Key Points:

A modified emissions trading scheme (ETS) is seen as the most likely outcome of a special select committee review of climate change policy.

The review, and associated deferment of the emissions trading scheme passed into law in the last Parliament's dying days, is part of National's confidence and supply agreement with Act.

It has been welcomed by business lobby groups and deplored by environment ones.

In particular, Act's wishlist for the review's yet-to-be-agreed terms of reference was seen as creating open-ended delay and uncertainty.

Cath Wallace of Environment and Conservation Organisations (ECO) said climate policy had been under almost continuous review since 1992.

"The ETS, combined with the moratorium on large new thermal generation, would have for the first time placed a price on carbon and have provided investors in cleaner technology with some degree of certainty."

But incoming Finance Minister Bill English said on TV One's Agenda programme on Sunday that he expected "we will have a modified emissions trading scheme".

"It is certainly our intent to get through that debate and have the rules settled, because if we're going to have confidence among business to invest they need certainty about what the rules are about the ETS. So we can't afford to have a debate that drags on."

Prime Minister-to-be John Key echoed those comments yesterday.

Catherine Beard of the Greenhouse Policy Coalition, which represents large industrial emitters, welcomed the prospect of a review. The process which produced the existing one was rushed and failed to address the issues raised by industry, she said.

Environmental groups argue delaying the scheme transfers costs to taxpayers and pushes costs into the future, thereby increasing them.

In response Beard cites a New Zealand Institute of Economic Research study released in April which concluded that the costs to the economy might be lower if spread across the entire tax base, if the alternative was to render export industries uncompetitive, costing jobs and depressing wages.

Charles Finny of the Chambers of Commerce said he understood National was committed to an ETS.

"But I would not rule out some form of carbon tax as an interim measure, to cover our liabilities."

Reneging on Kyoto altogether - as Act has proposed - was out of the question. "I would be there alongside [Greens co-leader] Jeanette Fitzsimons on the protest march that happened," Finny, a former diplomat, said.

But the chances of there being a successor treaty to Kyoto in place when it expired at the end of 2012 were close to nil in the current environment, Finny said.

Given that New Zealand has a Kyoto liability, the smart thing for the Government to do was to buy the carbon units it would need as soon as possible and then recoup some of the cost from emitters.

Finny said business needed certainty and in the short term that would be either a carbon tax or an emissions trading scheme with a price cap, such as the Australian Government controversially proposes.

The Environmental Defence Society accused National of reneging on its commitments prior to the election.

"It was going to tweak the legislation to improve it. Now the ETS which is already in place will be put on hold indefinitely pending a lengthy and very wide-ranging review."

It would throw emerging carbon markets into disarray and end up with a higher-cost transition to the low-carbon economy we need, EDS chairman Gary Taylor said.