Carbon tax expected to yield $360m

The Kyoto Protocol is aimed at reducing the use of greenhouse gas producers such as the Huntly power station. Picture / Amos Chapple

The carbon tax to be introduced on April 1, 2007, is expected bring in $360 million in its first year.

The rate announced by the Government yesterday was the expected $15 a tonne of carbon dioxide.

That would stay until 2012 unless the international price of traded rights to emit greenhouse gases diverged substantially "on a sustained basis", Climate Change Minister Pete Hodgson said.

The losers are:

* Energy consumers faced with petrol prices that will rise 4c a litre and electricity prices up 1c a kilowatt hour, equivalent to a 6 per cent increase for the average residential consumer.

* Retailers trying to sell to households that will, on average, have $4 less to spend a week.

* Businesses that find it difficult to pass on a 4.5c a litre increase in diesel costs or higher power bills.

* Companies whose international competitiveness is put at risk as a result of the tax but cannot afford the time and expense involved in negotiating a greenhouse agreement with the Government.

Hodgson said that without those agreements, the impact of the tax would be closer to $600 million than $360 million.

The winners are:

* Businesses and savers who will get tax breaks in the coming Budget paid for by the carbon tax.

* Electricity generators that use water, wind or geothermal steam to turn their turbines. The wholesale price of electricity is determined every half-hour by the most expensive generation needed to satisfy demand in that period. A lot of the time it is power from Huntly, which burns coal, or one of the gas-fired power stations. The other generators will get the benefit of that higher price, even though they do not face the carbon tax.

* Those whose livelihoods depend on the country's benign and equable climate - or so Hodgson argues. "If we are going to tackle climate change, we need to start taking the environment into account in the economic choices we all make.

"This is what the carbon tax does. It begins to affect prices so that environmentally friendlier technologies become relatively cheaper," he said. "The world is moving to a future where limits will increasingly be put on greenhouse gas emissions and rights to emit will be traded ... We have designed the carbon tax so that we can move to full emissions trading once international markets begin to mature."

The tax will be collected as far upstream in the supply chain as possible, to minimise compliance costs.

For transport fuels that is likely to mean when they leave the Marsden Point refinery or cross the wharves in the case of imported refined fuels.

PricewaterhouseCoopers partner Julia Hoare said firms eligible for some of the $240 million of tax relief earmarked for negotiated greenhouse agreements needed to get cracking if they wanted to have concluded the agreement by the time the tax came into effect.

She said smaller firms had tended to take a ho-hum view of the Kyoto Protocol and its implications. They needed to take it into account in their pricing decisions.

Business groups reiterated their opposition to the tax.

Employers and Manufacturers Association chief executive Alasdair Thompson said it would keep new investment on hold and impose another cost setback on exports.

Business New Zealand chief executive Phil O'Reilly said it was a big reduction in purchasing power that would slow the economy.

Business Roundtable executive director Roger Kerr said it would harm the country's international competitiveness and put its policies further at odds with two key trading partners, Australia and the United States, neither of which had signed the Kyoto Protocol.

National's finance spokesman, John Key, said the claim that the Government would "recycle" the tax was laughable.