The Emission Trading Scheme (ETS) needs to be given "a set of teeth" by the panel reviewing it, the Labour Party says.
Climate Change Minister Nick Smith yesterday announced the panel which will study the way the ETS is working and whether it should continue to full implementation.
The scheme makes industries pay for some of their greenhouse gas emissions and is being introduced in stages.
Labour's climate change spokesman Charles Chauvel said today it should be fully implemented immediately.
"If New Zealand wants to avoid burning a lot of gas to generate electricity, to achieve a long-term turnaround in deforestation and bring about changes in consumer behaviour around energy and transport use we need a stronger ETS," he said.
"And we need the revenues from the scheme to pay to help bring about these changes, rather than to provide an ongoing subsidy to polluters, as the ETS currently does."
The previous government produced an ETS but National changed it after the 2008 election, saying Labour's plan was too costly for consumers and businesses.
Transport fuels, electricity production and industrial processes came under the regime in July this year on what is called a half-obligation basis.
That means they have to pay for one in two tonnes of emissions they put out. In January 2013 they are due to start paying for all of it.
Mr Chauvel said they should pay for all of it immediately.
"The so-called 50 percent obligation where the Government subsidises the price of carbon is unsustainable, distorts the carbon market and blunts the price signal intended to be sent by the ETS," he said.
Dr Smith said yesterday there had been good results during the first six months the ETS operated, with more resource consents for renewable electricity than in any similar period in the past and a move toward planting trees rather than cutting them down.
He said he wanted the review to focus on whether it was achieving its goal of reducing emissions with the least possible cost to consumers and businesses.
The Green Party said the review would inevitably leader to an "even weaker" ETS.
The review panel is headed by former Labour cabinet minister David Caygill. It will report in June next year.
