New Zealand's emissions trading scheme (ETS) will start on July 1 because delaying it would create instability and uncertainty, Climate Change Minister Nick Smith said today.

Australia has put its ETS on hold because the government can't get sufficient support in Parliament to pass it, and there have been calls for New Zealand to do the same.

Federated Farmers and other business organisations are saying New Zealand will be at a competitive disadvantage unless it aligns itself with Australia.

Dr Smith said New Zealand's ETS, which was passed by Parliament last year, represented "a modest step forward" on climate change.

"This is a long-term issue requiring a steady and consistent approach. Our strategy has been to start the transition early but at a softer rate," he said.

"There would be real instability and uncertainty in deferring the emissions trading scheme's introduction at this late stage."

Dr Smith said he had been contacted by a number of businesses who were making substantial investments or had entered into significant contracts that would be severely disadvantaged by any change.

He said he had not been surprised by the news that Australian Prime Minister Kevin Rudd had decided to wait until the expiry of the Kyoto pact in 2012 before again trying to pass its ETS, which is one of the world's most comprehensive regimes.

"I would much rather be in New Zealand's position of having a settled emissions trading scheme passed in our Parliament than in the position of Australia or the United States, where there is agreement at government level on the policy and the right way forward, but they just can't get the necessary legislation through their parliaments," he said.

However, Dr Smith said New Zealand would be unlikely to proceed with its full obligations for energy, transport and industrial sectors, and to add additional sectors to the ETS, if there was no progress in other countries, particularly trading partners like Australia, Japan and the United States.

Agriculture is not due to come under the scheme until 2015 and there will be reviews in 2011 and 2014.

Dr Smith said claims that New Zealand was the first country in the world to bring in an ETS were wrong -- 29 of the 38 countries with Kyoto obligations already had them.

Prime Minister John Key said New Zealand's ETS was always going to come in ahead of Australia.

"Our scheme is different to Australia's and others. We think we've got a good and fair scheme," he said.

Labour leader Phil Goff did not support delaying the ETS.

"We have obligations under Kyoto, we're paying for these things anyway and we have obligations to the forestry industry," he said.

Delay would hurt New Zealand because it would be seen to be doing nothing about climate change.