Striking the right balance with our Emission Trading Scheme

New Zealand is one of the great majority of countries that accepts climate change due to carbon pollution is being an universal issue that we have to tackle together.

Among the measures that can be used to control carbon pollution are legislative controls, carbon tax or emission trading scheme and New Zealand has chosen the emission trading scheme option, which puts a price on carbon and provides an incentive for forestation.

National's pre-election commitments in terms of the emissions trading scheme were to align our scheme more closely with Australia and to provide incentives for industry to reduce emissions without encouraging an exodus of industry and their skilled staff overseas.

We are making changes to the previous Labour government's scheme to achieve this and to re-jig it so that households, farms and businesses will not be funding multi-billion dollar windfall gains to the Government - which would have happened under the previous scheme.

We do not think it is fair to pocket billions of dollars by nationalising our emission allowance, nor do we think it is viable to discriminate against small businesses and these legislative changes will ensure that this is not the case.

The Parliament needs to make changes to the previous Labour Party scheme before end of the year - otherwise more than $400 million per year will be imposed on consumers and businesses from January 1 2010, including a 10% rise in power price.

The Labour scheme would have cost households on average $330 a year which we believe is too much for families to pay. That is why we are introducing changes, which will see the cost reduced by half, with the average cost expected to be just $165 representing significant savings for New Zealanders.

Features of the revised scheme include revised entry dates of July 1 2010 for transport, energy and industrial sector and January 1 2015 for agriculture; a transitional phase until 1 January 2013 with a 50% obligation and $25 fixed price option for the transport, energy and industrial sectors; and a phase out of industry support aligned with trading partners and the Government's long term -50 by 2050 emission reduction target.

The agreement reached with the Maori party will ensure the scheme will be passed to reduce the cost impact on low income households and insulate a further 8000 homes.

This deal strikes the right balance in protecting the future of our economy and our environment as it halves the cost increases for households and make the scheme workable for business while ensuring New Zealand does its fair share to combat climate change.

The revised Emission Trading scheme will need to be reviewed as international negotiations progress, new technologies evolve and with new knowledge on the complex science of climate change.

This is why the Bill provides for a review in 2011 and thereafter at five yearly intervals.