KEY POINTS:
Helen Clark's finely honed political instincts are again to the fore as she courageously throws her pet climate-change agenda into reverse to avert mounting economic pressures.
In any normal situation Clark would face allegations that delaying the introduction of key features of the emissions trading regime is simply hypocritical.
The Prime Minister has after all been named a "Champion of the Earth" for her goal to make New Zealand use 90 per cent renewable energy by 2025.
She has declared an ambition for New Zealand to be the world's first "carbon-neutral country" and made "sustainability" a catchphrase for her Government in election year.
But the times are not normal. The New Zealand economy, like that of many Western nations, is feeling the strain as the international credit crunch helps keep interest rates high and household budgets feel the pinch from rising oil and food prices.
Exerting more inflationary pressures by bringing the transport sector into the proposed emissions trading scheme next January would have been pure madness.
High fuel prices have already caused ordinary motorists to cut back at the petrol pump with the inevitable effect of slowing the growth of greenhouse emissions from the transport sector.
Now that Clark has signalled the Government will ask the parliamentary select committee studying the emissions trading legislation to take note of its intention to delay the entry of the transport sector to the scheme by two years, the Reserve Bank, which has cited climate-change policies as an inflationary worry, has no excuse to delay the interest-cutting cycle to next year.
The Reserve Bank has always had the ability to "see through" the one-off nature of the price rises associated with a major policy shift like emissions trading.
But the central bank's position is complicated by the Government's refusal so far to insist on a price safety valve being built into the emissions trading scheme, so that New Zealand does not become hostage to a volatile international carbon price.
If Reserve Bank Governor Alan Bollard signals next month that the bank is getting close to embarking on interest rates cuts, householders will be more inclined to praise Clark for her reality check rather than holding religiously to a green programme that had the potential to kneecap the economy.
Clark is not doing God's work entirely on her own here.
Behind the scenes, Finance Minister Michael Cullen, who is in receipt of economic forecasts from Treasury and other players on the real deterioration that has happened in the past few months, has been positioning for a rescheduling of the emissions trading scheme.
Cabinet papers released under the Official Information Act suggest that some major policies such as the 10-year moratorium on more base-load thermal generating plants have not been sufficiently investigated.
The moratorium may also be shortened in the hard bargaining that lies ahead as the Government tries to get a majority to pass legislation on its climate-change suite of policies through Parliament.
It's instructive that Cullen's own department - the Treasury - has now reworked the figures on New Zealand liability for the first phase of the Kyoto agreement, managing to halve the liability the New Zealand taxpayer faces from just over $1 billion to just under $500 million.
There's an element of "fudge, smudge and nudge" applied here despite the Government's claim that lower transport emissions, lower agriculture emissions as a result of the drought and lower deforestation have enabled the rethink.
Clark cited the reduced liability as one of the reasons which has enabled the Government to defer the entry of the transport sector.
But its not such plain sailing as far as the trade-exposed sectors are concerned.
Clark did say the polluting industries would not start feeling major effects from the emissions trading scheme until 2018 when their allocation of free carbon units would start to phase out.
She did not spell out that agriculture would also be given a reprieve. That became obvious only after digging by journalists and her political opponents.
But by delaying the transport sector's entry to 2011, Clark basically creates a problem for the next Government to address.
If the international economy is still sour there will be no political incentive to deal with the real problem, which is how to get New Zealand's greenhouse gas emissions down to a sustainable basis.
The odds are that the next Government will face similar consumer fears when it comes to the entry of stationary energy into the emissions trading scheme in 2010.
This suggests that Labour and National - which will be the key drivers for New Zealand's political future - should be talking.
If there is too little time to get a sensible outcome from the legislation before the election the two parties should agree to roll it over for the future Parliament to decide.
That will give New Zealand time to assess Australia's forthcoming scheme and make sure that the Kiwi scheme stays compatible with our future economic competitiveness.
