The bill amended the Climate Change Response Act 2002 by inserting an emissions trading scheme including all sectors of the economy and all greenhouse gases.
[6] On 10 September 2008, the Climate Change Response (Emissions Trading) Amendment Act 2008 had its third reading in Parliament and was adopted 63 votes to 57 with support from the Green Party and New Zealand First.
[6] The proposed scheme was to cover all six greenhouse gases specified in the Kyoto Protocol, carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6).
[9][10] In 2007, the Ministry for the Environment acknowledged that the NZ ETS would not have a binding, absolute limit on the total level of emissions allowed in New Zealand.
However, the Ministry for the Environment still regarded the NZ ETS as operating within the cap on emissions established by the Kyoto Protocol for the first commitment period of 2008–2012.
[12] Greenpeace noted that the proposed NZ ETS placed no limit on the number of permits that could be imported into New Zealand and it did not include a domestic emission reduction target.
[14] Bertram and Terry (2008, p35) concluded that the NZ ETS is not a cap-and-trade scheme as described in the economics literature because it does not place a cap on New Zealand's emissions of greenhouse gases.
[8] Dr Suzi Kerr, an economist and Senior Fellow at Motu Economic and Public Policy Research, commented that the NZ ETS would be costly to tax payers as it provided for very high levels of free allocation of emission units to emitters.
[8] In August 2007, Infometrics economist Adolf Stroombergen wrote an opinion article about permit auctions and free allocation for the Dominion Post.
[18] In May 2008, Chris Schilling, an economist at the New Zealand Institute of Economic Research (NZIER), argued that free allocation of emissions units to 'at-risk' firms competing in export markets was necessary to maintain their competitiveness.
[19] Economist Geoff Bertram compared the price incentives of the 2008 NZ ETS with a carbon or greenhouse gas tax for Kyoto commitment period 1, 2008 to 2012.
[21] Business New Zealand Chief Executive Phil O’Reilly described the legislation as "deficient","a risk to our economy" and an "example of poor law-making".
[22] The Sustainability Council stated that farmers and big industries were being heavily exempted through gifted allocations of New Zealand Units which were effectively off-balance sheet subsidies.
[23] The Greens co-leader Russel Norman questioned the fact that agriculture would not enter the NZ ETS until 2013 and that the delay represented a $1.2 billion subsidy for the dairy industry.
Norman said that existing technology allowed farmers to reduce emissions, and the agriculture sector should join the NZ ETS on the same timetable as fuel companies – in 2009, rather than 2013.
NZIER economic modeling was reported to have shown the Labour ETS would take $3000 off individual household spending annually and cost 20,000 jobs.
[28] In April 2009, the Sustainable Energy Forum described the NZ ETS as an "almost completely ineffective means of reducing New Zealand's gross greenhouse gas emissions".