Very low international carbon prices (the consequence largely of the global recession and absence of greater international action on climate change) and;
Our decision not to use the Kyoto Protocol for the next international commitment for New Zealand beyond December 2012.
No doubt, some of the confusion has been deliberate but certainly not in all cases. Often, the differing views reflect differing views about priorities and how international politics works. Let me state the Government's view.
Domestic policy
First, the ETS has not been "gutted" by the changes passed recently in Parliament. Essentially, we have left the ETS on its current speed settings. What we decided was not to increase the cost of the ETS to anyone. No New Zealander - no household, no company - has to pay more, or subsidise anyone because of this decision. Only by the most extraordinary contortion of the English language can you describe a decision not to increase a levy or a charge "a subsidy". Our top priority is to strengthen the recovery in extremely difficult international economic times.
Before it was amended, the legislation was, in effect, a one-way bet taken on the last day of the Labour Government's life in 2008 that the 2009 Copenhagen Summit would deliver a "single, comprehensive and ratifiable climate change agreement" (the political mantra of the day). It therefore foreshadowed a progressive extension of NZ's scheme to cover the entire economy. The bet failed - we did not get close to such an international agreement at Copenhagen. It is still a long way off.
Our current policy will remain in place until a future government makes a positive decision to change the settings. We no longer have to pass amending legislation to avoid an automatic ramping up of the scheme, irrespective of either economic conditions or international progress.
What then, is the impact of the policy? At current low international carbon prices - they move around but they are clustered around $5 - there is indeed little petrol in the ETS tank. But that is exactly the way it was designed - to be aligned to world prices, whatever world prices are, up to a cap. The alternative - put a fixed price on carbon (a carbon tax) - has been rejected by both Labour and National. The domestic political debate has confused the structure of the policy with the international drivers of the carbon price. Forget the nonsense about the policy being "gutted".
Precisely because the settings of our ETS remain, watch what happens to the carbon price when the international recession is over and the EU moves to strengthen carbon markets and, hopefully, more countries start adopting carbon policies. You will then hear, no doubt, the exact opposite of the current political debate. Foresters will be happier as the carbon they sequester becomes more valuable (paper profits unless they sell them) and emitters will be less happy as they pay a higher carbon price.
Meantime, NZ continues to make remarkable progress in increasing the share of our electricity coming from renewable energy - it is 77 per cent and climbing. Compare that with the average across all developed countries - less than 10 per cent. No wonder two recent independent studies have placed NZ respectively the fifth and sixth best country in the world for sustainable energy.
Agriculture in perspective
Finally, on agriculture, let me state the obvious. Our agriculture exports account for around two-thirds of our export earnings and New Zealand has not had a current account surplus for 30 years.
So is this a great time to put new costs on our major exporting industry when we have a huge need to increase our exports? The Government does not think so. Not a single country in the world has put a price on 'biological emissions'. Our agriculture sector is, by and large, the most carbon efficient agriculture sector in the world. However because we produce so much for export, emissions from this sector are high. Other less efficient agricultural economies would create more emissions for the same or less output.
So are we sitting on our backsides just pondering the problem?
Quite the contrary. We have set up a new international organisation to find solutions to one of mankind's greatest challenges - to produce the 70 per cent more food than the planet needs by 2050 but with lower emissions. This is the Global Research Alliance on Greenhouse Gas Emissions, which we lead.
A few days ago we joined another international initiative on climate change - the Climate and Clean Air Coalition - and it is expected that NZ will lead its work on agriculture here too.
If you did nothing but monitor the NZ domestic debate, you would be forgiven for thinking that NZ is some stubborn "hold out" on agriculture and climate change. In fact, no country is doing more on agriculture and climate change than NZ.
The international framework
When Kyoto was signed, developed countries accounted for nearly 60 per cent of global emissions. But it took a body blow right at the start. On July 25, 1997 Ted Kennedy and John Kerry (the next Secretary of State), along with 93 other Republican and Democrat senators voted the treaty down 95-0. I call that pretty decisive. Today, the countries that are prepared to do a second Kyoto commitment for the period beyond 2012 account for some 14 per cent of global emissions. In a few years time 90 per cent of emissions will be outside Kyoto.
The unrelenting emphasis on "Kyoto, Kyoto, Kyoto" has sucked the political energy out of the negotiations, diverting attention from the real problem. It is time to move beyond Kyoto and find a solution that can have a real environmental impact.
We are on track to meet or exceed our Kyoto commitment to 2012.
Next year, Cabinet will consider how much NZ will commit to unilaterally for the period beginning in 2013 and whether this should be run to 2020 or some earlier date. In the meantime, we will be active internationally in the formal UN negotiating system and elsewhere.
In addition to the two pro-climate change action groups mentioned above, NZ also leads a group of countries urging major emitters to reform Fossil Fuel Subsidies (which would make a huge difference to global emissions), and the Asia Pacific Roundtable on Carbon Markets.
Closer to home, we are helping Pacific Island countries become more climate resilient by helping them swap their fossil-fuel dependence for renewable energy and that will continue.
New Zealand is in the right space and I believe this will become more and more obvious as the next few years progress.
Tim Groser is the Minister of Climate Change.
