Household bills to increase under carbon tax

The Government says household bills for power, petrol and other fuels will increase by $4 a week when it introduces a carbon tax in April 2007.

The minister responsible for climate change policy, Pete Hodgson, confirmed this morning the carbon tax would be set at $15 per tonne.

"This will add around one cent to the cost of a unit of electricity, about 4 cents to a litre of petrol and 46 cents to a 9kg bottle of LPG and 68 cents to a 20kg bag of coal," Mr Hodgson said in a statement.

"If we are going to tackle climate change, we need to start taking environmental costs into account in the economic choices we make."

The tax will make polluting energy sources more expensive than cleaner ones.

Mr Hodgson promised that the new tax would not lead to an overall increase in government revenue with net gains used to change taxes elsewhere.

Finance Minister Michael Cullen has said he will be outlining some of these in the upcoming budget and will include changes to depreciation rates.

It was estimated that the tax would raise $360 million a year.

The tax is part of the Government's policy to meet its Kyoto Protocol obligations.

Mr Hodgson said the Government would spend $4.45 million on grants to assist small and medium businesses who would be hit by the tax.

- NZPA