Touch and go for carbon tax

The carbon tax appears in jeopardy after Labour confirmed it would only decide whether to introduce legislation after the tax is reviewed.

The review was agreed in the confidence and supply deals signed with NZ First and United Future.

Should Labour decide to proceed with introducing the tax, it would need the Maori Party's four votes to get a majority, assuming Green support.

All other parties oppose the tax which, until the election, Labour had intended introducing in April 2007.

The tax, which arises out of New Zealand's ratification of the Kyoto Protocol, would cost a typical household about $4 a week for electricity, petrol and other fuels, raising $360 million..

Incoming Energy Minister and Minister Responsible for Climate Change Issues, David Parker, said before he was sworn in yesterday that the Government intended reviewing the tax before making any decision to proceed with legislation.

"One of the accommodations that we've been forced to make through the ... or that we have agreed to make through the confidence and supply agreement, is as expressed in the agreement. I really can't take it further than that."

The Maori Party told the Herald yesterday it supported the thinking behind the proposed carbon tax regime, but indicated it may be conditional on who the tax affects.

A spokeswoman said: "Our key position is that we support a carbon tax as long as those responsible for polluting, ie industry, are directly contributing to it."

However, much of the tax's impact will be passed to consumers and it is unclear what that might mean for the party's support.

National MP Nick Smith was doubtful there was enthusiasm even within Labour's ranks to introduce the tax.

He said introducing carbon tax legislation would add to political instability, with NZ First and United Future opposed, yet still having to support the Government on confidence and supply.

The deal between Labour and NZ First was to "review the appropriateness or otherwise" of introducing the tax.

The deal between Labour and United Future calls for a new cost-benefit analysis and includes agreement no legislation will be introduced before it is completed.

NZ First leader Winston Peters told the Herald in an interview this week the "carbon tax is gone".

Before the election United Future's policy was to axe the tax and withdraw from the Kyoto Protocol.