The rush to make New Zealand the world's first sustainable nation could spell disaster, economic analysts say.
New Zealand will be the first country to expose its total economy to an emissions trading market, if the Emissions Trading Scheme (ETS) is passed in its current form.
Business NZ chief executive Phil O'Reilly said the emissions Bill could place a heavy burden on industry, risk job losses, and could push businesses overseas.
Small businesses will be the hardest hit, with higher energy bills and the inability to afford investment in energy-saving technology, he said in a press release.
"An emissions trading scheme should essentially underpin New Zealand's long term economic growth. If we are not confident that it can do that, then we should take the time to make it right."
The future cost of buying credits is uncertain, he said, and could be far higher than government estimates.
Most large industries have already scaled back their operations to 1990 levels of emissions under the Kyoto obligations, Mr O'Reilly said.
New Zealand leads the world in renewable energy, and its overall greenhouse gas emissions are less than 0.25 percent total world emissions.
Recession Similar to '80s and '90s
A report from the Economic Consultancy firm Castalia showed New Zealand's energy intensive economy and primary produce exports could incur huge costs, leading to a recession similar to that of the 1980s and 1990s.
Castalia has said that the economic modelling carried out by the Government is flawed and misrepresents the potential impact on different sectors of the economy.
Emissions Bill "Drastic"
Catherine Beard, executive director of the Greenhouse Coalition, which represents business interests, said adopting an emissions trading scheme is much more drastic than what other countries are doing.
"Why should you have to cut back your production while production expands somewhere like China and theirs is a lot dirtier than ours – it doesn't make any sense - plus we lose our industry," Ms Beard said.
The present ETS proposal will 'cap' emissions – setting them at an agreed level.
The Coalition believes that emissions should be 'intensity based' in order to foster business growth and efficiency.
"Our industry needs to be benchmarked against the world's best practice or better," Ms Beard said.
Forestry Industry "High Risk"
The forestry industry will be "breaking new ground" when they enter the Emissions Trading Scheme next month, Farm & Forestry Association executive member Dennis Hocking said. Pre-1990 plantations and post-1989 plantations will fall under different regimes.
Owners wishing to harvest pre-1990 trees will need to buy carbon credits, but if the stands are replanted there will be no liability.
Owners of post 1990-plantations can earn carbon credits.
If an owner registers their interest with the Government, they will be able to claim carbon credits equivalent to the carbon contained in their trees. But if they harvest their stands, these carbon credits will disappear.
"Potentially it is a pretty high risk business," Mr Hocking said.
"In the case of a stand [of trees] that is blown over, burnt or destroyed by disease, carbon credits will be deemed to have disappeared and will have to be replaced and bought from somewhere else.
"Insurance companies have not shown interest in covering the extra risk," he said. Mr Hocking disagrees with the way the legislation is being rushed through.
"I think inevitably there are going to be problems. I don't know what they are but I guarantee they will be there."
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