The Government's decision to ditch the proposed carbon tax has been backed by the business community, but slammed by the Greens who called it a "capitulation" to vested interests.
Climate Change Minister David Parker announced today that the tax, designed to reduce greenhouse gas emissions and due to come into effect in April 2007, would not go ahead.
Officials are being asked to look at other options.
It had been claimed that the tax would harm businesses and cost households between $4 and $10 a week.
Business leaders said today's decision was sensible.
Simon Arnold, president of the Wellington Regional Chamber of Commerce, said: "For some time we have been arguing that this was poor policy.
"It would have increased the cost of energy and transport but would not achieve its stated aims of reducing carbon emissions."
The Employers and Manufacturers Association (Northern) also threw its weight behind the move, calling it a pre-Christmas "fillip" to business confidence.
Alasdair Thompson, EMA's chief executive, added: "The carbon tax represented a huge hurdle detracting from New Zealand as a profitable place to invest."
He called for a "150 per cent write off" of research and development costs on technology aimed at reducing carbon emissions.
The Green Party, however, said the ditching of the tax amounted to a cave-in to the "anti-Kyoto lobby", referring to opponents of the United Nations' Kyoto protocol on climate change.
"They are putting the corporate pursuit of short-term profits ahead of the planet's and our grandchildren's future," said co-leader Jeanette Fitzsimons.
She feared a further three-year delay in action being taken to cut greenhouse gas emissions.
New Zealand First had been campaigning against the tax and an greement to see it scrapped formed part of the confidence and supply agreement which led to its leader Winston Peters becoming Foreign Minister.
Mr Peters said: "The government's decision is a victory for the thousands of New Zealanders who were not well placed to carry the burden of another tax, particularly those on low and fixed incomes."
- HERALD ONLINE STAFF