New Zealand companies should start making changes internally to achieve significant carbon emission reductions, according to the Energy Efficiency and Conservation Authority.

The authority's business manager Murray Bell said there were many areas where companies could make changes or investments with a high pay-back rate and cost savings per year.

Under the planned emissions trading scheme, companies need to reduce their emissions or offset them by buying credits.

"There are many steps companies can take to invest in New Zealand, which are cheaper than buying carbon credits on a trading market," Mr Bell said.

He said about a third of company energy use came from electricity, so the best oppportunities for carbon reduction came from investing in more efficient use of fossil fuels, including through transport, industrial heat, or food processing.

His comments were in response to reports that New Zealand companies were encouraged to invest in overseas clean energy projects rather than buy credits, during the Australia-New Zealand Climate Change & Business Conference in Melbourne last week.

Mr Bell said New Zealand should concentrate on reducing emissions from fossil fuels first.  "Our advice would be, look at opportunities internally first.  Most will have 10% energy savings within two years or less.

"Investing in cost effective projects can have a reasonably short return of investment.  It makes good business sense."