A furious Labour Party has quit crucial climate change talks because the Government has made a deal with the Maori Party on legislation to set up an emissions trading scheme.
Labour and the Government were negotiating a "grand coalition" agreement on an amended emissions trading scheme (ETS) but in a surprise move yesterday Prime Minister John Key announced the Maori Party was National's ally.
That means the Government has 63 votes -- a slender majority -- to pass the legislation and doesn't need Labour or the other minor parties to get it through Parliament.
"This is a total breach of good faith," Labour leader Phil Goff told NZPA.
"We were in the midst of negotiations and they have reached a separate deal, without notice, and that can only be seen as a breach of trust."
The Government said it still wanted to talk to Labour so it could gain wide cross-party support but Mr Goff said that wasn't going to happen.
"I regret that negotiations entered into by Labour in good faith, at the request of National, have ended because of bad faith on its part," he said.
The Green Party was just as angry as Labour, but for a different reason.
It said changes to the ETS legislation agreed between the Government and the Maori Party meant New Zealand was going backward while the rest of the world was going forward.
"We will be committed to big handouts to big polluters for the next 40 years, in exchange for a few small concessions in the short term," said MP Jeanette Fitzsimons.
"The Maori Party used to say that the polluter should pay and now they say that polluters should get paid -- when will they stand up for what they believe in?"
And ACT, the Government's partner party, said the deal would impose "massive costs" on ordinary New Zealanders.
"The Government needs to be honest about what deals are buried in the details," said ACT leader Rodney Hide.
The new ETS, which the Government was to pass by December, will halve the cost of power price rises and give polluting industries an easier ride and longer to adjust through taxpayer subsidies.
Climate Change Minister Nick Smith said the changes would reduce the impact on households and businesses.
The previous government passed an ETS just before the election, but National put it on hold and reviewed it.
It had been discussing the amended version with other parties, seeking a solid majority in Parliament for the bill.
An ETS puts limits on the amount of greenhouse gases different sectors of the economy can emit.
Those that exceed their limit have to buy carbon credits from those under their cap, or from those who plant trees.
Dr Smith said the changes meant the cost to the average household through power and petrol price rises would be about $165 a year compared with $330 under the ETS passed last year.
Mr Goff said those figures were "utterly misleading" because the same Kiwis would have to foot the bill through higher taxes, effectively subsidising emitters to keep polluting.
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