A cap on the price of carbon could increase emissions, Green Party MP Jeanette Fitzsimons says.

It has been suggested, the Government may limit on the price carbon credits could be sold for and was considering a ban on the sale overseas of New Zealand credits.

A cap on the price would bring New Zealand's emissions trading scheme (ETS) into line with Australia's, where it is proposed to put a cap of A$10 ($12.54) per tonne of carbon dioxide emissions in the first year, rising to A$40 per tonne in the second year.

But Fitzsimons told Radio New Zealand it was important to send proper price signal.

"Every year that we delay allowing the true price into the market the harder we make it to meet any climate target in the future and the longer we take to stabilise our emissions."

The previous government passed legislation setting up an emissions trading scheme (ETS) but it was put on hold and under review after the election.

Under an ETS, limits on greenhouse gas emissions would eventually be imposed on all sectors of the economy.

Those that exceed their limits would have to buy carbon credits from those under their caps.

The Kyoto Forestry Association (KFA), which represents most of the industry, said a cap on the price of carbon would make a mockery of National's policy of having up to 800,000ha of land planted with new forests.

KFA spokesman Roger Dickie said that if the Government wanted the forestry industry to receive artificially low carbon returns it would be forcing it to subsidies power generators and oil companies.

NZPA