After months of controversy the Government today brought its new-look emissions trading scheme (ETS) to Parliament and got the bill through its first reading on a vote of 63 to 58.
The previous government passed an ETS just before last year's election but National put it on hold because it considered the cost to the economy would be too high.
It was revised and changes have been put into the Climate Change Response (Moderated Emissions Trading) Amendment Bill.
The ETS seeks to limit emissions, which New Zealand is required to do under international agreements, by putting a price on carbon.
Eventually all sectors of the economy will come under it, starting with industry, energy and transport in July next year.
Agriculture will come under it in 2015, two years later than under the original ETS.
It is a less rigorous scheme than the one introduced by the previous government and will halve the cost to consumers of power and petrol price rises.
Taxpayers will subsidise polluters to a greater extent during a transition period.
Climate Change Minister Nick Smith said the scheme was workable and affordable.
"The existing Act was a branding statement by a dying government wanting to make grand gestures about saving the planet with little regard as to whether it would work and its impact on consumers, jobs and investment," he said.
Labour and the Greens have said that by 2030 it will be costing taxpayers $2 billion a year.
Dr Smith said it would cost $415 million to 2013 and there would be savings of $493m between 2013 and 2018. Cost estimates beyond 2018 were "very uncertain".
"I just ask members to get reconnected with planet earth," he said.
"This ETS will be the first of any country outside of Europe, and on July 1, 2010, will be the most comprehensive."
Labour's climate change spokesman, Charles Chauvel, said the scheme was very different to the one his government introduced.
"Emitters get a much longer transition subsidy to allow them to continue to pollute and there is no cap," he said.
"It means emitters are incentivised to continue to increase their pollution rather than decrease it."
Mr Chauvel said the ETS was not sustainable and would be rolled back by the next Labour government.
"Polluters will be laughing all the way to the bank," he said.
"This is a fiscally irresponsible legislation. This is a day of shame...it is just madness, utter madness."
Mr Chauvel said he first saw the bill 15 minutes before Dr Smith began his speech and the Government was refusing to release cabinet papers on the cost of the scheme.
Green Party MP Jeanette Fitzsimons said there was nothing in the bill that would reduce carbon emissions.
"This is the sort of emissions trading scheme you have when you still think climate change is a hoax," she said.
"There is no cap, therefore there is no protection for the climate."
Ms Fitzsimons said taxpayers were going to pick up 90 percent of increased emissions.
She criticised the transition periods in the bill, saying the real transition began in 1992 when New Zealand first committed itself to an international treaty to reduce emissions.
"How much notice does business need that a carbon priced must be factored into their decision-making?" she said.
"This scheme is designed to favour those who have done nothing."
The Government was able to bring the bill to Parliament because it negotiated an agreement with the Maori Party.
When it went to a vote, National, the Maori Party and United Future supported it.
Labour, the Greens, ACT and the Progressive Party opposed it.
The bill has been sent to the finance and expenditure select committee for public submissions.