Climate Change Minister James Shaw confirms petrol, electricity prices will rise after carbon pricing backtrack

Climate Change Minister James Shaw admits the Government's change of tack on the Emissions Trading Scheme (ETS) will result in people paying more for electricity and petrol.

The Government on Tuesday confirmed it had backtracked on its decision to keep a tight lid on carbon prices - taking on board earlier advice from the independent Climate Change Commission. It comes after the Government earlier this month lost a court case to climate-concerned lawyers.  

Energy Resources Aotearoa chief executive John Carnegie said the decision could have "real implications for the cost of living, the competitiveness of our exporters and… the confidence to invest in decarbonisation".

Carnegie told AM the Government's climate change policies were in "disarray - with decisions being made and reversed, and actually tinkering with the ETS to the point that participants have actually lost confidence in the ETS as a tool to encourage decarbonisation".

But Shaw said the ETS was a key tool for meeting New Zealand's climate change obligations.

"The decision to follow the advice of the commission obviously is off the back of the legal challenge," he told AM. "However, it is very good news for the climate because what it means, of course, is that pollution is going to come down this year and every single year from now onwards.

"Ultimately, businesses who are putting pollution into the atmosphere will face higher prices but, of course, that is an incentive for them to switch, for example, away from coal-fired boilers and towards electricity."

He's standing by the Government's plan, which would see electricity and petrol costs rise by about $5 per week for most households.

"That's largely offset… for low-income households because we index income support and Working for Families and so on to the CPI (inflation) so that largely takes care of itself through those adjustments," Shaw said of the cost increase.

"When you say, 'we're all going to be paying more', that's kind of a speculative statement, right? And it's unhelpful because, as I said, those costs are largely offset by other policies that we have in place to reduce household costs," he told AM host Ryan Bridge.

James Shaw.
James Shaw. Photo credit: Newshub.

The Climate Change Minister said the latest ETS decision was a smooth one within Cabinet.

"I think that the legal challenge has helped to provide additional definition around the decision-making process and, obviously, you've got a Cabinet here who are concerned about climate change who are making some pretty bold moves," Shaw said. "I think that given there are thousands of people still, around the country, who are still displaced from those climate-related events earlier in the year, it just shows that there is a determination to deal with it."

The ETS changes will come into force in December.