All the major petrol chains, but not the smaller chain Gull, raised their prices on Thursday as the next stage of the Emissions Trading Scheme (ETS) c

As of 1 July, all motorists will have to pay their part of the ETS.

One by one, the oil companies bumped up prices by 3c a litre for petrol, which took 91-octane petrol at most stations to about $1.79 a litre.

The AA thinks that that on its own will not change driver behaviour but might do so in conjunction with higher ACC, GST and excise levies.

The big chains in fact raised prices by slightly less than the full impact of the ETS, citing competitive needs as their reason.

Even so, emissions trading in the energy sector will generate immense transfers of wealth. Drivers burn 3.2 billion litres of petrol a year, and at 3.1c more a litre the oil companies must accumulate $90 million in order to buy emissions credits payable to groups such as foresters, whose growing wood absorbs the main greenhouse gas, carbon dioxide.

Transport price rises too

Gull says it will hold prices until at least Monday, in part because it uses 10% biofuel, which does not attract an emissions charge.

The cost of freight and some passenger transport is also predicted to rise under the extended scheme.

Road Transport Forum chief executive Ken Shirley says trucking firms can't afford to absorb costs associated with the ETS, and will have to pass them on - which could reduce demand for freight, which in turn could hurt the economy.

KiwiRail says it will pass on a small increase to its freight customers, and some ferry fares will increase by about $1.

Air New Zealand has already increased its domestic fares.

Significant first step - minister

The Government predicts the extended ETS will stop 19 million tonnes of carbon dioxide going into the atmosphere in its first three years.

Climate Change Issues Minister Nick Smith says the predicted drop is not large but is a significant first step.

Dr Smith predicts that because of new forest plantings, the halting of deforestatation that would otherwise occur, industry efficiency gains and incentives for renewable energy production, the country will meet its international target on reducing greenhouse gas emissions by 2012.

'Little more than a guess'

Greenpeace political adviser Geoff Keey says however that the prediction of a 19-million-tonne reduction in carbon dioxide is little more than a guess.

Mr Keey says the estimate is largely based on the number of carbon-absorbing trees that will not be cut down during that time, rather than on any efficiencies in transport or energy.

The Government expects 95% of the money gained from higher fuel and power prices to find its way to foresters who sell credits.