which is a totally different system. However, the current plan is that we’ve changed into a trading scheme in 2015, so if that’s the case then the possibility of doing what the Prime Minister has said is absolutely on the table.

Rachel Can’t we look after the environment without the scheme?

Tim Well we’re looking after the environment in a number of ways but this is part of a global challenge. We think New Zealand’s gotta play its part, and this is our responsibility.

Rachel Alright we’ll pause there, and return after the break when we’ll ask Tim Groser to put on his other hat as Trade Minister and ask him what powers foreign investors will have, if the Trans Pacific Partnership goes through.

We’re back with Trade Minister, Tim Groser. We’re going to talk about the Trans Pacific Partnership. You’ve admitted Minister that there will be some loss of sovereignty with this. You seem to be fairly accepting of that, but it does have far far reaching consequences doesn’t it?

Tim Groser – Trade Minister Well any international agreement is about limiting the other party’s sovereignty. The point I’m trying to make is not some fine technical point here. At the moment the United States has got the sovereign right to exclude a number of very important New Zealand exports. We want to limit the US sovereignty. The real question here is in what areas, and the sensitivity in the public domain which I fully understand and share, is around limiting sovereignty, on basic things like right to regulate for public health, right to regulate to protect the environment, and those are very important and different issues. On that issue we’re going to be absolutely careful about preserving policy space for New Zealand.

John Even in the absence before we’ve got TPP we’re already seeing foreign member states that the WTO line up. Australia over plain packaging and obviously New Zealand will follow, and now we’re learning as well that our efforts with alcohol reform may come with a challenge from member states, particularly Australia. So are we not already seeing these challenges to our sovereignty? Every time we it seems we try to do some kind of reform we get challenged as a result of these agreements.

Tim Oh there’s certainly a bitter struggle which the international tobacco industry is mounting against a number of countries. I hope they can see the writing on the wall, and when it comes down to this government’s attitude to tobacco, just look at the decisions we took in the last budget, to increase the price of tobacco because all the evidence tells us this is the right way to attack. Now we’re supporting Australia 100% by the way, both in terms of these challenges to legislation in Geneva, and we’re supporting them morally cos we’re not involved in their dispute through the Hong Kong Investment Treaty.

John So would it be you’re expectation then that we should actually wait until the race is run with Australia and their challenges over plain packaging, before New Zealand moves down that path as well, just because of costs.

Tim Well we’re in process of consulting the public on exactly that question, and I don’t want to get ahead of the public consultation process.

Alex So this plain packaging policy might be delayed because of the Australian debacle?

Tim It’s an option on the table which we’re consulting with now. The Maori Party has taken political leadership on this. We’re strongly supporting them but we’ll listen to different views. I think it’s getting a bit ahead of the play here cos there are some complexities around this.

John If plain packaging does remove the intellectual property that has been – you know over time these cigarette companies, whatever you think about them, they’ve invested a lot of money into it, so do you not agree that we are rather removing their intellectual property by this?

Tim There is an argument there. We need to listen carefully, especially to other companies that would be very concerned if we were setting a precedent on this, that might actually go against our own interests. So this as I say you know, we know what the real target is, but we need to consult the public and then we’ll need to have some very careful decisions to make sure that if we are gonna move forward with legislation in this area, is properly designed to deal with those legitimate concerns. I’m thinking really outside tobacco I should say.

Alex Can I just ask you about progress on the Russian FTA, I mean you’ve been quite bullish about that in the past, but we haven’t heard anything for a while.

Tim Yeah it lost momentum primarily because the chief negotiator for it, who I’ve known for many years, was involved in the …. negotiations that Russia did with the WTO. Look they were negotiating I think 17 or 18 years to get into the WTO, and I have to accept look if you’re a great country like Russia, and you’ve got limited time available, do you do the World Trade Organisation or you’re first FTA with distant New Zealand, you do the WTO. But I was up in Moscow and Kazan about four or five weeks ago. I had some very difficult discussions, let me be blunt about it, with the previous Minister for Economic Development, but we’ve identified a possible landing path and I’m hoping to go to Moscow in about seven or eight days’ time to take that discussion forward.

Rachel Alright, we do have to leave it there. Very much appreciate your time, thank you Trade Minister Tim Groser. Also the Meet the Press Team, Alex Tarrant from Interest.co.nz and John Hartevelt, Political Reporter for Fairfax Media. Thank you to you all.

ENDS

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