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Mr Key this week said he was looking forward to facing off with Mr Shaw - part of a National Party strategy which Mr Shaw said was designed to undermine him.
After beating the more experienced Kevin Hague in a vote for male co-leader position this afternoon, Mr Shaw said he was capable of taking on Mr Key.
"He did say he was looking forward to it, so he should be careful what he wishes for," the Green MP said at a press conference.
Mr Shaw, a Wellington-based MP with a business background, ran on a platform of growing the Green Party vote.
He said the members saw the Greens needed to expand into a broad-based party and he was the best person to do that.
But the party already had solid foundations, he said, and he did not plan to make a drastic change in direction. He reiterated his opposition to forming a Government with National, but said that would ultimately be decided by the party's members.
Mr Shaw said both Labour and Greens were in good shape, having changed leaders, and were looking ahead. He noted that the two parties polled highest when they presented themselves as a unified, alternative government.
Mr Shaw has only been in Parliament since October, but said: "I wouldn't have stood if I didn't believe that I was ready."
He added that he was a "fast learner" and "a pretty safe bet".
One of his goals was continuing to improve Greens' economic credentials and he was likely to hold on to his economic development portfolio.
Earlier, Mr Shaw was announced as the new co-leader after a vote by delegates at the party's annual general meeting in Auckland dragged past the 2pm deadline because of how close the contest was.
Once the result was finally announced, to huge cheers from around 200 people, Mr Shaw took to the stage.
"This is an extraordinary privilege," he said. "It's also an enormous responsibility and I do not take that responsibility lightly.
"I know that this was an incredibly close race, and that there will be many people who are disappointed at the outcome. So I am committed to doing everything in my power to earn everybody's respect over the coming months and years."
Mr Shaw concluded by saying: "The campaign for the Green Party to enter government in 2017 - that just started."
After the short speech, he hugged his wife Annabel. He was also congratulated by a tearful Jeanette Fitzsimons, a former Greens co-leader.
Mr Hague, clearly upset, said he was "deeply disappointed" because he had "desperately" wanted the job. The third-term MP had started the contest as the favourite.
"This has been a really robust process," Mr Hague said. "I absolutely congratulate James, I wish him all the very best."
He confirmed he would remain as an MP: "I'm not going anywhere."
The other candidates for the co-leader position were Gareth Hughes and Vernon Tava.
Co-leader Metiria Turei was re-elected unopposed by members today.
She had earlier compared the male leadership race to the Bachelor TV show, and said "the rose had gone to the right man".
She ruled out standing down herself, saying she was committed to getting Greens into government in 2017.
Mr Shaw will give a keynote address at the party's AGM in Auckland tomorrow.
- By Isaac Davison of The New Zealand Herald