KEY POINTS:
Finance Minister Michael Cullen now has all the ammunition he needs to force an urgent rethink on New Zealand's controversial suite of climate change policies before the economy suffers serious damage.
Cullen doesn't say so in public. But it's well known he has growing concerns over the zealous approach his Cabinet colleague, David Parker, continues to take to climate change in the face of obvious policy defects.
New Zealand is already heading towards economic recession. Increasing power and fuel prices further to curb the country's growing greenhouse gas emissions issue - while farmers make the problem bigger by continuing to expand agriculture emissions - is sheer madness.
Households, already suffering from rising mortgage costs, fuel and food bills, will not vote for a government planning to increase their financial pain next year by introducing a scheme which will impact on their budgets, while farmers escape their share of the cost burden until 2013.
Parker professes not to be worried. But my pick is that Cullen will be concerned at the raft of reports by respected forecasters like Infometrics and the Institute of Economic Research that say the emissions trading scheme will have a major economic impact: 22,000 jobs gone by 2012, wages down by $2.30 an hour by 2025 and a cost to households of $600 a year by 2012, rising to some $3000-$5000 a year by 2025, depending on the international carbon price.
Earlier this week, it appeared that Cullen and Parker had won broad support from business leaders for the emissions trading scheme.
The Government's hand-picked Climate Change Leadership Forum, which is chaired by Stephen Tindall, said the group backed the emissions trading scheme and wanted to make sure all emitting firms faced the cost of carbon at the margin at the outset.
Among other points it suggested was the Government should use any additional net revenue from auctioning carbon credits above its Kyoto commitments to either reduce overall tax levels or invest in quality, cost-effective emissions reduction.
The timing of the forum's statement was clearly designed to offset mounting criticism. It was based on a statement crafted by forum member Peter Neilson - chief executive of the NZ Business Council for Sustainable Development - to focus on the common ground among the varying interests.
But the forum's claimed consensus lasted just two days before Business NZ chief executive Phil O'Reilly spat the dummy because he had not been appropriately consulted over 10 key points of policy advice, issued under the names of the 31 forum leaders. O'Reilly telephoned Tindall to warn him that Business NZ would dissociate itself from the group view.
He was particularly concerned Neilson had made the release when, under forum protocols, the group had originally said it would not publish the advice it gave to Government.
O'Reilly's not the only business organisation head upset by the Neilson move. Wellington Chamber of Commerce CEO Charles Finney said he told Neilson he was happy for the paper to be the basis of further discussion but the chamber could not agree to all the points - the most fundamental of which was the proposition that the emissions trading scheme was the best way forward.
Finney also said he never agreed to the 10 points being made public and would have opposed this if asked. The chambers, which prefer a carbon tax, will be issuing their own formal statement next week.
Cullen will know in his bones that the Government will need to make some sequencing adjustments if the emissions trading scheme is to get over the line at the select committee.
Or, at the very least, come up with counter-veiling measures to stop voter angst - such as forging a consensus with the Reserve Bank to allow upcoming fuel and power price rises caused by the scheme to sit outside the indicators on which the central bank bases its anti-inflation policies.
Adding to the political angst will be the mounting problems caused by the lack of rainfall this summer.
The heat can only intensify if ordinary householders are slapped with escalating power bills this winter - or electricity cuts - as power suppliers ration dwindling electricity supplies.
Yesterday's announcement that the major NZ-based manufacturer Rio Tinto, which owns the Tiwai Pt aluminium smelter, is cutting back production in the face of potential brownouts - wood pulp producer Pan Pac may follow - has brought home the absurdity of Parker's other key decision to enforce a 10-year moratorium on new base load thermal generation.
There is a now a risk that major local businesses, which are not location-dependent, will shift production offshore unless the Government puts security of future power supply back at the top of its priority list. All this suggests that the Government needs to get to grips with cold reality.
New Zealand does need to address climate change issues. But not in a lopsided fashion where ordinary folk - and smaller businesses - feel the brunt first.
