SUBJECT: A $NZ2 BILLION AND 17,000 NEW JOBS MISSED OPPORTUNITY

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1 Tuesday 20 th August, 2013 Hon. Minister Tim Groser Minister for Climate Change Parliament Buildings Wellington SUBJECT: A $NZ2 BILLION AND 17,000 NEW JOBS MISSED OPPORTUNITY E te Minita, tena koe Thank you for your letter of 31 July. I have read your letter with interest and have also noted your recent public comments in relation to this issue. I respond as follows: The Treaty of Waitangi Firstly, unlike any other stakeholders in this country, Iwi have a unique place as tangatawhenua where we will never leave our country and our lands. We will be here for generations to come, unlike other business who have only a short term planning horizon s. Furthermore, as Iwi we have a constitutional relationship with the Crown through the Treaty of Waitangi that requires the government to ensure that through policy, Iwi are treated fairly and equitably. In determining climate change policy for New Zealand, you have clearly overlooked these fundamentals in favor of short-term interests such as those of Business NZ and a select group of others. Secondly, Iwi are dismayed by the factual inaccuracies in your letter, particularly as similar incorrect statements have also been made in the public arena. I will address each incorrect statement in turn: 1. The current low carbon price is only a recent phenomenon of the last two years and follows several years of price stability at around the $20-$25 mark This statement is not correct. The carbon price has never exceeded $22 and has only exceeded $20 for a few weeks in its entire trading history. In fact, since trading began, the price has spent more time below $10 than above it. I have attached a chart to this letter setting out the trajectory of the carbon price since trading began. We would remind you that you have acknowledged in the past and as recently as in our meeting on 4 July that the collapse in the carbon price is a direct result of the failure to introduce restrictions on international units. Furthermore you have made repeated public statements last year that led Iwi and others to expect that this issue would be addressed.

2 This included the commitment you made to in your speech to the Climate Change Iwi Leaders Group National Hui on April Therefore, in fact, it is your policy settings of allowing unfettered access of international credits that has precluded this stability and furthermore, because of these settings, the carbon price has never shown the claimed stability around the $20-25 mark. 2. The Government must provide long-term policy stability In the last 4 years, the National government has made 2 sets of significant changes to the ETS settings. Last year s changes flew in the face of the recommendations of the Select Committee and the expectations of Iwi and the majority of ETS stakeholders. Iwi do not believe that this is the behaviour of a government focussed on policy stability. Therefore, making policy stability a priority can hardly be used as a justification for failure to take action on this key issue. As referred to above, the failure to address the issue of unfettered access to international credits, has impacted market and investment confidence and led to price instability below $15. This has most adversely and directly impacted Iwi interests and directly eroded the value of our Treaty settlements. 3. Costs on businesses and households This assertion has been constantly used as a reason for not taking action on the issue of international credit importation. I have seen the lobbying material from Business New Zealand and their reports and assertions in relation to this issue made outside the public consultation process. I fail to understand how given the comprehensive protection mechanisms in place, such as 2 for 1 and allocations, and the very low percentage of total input cost that carbon mitigation represents to a business, how their conclusions can be arrived at. I have also seen the conclusions of Business New Zealand in the reports from officials. All I can say is that the advice you are receiving on this issue is fundamentally flawed. Businesses and households continue to pay between $15 and $25 per unit for fuel and electricity. I have seen the evidence of this behaviour in the market and I am aware that your officials have also. Taking action to restore a $15 credit price will create no additional cost to business and households. As part of this change, it has been suggested to me that it would be prudent to introduce an emitter reporting mechanism that would stamp out this appalling market behaviour which disproportionately impacts those on low incomes such as many of our whanau. 4. The Government is looking at ways to encourage afforestation We discussed with you at our meeting on July 4, we currently have on the table an $800 million Iwi/foreign investment opportunity. This opportunity has the potential to generate very significant new planting on Iwi marginal land, creating an asset for future generations and income for our people. You acknowledge in your letter that the low

