Climate Change Minister Paula Bennett says removing a carbon credit subsidy for businesses could cost households between $30 and $40 a year.
The minister urged businesses to think twice about passing on the costs of their climate change obligations in the form of higher petrol and power bills.
Parliament voted unanimously today to scrap a "1 for 2" subsidy which halved the cost of carbon credits for companies to cover their greenhouse gas emissions.
New Zealand's greenhouse gas shame
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The subsidy was introduced during the Global Financial Crisis to protect businesses, but was no longer considered necessary now that the economy had stabilised.
"It is time businesses move towards paying the market price of their emissions," Ms Bennett said.
"Gradually removing the one-for-two measure is a pragmatic and practical way for them to manage the costs."
The subsidy would be phased out over three years.
Ms Bennett said scrapping the subsidy alone was not the answer to meeting New Zealand's climate change obligations.
The Ministry for the Environment's latest report showed that New Zealand's gross emissions rose 1 per cent in 2014, and net emissions have now risen a total of 54 per cent since 1990.
The Government has set a target of an 11 per cent reduction on 1990 emissions levels by 2030.