Kerre Woodham: A one-off payment is not going to fix the problem
I have so many questions around the Government bailout of Golden Bay Cement, which is not in fact manufactured in Golden Bay, but in Northland.
Fletcher owns the company and they said Golden Bay Cement operates New Zealand's only domestic cement manufacturing facility at Portland near Whangarei. It supplies nearly 60% of the cement used in New Zealand – about 95% of its output is sold domestically. Golden Bay Cement took a long hard look at the account books and participated in an independent assessment which confirmed that without support, rising costs —including carbon costs— would force the closure of the company and a shift to an import only model for cement from 2030.
So in steps the Government with a $60 million payout. They say it’s a specific one-time response to an exceptional set of circumstances, to keep the plant open at least through to 2040. In return, Golden Bay Cement has committed to continue producing cement at its Northland plant at least until 2040 and to invest at least 150 million through to 2040, phased over time. Finance Minister Nicola Willis told Heather du Plessis Allan last night the decision to offer a bailout was not made lightly and does not set a precedent.
“We went through three steps. One, this is quite different in that it is strategically so important that you can produce cement for your domestic economy, that you're not exposed to not being able to have cement if there was an international trade disruption. Two, the financial case here is that actually this is a business that is working overall. The key thing is just that emissions cost. And three, we've set in place some really firm requirements that Golden Bay need to meet in order to get this cash with clawbacks if they don't meet those requirements. And that includes keeping production going through to at least 2040 making $150 million worth of investments in that manufacturing capability, keeping the jobs at that factory going, and having an open book exercise with us, the Government, so that we can audit that investment. So we set a very high bar, we took a very case by case approach. Believe you me, I did not want to be setting a precedent that we're going to keep doing this.”
Well, yeah, you kind of have set a precedent though, haven't you? Because when you bail out one company, that's precedent. The other companies can say you've done it before, so it's a precedent. And Nicola Willis made the point that, oh, this is a thriving company, it's just that emissions cost. Yeah, about that... that's one of those questions. If it's just that emissions cost, then that's not going to change unless you change our obligation to the Paris Agreement and unless you do as other European countries have done and delay the introduction of the ETS or scrap it all together. So “just that emissions cost” is what's snookering a whole lot of New Zealand companies.
Fletcher says that New Zealand manufacturers face carbon costs that importers largely avoid. They want to see a carbon border adjustment mechanism, something they say addresses the structural imbalance directly and would let the ETS work as intended without exposing domestic manufacturers like Golden Bay to ongoing domestic advantage. A CBAM would apply a carbon charge to imported goods based on the emissions generated during their production. While we're all being, hey look at us, we're being so good and we're saving the Arctic shelves and we're snookering our own companies because we believe in the greater good of the of the planet and the universe, other countries go, yeah, no, not for us. Not really. We don't buy into that whole ETS thing, so we're not going to do it. They can make their goods a whole lot cheaper on so many levels without the ETS even coming into it. Add the ETS on that, the fact that they're ignoring it completely, no wonder their goods are cheaper.
So as Fletcher says, why don't we bring in the carbon border adjustment mechanism so wherever it's made in the world, you have to pay your ETS if we're all going to buy into that. How is a one-off payment going to help given the trading environment isn't changing or they've given no indication of the ETS obligations changing anytime soon? And they won't under Labour and Greens, if anything they'd go up. And if Golden Bay is so critical, why isn't Carter Holt Harvey's pulp and paper and plywood? I would have thought that was pretty critical too. Except of course they closed down and it wasn't an election year. Perhaps that's the difference. Last year Carter Holt Harvey saw the closure of Kinleith and Eves Valley sawmill with the loss of hundreds of jobs. We had the closure of Ravensdown, Smithfield, and Ruapehu. Each of these towns and regions could argue that what they made was critical to the supply chain. It was certainly critical to the economic viability of their particular region, which is not awash in situations vacant.
Cameron Bagrie has called the bailout of Golden Bay corporate welfareism. Of course it is. Fletcher says it's not, the Government says it's not, but if it's taxpayer money going to an entity that can't support itself, that's welfareism. Nicola Willis might not want to set a precedent, but she has. And a one-off payment is not going to fix the problem, as Fletcher points out. We have signed up to the Paris Accord, we've said, oh yes, bring on the ETS, please let's cripple ourselves so we can maintain the moral high ground. And in the meantime, we're going to have to import goods that are made by other countries that have stuck two fingers to Paris and said we can't afford it. How does that work? How do we maintain the moral high ground by buying goods from countries that are ignoring their carbon offset obligations? We do our own companies out of business, we put people out of work, and we buy from countries that ignore the ETS. It doesn't make any sense to me at all.
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