Greenhouse gas emissions from energy generation have skyrocketed since 1990, the latest New Zealand figures show.

Based on current calculations, New Zealand is facing a bill of between $500 million and $1.2 billion if it fails to reduce greenhouse gases in line with its Kyoto Protocol commitments.

Overall emissions have risen more than 22 per cent since 1990 -- the year used as a benchmark -- with the greatest gains coming from the energy sector, the government figures show.

Emissions from public electricity generation increased 84% between 1990 and 2003, while emissions from transport (petrol and diesel) increased 61%.

Pete Hodgson, convener of the Ministerial Group on Climate Change, said the energy sector gains were a result of a worrying increase in transport emissions that needed to be addressed.

Power generation was a difficult area in which to reduce emissions, he said.

"We can't make significant changes because we are already 70% renewable, but we can set out to improve that, and we should," he said.

A briefing paper from his office to the Cabinet says emissions from the use of coal doubled between 2002 and 2003 a result of the additional thermal generation required in a "dry hydro year".

During the Kyoto commitment period, the Huntly power station increased its coal emissions amid concerns about limited gas stocks, resulting in emissions increases.

Hodgson said he believed Huntly would continue to play a part in New Zealand's power generation.

"Huntly provides New Zealand with a degree of resilience," he said. "There will always be a role for Huntly."

There was, however, huge potential for further development of wind generation in both islands. Hodgson declined to identify potentially suitable South Islands sites, citing commercial sensitivity.

There are five wind farms in New Zealand, with a total installed capacity of just under 170MW -- enough to power 75,000 New Zealand homes.

Wind Energy Association chief executive James Glennie said the potential for wind energy to play a role in reducing energy emissions was just part of a compelling case for increased use of wind power.

"Ultimately, there's a cost benefit trade-off to any environmental decision, and wind is cost-effective," he said.

A report commissioned by the Economic Development Ministry and the Energy Efficiency Conservation Authority, released in May, found wind generation had the potential to hold a 20% market share of the annual power generation and 35% of peak electricity demand.

Wind at present accounts for only 2.5% of peak power demand.

Hodgson said there also needed to be substantial improvements in reducing transport emissions, and officials were investigating new measures, including a ban on older Japanese imported cars and increased use of biofuels.

This view is backed by a report released last week by the PricewaterhouseCoopers climate-change services team.

"In order to make significant and quick reductions, New Zealand should focus on the largest emissions sectors, being agriculture and transport," the report says.

The report estimated the cost of carbon credits to the Government would be $1.2b if emissions were not reduced by 2012.

Greenpeace campaigners said debating how much carbon credits may cost was "like rearranging the deck chairs on the Titanic".

"We need to be discussing ways to tackle climate change, the biggest threat the planet faces, by cutting our emissions," Greenpeace climate campaigner Vanessa Atkinson said.

If New Zealand failed to reduce these emissions it would face "the double whammy of having to buy carbon credits as well as paying the costs of increased floods, droughts and other climate-change impacts", she said.

Emissions from agriculture still form the largest share of emissions at 49%, but the energy sector is close behind on 43%, the latest figures show.