ETS will bring barrage of price rises: watchdog

Nick Smith tells his Wellington audience that the sooner New Zealand acts, the easier it will be. Photo / Mark Mitchell

Households will be hit hard and fast with a "barrage" of price rises because of the Emissions Trading Scheme that begins today, Consumer NZ has warned.

Prime Minister John Key has already acknowledged that ordinary New Zealanders will bear the brunt of the scheme, but yesterday he said the Government's tax cuts in October would more than meet the extra cost.

This morning, many businesses, mainly fuel and energy companies, began charging their customers for the emission units the firms have to buy to offset greenhouse gases released as their goods and services are used.

The Government estimates the average family will pay an extra $5 a week in higher prices for fuel, electricity and general goods.

Yesterday, Consumer NZ chief executive Sue Chetwin said the institute expected the impact to be far heavier.

"Consumers are facing a barrage of price increases over the next six months," she said.

Consumer NZ recognised the need for some kind of emissions trading scheme, "but we think this one is going to leave consumers and the environment short-changed".

Taxpayers would also pay hundreds of millions of dollars in subsidies to businesses.

Meanwhile, Climate Change Minister Nick Smith told a meeting of about 120 people in Wellington last night that it was time for New Zealanders to be courageous in playing their part in acting against global warming

Dr Smith said he believed that the science suggesting man-made climate change was a real problem that must be addressed was "game, set and match".

The risks of not acting were higher than those involved in taking some action, he said. The sooner New Zealand acted, the easier it would be.

"We need to protect our clean, green brand. We need to honour our commitments to foresters and our international commitments. Business needs a steady, consistent approach."

But Ms Chetwin said: "Consumers are being hit from all sides, and in terms of sending a signal to polluting businesses that they need to cut their emissions, we don't actually see this scheme does that."

After his speech, Dr Smith fielded questions fairly evenly divided between mostly older people who believed the scheme was unnecessary or unfair, and younger members of the audience who believed it did not do enough to reduce emissions.

Opposition Leader Phil Goff yesterday attacked the Government, saying the impact of the ETS, the GST increase, rising rents and lower childcare subsidies meant ordinary families and the elderly would suffer.

The Government's own Budget showed increases in prices this year would be twice as much as wage rises and a third higher for the following two years, he said.

"They won't be better off at least for the next three years, and the Prime Minister knows it," Mr Goff told Parliament.

But Mr Key said New Zealanders "will be a lot better off. I stand by the statement I've said that New Zealanders will have a $4.3 billion personal tax cut or thereabouts funded off a $2 billion GST increase".

He acknowledged that households were facing rising costs, although he said it was "deeply hypocritical" of Labour to attack National on the ETS as its own scheme would have been twice as expensive for households.

WHO PAYS?

A breakdown of who pays the costs of the ETS, as estimated by the Sustainability Council:

ETS COSTS: For the first five years of the scheme, households pay 52%, commerce and service industries pay 14%, transport 9%, fossil fuel producers 6%, and other industry 14% while large industry pays 1% and agriculture 3%.

KYOTO LIABILITY: It is also the case that during the first five years of the scheme, only a sixth of all ETS charges can be used to meet the Kyoto liability once account is taken of all subsidy and compensation payments, so that 84% of the Kyoto liability will be passed to future taxpayers.