The Government is signalling that the Emissions Trading Scheme may be changed to miminise a competitive advantage Australian industries could have.
Climate Change Issues Minister Nick Smith has appeared before a parliamentary select committee reviewing the scheme.
The Government wants to align the scheme with Australia's, which has yet to be finalised.
Dr Smith told the committee that New Zealand's model of allocating carbon credits needs to be better matched to Australia's.
He said the rolling back or abatement of credits here for industry is currently about 8% per year, whereas in Australia it is about 1.3% per year.
Dr Smith says that means New Zealand industry faces a very aggressive abatement scheme, which will drive investment across the Tasman or further afield.