Calls to delay ETS get cool response

The economy is too fragile to handle the extra $255 million a year the emissions trading scheme will cost and the scheme should be delayed or ditched, business groups say.

Big power users and business lobby groups are keeping the heat on the Government to delay the scheme due to start in July or give greater assistance, although Prime Minister John Key has said a change is unlikely.

Climate Change Minister Nick Smith said the introduction of the ETS was a "half-step" and would go ahead as planned.

It was only a 50 per cent obligation starting on July 1 and there was a carbon price cap, so the cost was "not excessive to businesses", he told Radio New Zealand.

ETS legislation allows for a formal review of the scheme in 2011 and an increase in obligations from January 1, 2013.

At that time the Government would look at international progress, especially in Australia, the United States, Japan and Europe, Dr Smith said.

"If there was not progress in those other major trading partners, I think the Government would be unlikely to proceed with that step-up," but until then there will be no change."

The ETS is expected to lift power prices by 5 per cent and add about 4 cents a litre to petrol – about $165 a year for each household.

Power prices rose about 80 per cent for households between 2000 and 2008, with more recent rises of about 5 per cent a year, with the trend likely to continue up as new generation is built, analysts say.

On top of that, power customers can expect a likely increase in GST in October, though that should be offset by personal tax cuts, with details expected in the Budget on May 20.

The Employers and Manufacturers Association Northern chief executive, Alasdair Thompson, said yesterday that the ETS should be delayed because the economy was in no state to lead the world with such a scheme.

Instead, the Government should align the entry of business sectors into the scheme with those of our trading partners, such as Australia.

Business was too fragile to absorb the extra $255m a year that the ETS would cost and it would also hit the competitiveness of many leading industries, including big food-producing exporters, Mr Thompson said.

"A new energy tax is effectively a tax on exports," he said, with Australia gaining an immediate advantage in competing for international investment against New Zealand. There is now no certainty of an ETS in the United States or Australia.

The Major Energy Users Group said households and business would pay about $240m more than equivalent Australian consumers with the start of the ETS.

Late last year the group suggested delaying the ETS by six months to line up with a proposed Australian scheme, but that scheme has now been indefinitely delayed.

Major Energy Users is one of nine business groups that wrote to Mr Key last month asking the Government to consider options including suspending the ETS "pending action in Australia".

The other options were to give "maximum assistance" to trade exposed businesses through ministerial discretion or exemptions, or provide a fund to help firms that did not qualify for help, the letter said.

A power consumers group, the Domestic Energy Users Network, says that for the poorest families the coming ETS prices rises are a "disaster".

Network analyst Molly Melhuish said a $165 a year increase in energy costs for households would not matter for most people.

"But for the 20 to 30 per cent who are really struggling, it is a disaster," she said.

"It will throw them off the edge." Vulnerable consumers should get generous insulation retrofits before winter, or some financial help.

Energy analyst Bryan Leyland wants the ETS scheme dumped or at least deferred and a Royal Commission held to look into the reason for the scheme – global warming.

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