Petrol exempt from emissions scheme for two years

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Petrol will be exempted from the Government's emissions trading scheme for two years as Labour tries to dampen cost of living concerns.

It is understood the scheme, which effectively taxes greenhouse gas emissions and applies across the economy, will exempt fuel till 2011, rather than from January next year as originally planned.

The delay is a big U-turn on Labour's centrepiece climate change policy.

Figures show New Zealand's Kyoto protocol commitments have just topped $1 billion, the amount other countries will have to be paid for carbon credits to cut our greenhouse gas emissions to 1990 levels by 2012.

However, Climate Change Minister David Parker insisted it did not include the impact of the emissions trading scheme.

With agriculture - New Zealand's biggest emitter - excluded till 2013 and petrol delayed till 2011, its impact will be hard to measure. Labour is also struggling for support from other parties to pass the required law.

However, Prime Minister Helen Clark said yesterday that big oil price rises, which have seen petrol reach $2 a litre, appeared to be achieving the scheme's goal of discouraging private car use.

The scheme would add up to 8c a litre, but Miss Clark said it might not be needed immediately if fuel consumption was confirmed down.

The Government also feared that imposing the scheme on petrol would be inflationary and could stop the Reserve Bank cutting interest rates later this year.

Families and businesses were hit by high fuel prices and interest rates, and people were feeling the pinch of basic foodstuffs, particularly dairy products.

"We are obviously looking at ways in which we can help relieve some of those pressures. I'm also very aware that the sudden and quite steep latest spike of oil price rises is to a large extent achieving what anything like an ETS [emissions trading scheme] or carbon tax can achieve.

"In other words, petrol consumption is down."

Greens co-leader Russel Norman said the rising cost of New Zealand's Kyoto commitments would fall to all taxpayers if the Government did not continue with emissions trading. Agriculture had to be included from the start.

Miss Clark said involving agriculture from January was not on, as the industry had been promised it could stay out of the first phase.

Meanwhile, Commerce Minister Lianne Dalziel said ways to better monitor relationships between fuel prices and how much importers paid were being discussed by the Economic Development Ministry and Automobile Association.

The work, signalled on Sunday, followed a meeting with AA leaders. Ms Dalziel wants more transparency in fuel prices, including the relationship to falls as well as rises in international oil rates.