ETS passes second reading

Labour and the Greens have fought the first battle in a war they will lose before the week is out against the Government's emissions trading scheme.

After negotiating a deal with the Maori Party, the Government has the numbers to pass the contentious legislation and it went through its second reading tonight on a 63-58 vote.

With Parliament sitting under urgency, it is expected to be enacted late on Thursday.

The Climate Change Response (Moderated Emissions Trading) Amendment Bill sets up an emissions trading scheme (ETS) which will replace the one passed by the previous government just before last year's election.

It is much easier on big polluters than Labour's version and significantly reduces the impact of an ETS on fuel and energy prices.

But Labour and the Greens say it is a shameful capitulation which will make New Zealand an international laughing stock.

"This is a bill that is fundamentally flawed," Labour's climate change spokesman Charles Chauvel told Parliament during the second reading debate.

"The magnitude of policy incoherence is breathtaking on many different levels. It will make New Zealanders poorer, our economy weaker and our emissions higher."

Mr Chauvel said Labour had been prepared to compromise during its negotiations with the Government to work out an ETS which had broad support.

He said it had been close to achieving that when Climate Change Minister Nick Smith turned to the Maori Party.

Mr Chauvel argued that the bill actually allowed emissions to increase because there was no cap on them.

"It defies commonsense...the lack of a cap obviates the whole point of an ETS which is to reduce emissions over time."

Green Party co-leader Russel Norman said the legislation weakened New Zealand's response to climate change.

"It's a shameful day to be a member of the New Zealand Parliament," he said.

"People will look back on this and scratch their heads in wonder."

Climate Change Minister Nick Smith insisted, as he always has, that the ETS will eventually reduce emissions from all sectors of the economy.

He said the Government was putting in place a workable and affordable scheme after more than a decade of "round and round" discussions and argument.

"This is about New Zealand doing its fair share to combat climate change," he said.

ACT leader Rodney Hide, whose party doesn't want an ETS at all, said Parliament was witnessing a very good government passing atrocious legislation.

After the bill passed its second reading Parliament began debating its committee stage, which was expected to continue to 10pm and resume at 9am tomorrow.