The Government's emissions trading scheme was passed into law today after months of controversy and two days of debate under urgency in Parliament.

MPs voted 63-58 to pass the bill that sets it up, the narrow majority made possible by a deal with the Maori Party.

The emissions trading scheme (ETS) has replaced the one passed by the previous government just before last year's election and put on hold by National.

It is a significantly watered down version, giving big polluters a much easier ride and agriculture until 2015 before the sector comes under the carbon trading regime designed to reduce greenhouse gas emissions.

Labour and the Greens fought it all the way, describing the ETS as a hopelessly inadequate response to climate change which would impose huge costs on future generations.

The Act Party opposed it as well because it doesn't believe an ETS is necessary.

But Climate Change Minister Nick Smith told Parliament is was an affordable and workable scheme.

"New Zealand has been going round in circles for a decade on how to impose a cost on carbon pollution," he said.

"This bill means that from July 1 next year there will be a price on carbon and an incentive for afforestation."

Dr Smith said the Government revised Labour's scheme to take the recession into account.

"We do not wish to snuff out the fragile recovery," he said.

"Power and petrol price increases are halved for households and businesses during the transitional phase."

Labour's climate change spokesman, Charles Chauvel, said the legislation was fundamentally flawed.

"It is economically irrational, socially inequitable, environmentally counter-productive and fiscally unsustainable," he said.

"And its hallmark has been one of poor procedure and hasty consideration."

Mr Chauvel said the ETS did not put a cap on greenhouse gas emissions and would allow them to rise if industrial sectors increased productivity.

It was far too generous with its allocation system for free carbon credits, he said.

"Future governments will find it very difficult to roll this assistance back - allocation recipients will have a powerful incentive to maintain the status quo."

The Maori Party's agreement with the Government boosts the home insulation scheme for poor families and gives iwi important rights of participation in forestry projects, which will earn money through carbon trading.

The party has five votes but could cast only four in support of the bill because Hone Harawira was away and Tariana Turia is in hospital recovering from her stomach stabling operation.

Under Parliament's rules, the party lost one of its votes because of their absence.

The Climate Change Response (Moderated Emissions Trading) Amendment Bill was supported by National, the Maori Party and United Future.

It was opposed by Labour, the Greens, ACT and the Progressive Party.

- NZPA