3 carbon price has an effect on forestry planting and harvesting decisions. The advice I am receiving is that this opportunity will not happen for Iwi without a carbon price of $15. You have also made recent public statements that you expect the carbon credit price to recover. Given this, then taking action on the price now does nothing but accelerate that inevitable situation, while capturing the benefits that accrue from this investment. For the reasons set out above, a carbon price at a level of $15 will create no additional cost to households or business. That being the case, I can say with certainty that the Iwi Leaders Group will be very disappointed if Iwi are unable to secure the very substantial benefits of this opportunity because the Government will not address this issue. Furthermore, taking action, would demonstrate that the Government is seriously committed to assist Iwi in securing the benefits of large scale planting of our marginal land. 5. There is net afforestation going on" (New Zealand Herald 17 August) We must take issue with this public statement that net afforestation is going on. I am sure official briefings would have outlined that the ETS price collapse over the last 2 years has resulted in both large scale deforestation and widespread departure of forest owners from the ETS. An MPI Technical Paper (2013/02) on April 2013 has confirmed both of these trends. You acknowledge in your letter that the low carbon price has an effect on forestry planting and harvesting decisions. However, we note you go on to quote planting numbers from the 2008 to 2012 period. This is misleading as the trend in the last 2 years is quite the opposite. I can assure you, due to the policy settings, we are now in a period of deforestation. This will continue while the price remains unaddressed. As you also say in your letter, you have the power in the legislation to take action on this issue to reverse this trend. I am in receipt of advice that this can be done without any legislation or consultation. We therefore ask that the Government demonstrates its real commitment to address the substantial loss of Iwi asset values that has resulted from Government policy on this point and it acts now to deliver price stability at $15. I have read the independent analysis done by Sir Peter Gluckman on climate change. While Sir Peter was clearly constrained in his ability to comment on government climate change policy, he did nevertheless stress the critical role of forestry and especially new afforestation as a fundamental pillar of effective climate change policy for New Zealand. 6. Serious reputational damage to New Zealand I note the serious harm that has been done to New Zealand s reputation over the failings of Fonterra (and others) in recent days. Our reputation on the international stage has been further damaged by the government decision to walk away from the Kyoto Protocol in favor of non-binding 5% emissions reduction target you announced last week. Taken together these international issues pose serious concerns for our country s international reputation.

4 In summary Following our meeting, I have discussed our last meeting and tabled your letter at a meeting of the Iwi Leaders Chairs on Thursday 8 th August at Ngaruawahia. The meeting reaffirmed Iwi commitment with a unanimous resolution to progress this issue as a matter of urgency and priority. Your refusal to address this issue now forces us to take this matter further where the Iwi Leadership Group will seek as a matter of urgency, a meeting with Minister Steven Joyce, Deputy Prime Minister Bill English, and Minister Chris Finalyson. In this meeting we will table independent technical analysis that illustrates the folly of current government policy and indeed the long term economic development opportunity not only for Iwi, but indeed for New Zealand were the government to act now to address the price collapse. Our analysis is clear that such a move will: Restore the value of Iwi held NZU s to more than $NZ400 million. These monies will then be immediately available for reinvestment by Iwi into further development of our largely primary sector based interests; Attract immediately a further $NZ800 million of foreign direct investment for afforestation projects particulalrly on the estimated 1.2 million hectares of under utilised Maori lands. Our analysis estimate that the NPV of these investments to be an estimated $NZ2 billion. Create an estimated 17,000 new jobs. Many of these jobs will occur in rural New Zealand where many maori live. This will provide a masive injection to regional economic development across the country and impact many Maori communities. These outcomes align direclty with the governments own business growth agenda and why we will now seek an urgent meeting with the Minister s I refer to above. Kia ora, Dr Apirana Mahuika Chairman Climate Change Iwi Leadership Group CC Minister Steven Joyce, Deputy Prime Minister Bill English, Minister Chris Finalyson, Sir Mark Solomon, Sonny Tau, Haami Piripi, Sir Tumu Te Heuheu, Tom Roa, Traci Houpapa, Chris Karamea Insley, ALL Iwi Chairs and advisors

5 Figure 1: NZU Price trajectory Source: OMF