27 May 2016

Scrapped ETS subsidy may cause energy price rises

2:56 pm on 27 May 2016

Changes to the Emissions Trading Scheme (ETS) in the Budget could cost households up to $40 a year, if energy companies decide to pass costs on, Climate Change Minister Paula Bennett says.

Industrial smoke from a chimney against blue sky

Climate Change Minster Paula Bennett said companies should think twice about passing on costs following the scrapping of ETS subsidies. Photo: 123RF

Parliament has passed the legislation, which phases out ETS subsidies, under urgency, as part of Budget legislation.

Budget 2016: Read RNZ's full coverage here.

The two-for-one subsidy was a temporary measure introduced during the global financial crisis to help moderate the initial costs of the ETS to businesses.

The subsidy was scrapped in the Budget yesterday, meaning sectors in the ETS would start paying the full market price for their emissions from 1 January, 2019.

And Mrs Bennett said businesses should think twice about passing on those costs.

Paula Bennett during caucus run 1.03.16

Climate Change Minister Paula Bennett. Photo: RNZ / Alexander Robertson

"There's a lot of competition in electricity so this is my chance to say to them all, you know, be careful about the costs that you pass on because people are very mindful of the cost and they have choices about where they go."

The government had done modelling to estimate potential costs to households, Mrs Bennett said.

"If those costs of fuel and electricity are passed on, for low income families it's about $30 a year, for medium about $40 a year so it's relatively low and I'm kind of confident that that's at the upper level of what the cost per household might be."

She said companies always looked at their pricing very carefully and should recognise the government had phased out the taxpayer funded subsidy over a long period of time.

"And I hope that they think of the consumer and their businesses."

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