KEY POINTS:
Households will pay up to 10 per cent more for electricity and 6c a litre more for petrol to reduce New Zealand's contribution to global warming.
The Government's carbon emissions trading scheme revealed yesterday makes businesses pay for the amount of carbon they put into the atmosphere - costs that will generally be passed on to the consumer.
It is expected to increase petrol prices by between 4c and 6c a litre from 2009 and put power prices up by between 5 and 10 per cent from 2010.
The Government report on the scheme - one of its keynote policies as it heads towards next year's election - says price increases are a key part of the scheme's effectiveness.
The increases will be staggered - transport will be brought into it in 2009, then the energy industry in 2010. Other sectors, such as high-emission industries and agriculture - will be introduced by 2013.
While the Government has promised interim help for those on low incomes, most homes will have to cope with the price increases. The report says these are "precisely the aim of the scheme" because they will push consumers into buying more efficient appliances and vehicles that use less petrol to avoid those higher costs.
Climate Change Minister David Parker said the price increases were well worth it and the staggered phase-in of different sectors of the economy would buffer the blow.
"Let's get real here. Four cents a litre in a couple of years to get climate change? What a deal!"
National deputy leader Bill English said that though his party broadly supported the scheme, it wanted to ensure that its impact on households was reasonable.
"There's a lot of uncertainty, particularly for people on lower incomes, about whether they will have to pay for fixing climate change."
Although Prime Minister Helen Clark reiterated her promise to help low and modest income households with the price increases, there were no further details at the launch yesterday.
Finance Minister Michael Cullen said further details were likely before next year's election, but there was no need to rush because the power price rises would not kick in until 2010.
Mr Parker said work was under way on other ways to help offset the impact of the electricity price rises, including a package that Helen Clark has indicated will include interest-free loans to help property owners retro-fit old homes with insulation.
Further announcements are expected next month, when the new energy efficiency conservation strategy is due.
Energy analyst Molly Melhuish said robust measures must be in place before the 2010 phase-in of the emissions scheme to the electricity industry: "The impact of carbon pricing on low-income earners will be even worse than from recent electricity price rises. These people will already have faced petrol price increases from 2009 and are finding that food prices are rising because of international pressure, ironically partly because the world's grain reserves are being siphoned off to make biofuels."
Mr Parker said another target of the Government's carbon-neutral goals was for New Zealand to be a world leader in using electric cars.
However, no concrete work was under way, and while Meridian Energy was due to introduce electric cars by the end of the year, Mr Parker said he expected they would not be available for general retail for another five to 10 years.
While they would be more expensive to buy than petrol cars initially, the price should drop as they became more common.
AA spokesman Mike Noon said the fuel increase would not have much impact on householders at the pumps - it would cost those who spent $50 a week on petrol a further $1.20.
However, motorists were facing the hikes early in the piece. Transport as a whole was responsible for about 20 per cent of greenhouse gas emissions but everyday motorists contributed only 8 per cent.
There will be more consultation before the bill setting up the scheme is introduced - probably before Christmas.
