When the Greenhouse Policy Coalition sends out a press statement headed "Emissions Trading Scheme Changes Welcome" you know the Government has gone too far. GPC consists of the big polluters in New Zealand and is backed by state-owned Solid Energy. An emissions-trading scheme welcomed by polluters and coal producers is not going to work. An effective ETS should cause them to change their business model but instead it's full steam ahead with pollution as usual.

The proposed changes to Labour's scheme have weakened its effectiveness and set up taxpayers to pay billions of dollars in subsidies to business and farmers to at least 2050. This is a very odd thing for a business-savvy Government to propose. And you'd also have thought the Maori Party would have nothing to do with shifting the costs of pollution away from those causing it and on to Maori taxpayers - but there you go.

And you'd have thought independent-thinking farmers would oppose state dependency. They're happy, it seems, to receive a taxpayer handout to cover the costs of their emissions for years to come. They won't join the scheme until 2015 and then get a free allocation of 100 per cent of their emissions - and farming accounts for half of our total emissions.

The changes to the ETS follow the earlier announcement of a weak 2020 emissions reduction target. The Government seems to have assumed our trading partners will also set weak targets and we'll be in good company. European countries and Japan have already adopted robust targets and there are signs that the powerhouse economies of China and India are making commitments too.

New Zealand is now a climate change laggard.

You'd have also thought a business-savvy Government would realise the dangers such a weak response poses to our international reputation. As an exporting nation we're very vulnerable to changes in purchasing behaviours caused by growing awareness about climate change and environmental performance. This is particularly so when our goods travel long distances to their markets. We could make a real virtue out of being truly 100 per cent Pure but instead we place our powerful, compelling national brand at risk by a limp response.

It's worthwhile comparing New Zealand's climate change policies with those of a similar sized country also with a strong agricultural sector. Since devolution in 1999, Scotland has moved to the right politically with the election of the Scottish National Party. The Scottish Parliament last month passed the Climate Change (Scotland) Act 2009 that sets a 2020 target of 42 per cent below 1990 levels and a 2050 target of 80 per cent reduction. Compare this with New Zealand's targets of 10-20 per cent by 2020 and 50 per cent by 2050.

Moreover, the Scottish act requires annual targets to be set and performance against them to be monitored. Shipping and aviation emissions attributable to Scotland are included. The targets are legally binding so any decisions to approve projects that might cause the target to be exceeded could be challenged in the courts. The act also establishes a "carbon budget" in addition to the fiscal one, to create a clear link between government spending and emissions. The Government will evaluate all contracts on the basis of CO2 emissions so that price will no longer be the prime criterion. And on top of that, Scotland is part of the European Emissions Trading Scheme.

Addressing climate change is one of the biggest public policy challenges of our time. It is complex, urgent and has serious implications for our economic welfare as a nation. We need a policy mix that will work effectively and equitably across all sectors and shift our economy to a low carbon one. We don't want to pay more than we should but we must pay our fair share.

The Government has chosen an emissions trading scheme as our foundation policy. So far, so good. But the problem we have now is that the price signal given by the ETS is too weak. The complementary measures - other supporting policies to drive down emissions like the Scots have adopted - are just not there. They need to be. The more our ETS is watered down, the more we must rely on other policy measures to meet our emissions reduction targets.

So we need to take a collective deep breath and get the ETS right in the select committee stage. It's highly desirable to get a durable policy foundation in place that has wide support in Parliament to give certainty into the future. Farming needs to be included and we need to increase the strength of price signals through measures such as linking the ETS to the world price of carbon. There are other changes needed too.

It's time for real leadership in the longer term interests of the country.

* Gary Taylor is chairman of the Environmental Defence Society www.eds.org.nz