Dr Smith said, in an interview, that for 14 years there had been a debate on whether the Government should introduce an emissions trading scheme (ETS) or a carbon tax, and it was time to make a decision to give certainty to businesses and individuals.
But he promised a more cautious ETS to replace that proposed by the previous government, a system he said was too ambitious, too broad in its scope and pace of implementation.
It was to have been introduced on January 5 next year, a timetable he said was not achievable.
Dr Smith said he would not release details of a new scheme or implementation timetable until the select committee reviewing the ETS reported back in either late July or early August.
His support of an ETS over a carbon tax was reinforced by an independent report this week by the New Zealand Institute of Economic Research and Infometrics, which said delays in implementing a policy would put New Zealand out of step with the rest of the world, make it more expensive once a policy was introduced and create a risk of carbon leakage.
Dr Smith said that could mean a company could manufacture a carbon-intensive product overseas and import it rather than make it here.
Equally, delays could make the cost of a carbon-intensive exported product uncompetitive once a scheme was introduced.
He also favoured an ETS because it was easy to allocate carbon credits to owners of carbon absorbing forests and to respond to economic cycles, with carbon prices rising during boom economic times but falling when economies were weaker.
Dr Smith said with New Zealand contributing 0.2% of the world's carbon emissions, it made sense to follow Australia, Europe, the United States, Canada and Japan down the ETS path.
Business New Zealand's manager of energy, environment and infrastructure issues, John Carnegie, said business wanted a New Zealand ETS to match the nature of the problem, that fitted our circumstances and balanced costs with environmental goals.
"I would strongly argue that business recognises the need to adapt and clearly a part of that is pricing carbon emissions."
Two issues business wanted addressed was carbon leakage - where climate change costs forced a business to close only for it to reopen in another country without the same costs, and to ensure any harmonisation of schemes with Australia suited New Zealand.
"It is not a matter of slavishly following the rules of some other jurisdiction."
He said the National Party's policies appeared to recognise many concerns of business.
