Climate Change Minister David Parker said the plan will have little effect on the nation's economy.

"That has been the surprising conclusion ... the cost of emissions reductions, over time will have negligible effect on GDP, it's not going to make us poorer," he said.

Earlier this year, Prime Minister Helen Clark said New Zealand intended to become the world's first carbon neutral nation.

The proposed "cap and trade" system will cover all greenhouse emissions and apply to all businesses, Parker said.

Details of the scheme remain undecided but Parker said they should be decided by August, with emission limits or caps set for all industries.

The country's biggest contributor of greenhouse gases is agriculture, which accounts for 47 percent of emissions, mainly through methane generated by cattle and sheep.

The power sector accounts for 40 percent of the total.

The "cap-and-trade" system means businesses will be able to either reduce their emissions or buy additional allocations.

Carbon taxes are not currently being considered, Parker said.