ETS price fears stir up grassroots Nats

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National's grassroots supporters are joining a chorus of opposition as price rises caused by the Emissions Trading Scheme begin to kick in.

Prime Minister John Key confirmed there was an ETS protest vote at a party conference last weekend. "There certainly was a remit and they certainly did vote against wanting the ETS, they did vote to delay it."

Agriculture Minister David Carter has sought to stem caucus concerns by emailing MPs to assure them that claims by ACT about the ETS were just "misinformation".

ACT leader Rodney Hide said yesterday that the ETS, which begins on July 1, would eat up any gains from tax cuts for 550,000 households earning between $45,000 and $85,000 a year.

Last week's Budget delivered tax cuts worth an average $25 a week once a hike in GST was taken into account. ACT's claims are straining relations between the coalition allies, with Mr Key insisting that Mr Hide was wrong.

"The estimate I have is that the ETS will cost the average household about $3 a week and the tax cuts for someone on $50,000 – even if they consume the lot, net of GST, is about $14 or $15."

The Government was yesterday forced to defend the ETS after State-owned power operator Mercury Energy announced increased prices from July 1. It said the scheme would add an average $5 a week to residential electricity bills and $1.75 a month to gas bills.

The move appears to have surprised other operators. Genesis Energy public affairs manager Richard Gordon said retail prices would eventually rise and the cost of carbon would be built into those prices. "But we are not planning to put up our prices immediately or on July 1. We are going to take some time to look at the impact and the cost of carbon on our business." Genesis has about 650,000 retail customers.

Meridian Energy said the ETS would have an impact but "till we actually see it in play at the wholesale market we are finding it difficult to predict accurately [by how much]," spokeswoman Claire Shaw said. "As such we don't see ourselves having to make a one-off adjustment to accommodate the ETS."

A ministerial review of the sector in August last year found a 72 per cent leap in electricity prices in eight years had taken prices to excessive levels.

Energy Minister Gerry Brownlee said the ETS was expected to cost households about $165 a year, so the Mercury price rise was "loosely in line with that".

The ETS has been contested at a series of regional National Party conferences, particularly among its grassroots farming base. But Mr Key said New Zealand needed to "play its part" environmentally. "It will unquestionably be unpopular in certain places but on balance there is a recognition we need to do something."

THE EMISSIONS TRADING SCHEME

The Emissions Trading Scheme is part of the Government's primary response to global climate change. Forestry is already covered by the scheme but most other sectors are not fully covered until July 1.

What is it?: A market-based approach to reducing greenhouse gas emissions. Emissions units, or carbon credits, are traded between participants.

Some companies will get free emissions units that they will be able to sell, while others will need to acquire units to cover their greenhouse gas emissions. Putting a price on emissions is supposed to provide an incentive for people to reduce their emissions and plant forests to absorb carbon monoxide.

Who does it cover?: Eventually forestry and producers of transport fuels, electricity production, industrial processes, synthetic gases, waste and agriculture will be covered. Agriculture will not be fully covered until 2015.

Who runs the scheme?: The Economic Development Ministry.

How much will prices rise by?: The Government says officials have put the cost at about $3 a week for the average household. That includes a 3c a litre increase in the cost of petrol and a 5 per cent increase in the cost of electricity.