The Government has indefinitely postponed key stages of the emissions trading scheme, saying the economic environment means consumers and businesses simply can't afford it.
The announcement comes as Australian Prime Minister Julia Gillard's political future hangs in the balance due to the introduction of a carbon tax there this week.
But Prime Minister John Key said his Government's decision had not been influenced by the political fallout in Australia. Rather, it was acting on concerns the economy would suffer if New Zealand did more than other countries to reduce carbon emissions.
"We're not prepared to sacrifice jobs in a weak international environment when other countries are moving very slowly," he said.
As signalled in the Government's response to a review of the emissions trading scheme (ETS) completed last year, Climate Change Issues Minister Tim Groser announced farmers will not have to buy carbon credits to offset livestock and pasture emissions until at least 2015.
No country in the world put a cost on biological agricultural emissions and New Zealand wouldn't be the first unless there were signs of progress elsewhere, he said. Also, the two for one carbon credit scheme for emitters including oil and electricity companies will remain in place. It was to have ended this year.
Mr Groser said there was now no definite date for ending the two for one deal.
"The surrender obligation will, like all other polices I'm familiar with, stay in place until a future government decides to change it."
Mr Key said ending the two for one concession would likely have added the same margin to fuel and power prices as the introduction of the first half of the obligation last year. That was calculated at about 2c to 3c a litre to petrol and about 3 or 4 per cent to power prices or about $250 a year for a typical household.
But although the changes would have no impact on the Government's forecast track to surplus by 2014, 2015, the estimated additional $80 million cost to the Government would be met out of the allowance for additional expenditure in next year's Budget.
Meanwhile, Mr Groser also confirmed owners of forests planted before 1990 would be able to offset any liability for cutting down their trees by planting an equivalent area of forest. However, he also said those that didn't offset would be eligible for compensation for the fact that they had incurred a contingent deforestation liability but received no credits for their trees as they grew.
Labour's Climate Change spokeswoman Moana Mackey said yesterday's announcement confirmed the Government had no commitment to curbing greenhouse gas emissions.
Yesterday's changes were "a cop-out which further subsidises polluters at the expense of taxpayers".
Green Party co-leader Metiria Turei said subsidies to polluters cost the taxpayer the equivalent to $1.5 billion last year. She said the reluctance to subject agriculture, which accounts for 50 per cent of this country's greenhouse gas emissions, was damaging New Zealand's clean green brand.
* The two for one carbon credit scheme for emitters will remain in place beyond the end of the year.
* Biological agricultural emissions will not be covered until 2015 or later.
* The price of carbon will remain capped at $25.
* Owners of forests planted before 1990 will be able to offset any liability for cutting down their trees by planting an equivalent area of forest but not necessarily on the same land.
* Those that don't offset will be eligible for compensation for the fact that they had incurred a contingent deforestation liability but received no credits for their trees as they grew.