The Government has honoured a campaign pledge to keep electric trains running and has committed an extra $35 million to refurbish them.
Fifteen electric trains currently operating between Hamilton and Palmerston North will be refurbished under state-owned KiwiRail - a move welcomed by the Rail and Maritime Transport Union.
"We're thrilled to see the Labour-led government protecting Kiwi jobs," said Rail and Maritime Transport Union general-secretary Wayne Butson.
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"Union members, environmental campaigners and industry experts have all spoken out about the importance of investing in electric rail, and we clearly have a government that listens to the people."
If KiwiRail had been permitted to proceed with National's plans to replace the EF Class electric locomotives with DL class diesel engines imported from China, the union says it would have added an extra 12,000 tonnes to New Zealand's carbon footprint.
The plans to switch from electric trains to diesel under KiwiRail between Hamilton and Palmerston North were announced in 2016. But an external review by engineering consultants Worley Parsons warned that diesel trains purchased from China have "a very high failure rate".
Studies also suggested that the DL locomotives are often unreliable, overly expensive and at risk of asbestos contamination. The Worley Parsons review said KiwiRail should be switching its whole fleet to electric.
The switch to diesel would be 25 percent cheaper to run. And KiwiRail said at the time the move would reduce its carbon footprint because fewer trucks would be needed to move loads, despite diesel emitting five times more greenhouse gases than the current fleet.
Green Party Associate Minister for Transport Julie-Anne Genter, who was transport spokesperson at the time, said it was "shocking" that KiwiRail would choose the diesel options. She called on then-Transport Minister Simon Bridges to halt the plan.
In a letter to KiwiRail chief executive Peter Reidy in August last year, Labour's transport spokesperson at the time, Michael Wood, confirmed that if Labour was elected, it would "require a halt on any work to de-electrify the [train] network".
He said Labour would "work with KiwiRail to develop an evidence-based, long term plan to guide capital investment in the rail network," adding, "We will consider options to expand electrification as part of this plan."
Mr Butson believes New Zealand must "electrify more of our rail network, not less".
"The highly skilled workforce in KiwiRail's workshops can now build a modern, sustainable fleet of locomotives that will be the envy of the world," he said.
National's transport spokesperson Paul Goldsmith told Newshub the move is "another political promise made in the transport sector with no business case".
"We would like to see the business case for this decision, just as we would like to see the business case for much of the Government's plan for rail such as the rail line to Marsden Point and for light rail in Auckland.
"We would expect the Government to release the business case so New Zealanders would know the Government is making rational and well thought out decisions for how they spend taxpayer's money."