The Government has set a greenhouse gas emissions reduction target of between 10 per cent and 20 per cent below 1990 levels by 2020, Climate Change Minister Nick Smith announced today.

The target will be part of New Zealand's negotiating position at a climate change conference in Copenhagen later this year and the final target would depend on how those talks went.

The offer of a 10 per cent cut was made if only developed countries signed up to a comprehensive treaty and 20 per cent if developing countries signed up as well.

Prime Minister John Key said the targets were credible and responsible.

"It seeks to balance our economic opportunities with our environmental responsibility. The target is going to be a big ask for New Zealand because our gross emissions are already 24 per cent above our 1990 levels," Mr Key said.

A 10 per cent to 20 per cent reduction was close to Australia and other countries and well above the United States.

Greenpeace has been campaigning for a 40 per cent target, but Mr Key said this would have created unacceptable job losses and cost increases on families.

The target would be met by reducing domestic emissions, storing carbon in forests through more tree planting and purchasing emission reductions from other countries.

Dr Smith said Cabinet had also decided that an emissions trading scheme covering all sectors would be implemented and would be aiming to finalise details of this before the Copenhagen meeting.

It was difficult to estimate how much it would raise costs for households as this depended on the price of carbon and how people changed their behaviour.

One study has estimated that a 15 per cent reduction would result in a drop in disposable income from $49,000 a year to $47,650 in 2020.

Petrol prices could rise by between 3.7 cents a litre and 12.3 cents per cent a litre dependent on the price of carbon.

Climate Change Negotiations Minister Tim Groser said the targets put New Zealand in a "fine position" internationally.

"I think people have got to understand this is not a parlour game that people are involved in. This is serious governments taking on serious measures," Mr Groser said.

Other countries would understand the difficulties New Zealand faced in reducing emissions because of the way its economy was structured.

He did not believe the Copenhagen meeting would see an agreement finalised, but there would be a solid basis to finalise one next year and at that point New Zealand would set a final target.

Dr Smith said the target balanced economic opportunities with environmental responsibilities.

National was still committed to a 50 per cent reduction by 2050.

Treasury and many business groups have suggested an even lower reductions than 10 per cent, but Greenpeace has run a high profile campaign urging the 40 per cent.

Labour leader Phil Goff said the Government's target was not enough to deal with the problems of global warming and would not be taken seriously by trading partners.

This could mean New Zealand losing its branding image and facing trading sanctions if not seen to be acting sustainably.

Green Party MP Jeanette Fitzsimons said Mr Key was "piking out" and her party had shown how New Zealand could achieve an affordable, more ambitious target.

"Our opening bid is too low. Hopefully New Zealanders will convince the Government to up its game as the negotiations progress towards Copenhagen. This debate has only just begun, and it's time we had a real conversation about what is possible," she said.

Greenpeace also attacked the decision while Business New Zealand described it as sensible.