Cleaner air, but not at too high a price - Big industrials are concerned a carbon tax on gas-fired and coal-fired power stations will lead to increases in electricity prices

The Government canned a carbon tax on petrol and other fossil fuels in December because there was insufficient support in Parliament.

That pleased many in the business community, particularly big industries who are heavy consumers of electricity, because the carbon tax was expected to raise the price of electricity by about 1 cent a unit.

Mr Parker said there would be no broad carbon tax till after 2012.

However, the Government still had a narrower carbon tax option on the table as applied to gas and coal-fired electricity generators.

Mr Parker said if there was a tax on thermal (gas and coal-fired) power plants, then an increase in renewable generation (such as wind and hydro) would be positive because it did not produce greenhouse gases.

A long-term objective might be to have nearly all electricity generation from renewable sources or carbon-neutral generation sources where emissions were captured and stored.

Mr Parker said that if the Government opted for a narrower carbon tax, it would take effect in about 18 months but he stressed it was only one of several options.

Catherine Beard, executive director of the Greenhouse Policy Coalition, a lobby group of energy-intense industries, said she found quite a lot of positive material in the strategy, which included dealing with climate change in a long-term strategy rather than attempts to get quick fixes.

There was also a commitment to consultation.

It was good to see the Cabinet paper acknowledge New Zealand needed to avoid making policy choices, which would make local companies less competitive or strand investment or create trade distortions.

One of the concerns the coalition had expressed was that a tax on electricity generators would flow through into higher electricity prices.

"If there was another way to approach it without ending up lumping extra costs on electricity that would be a preferred approach."

The New Zealand Business Council for Sustainable Development, representing 50 companies, said the work programme outlined was slow.

But it was important for the Government to develop a policy which would survive successive governments.

Council chief executive Peter Neilsen said the documents clearly signalled some sort of pricing mechanism in the future for carbon emissions.