The Parliamentary Commissioner for the Environment has launched a substantive attack on big companies getting a "free ride" on greenhouse gas emissions.
Simon Upton told a parliamentary select committee that so-called free allocations amounted to a subsidy for large companies by the rest of society and could make overall emissions still greater than they are.
Worse still, big companies could still be getting a payoff, long after carbon emissions were supposed to reach zero, in 2050.
The comments came during hearings by Parliament's Environment Select Committee into the Climate Change Response (Emissions Trading Reform) Amendment Bill.
This law is aimed at several things, including scrapping a cap on the cost of carbon credits, likely doubling their cost.
It also continues a practise of excusing many large companies from paying for most of their emissions, though it does propose a slow wind down of this exemption.
But Upton told the committee free allocation was a subsidy, that cost the crown revenue and made the rest of New Zealand do more to reduce emissions.
It would also make the global environment still worse.
Some companies were receiving a 90 percent free allocation, others 60 percent.
This has always been justified because making companies pay the full cost of their emissions could drive them off shore, where their performance would be worse than it is is New Zealand.
But Upton told the committee that rationale was not working.
"To receive free units, a business only needs to show that it is emissions intensive and that there is - or could be - international trade in its products," Upton said.
"It does not need to show that meeting its obligations under the Emissions Trading Scheme could put it out of business, or that if the activity involved was relocated overseas, that would increase global emissions.
"In all likelihood, we have been giving free units to businesses that did not need them, or are less efficient than their overseas competitors.
"It appears that the eligibility criteria are designed to protect businesses and jobs as much as they are designed to protect the climate."
Upton argued free allocations made sense when they were introduced during the Global Financial Crisis, but that no longer applied.
Furthermore, the bill allowed new businesses undertaking existing activities, and even new activities, to get free units under existing criteria, he said.
"As the bill stands, highly emissions-intensive industries operating in a way which is inconsistent with best practice, could arrive in New Zealand and demand free allocations," Upton said.
"Not only that: Because our allocations are based on how much a business chooses to produce, there is no upper limit on the quantity of units that could be handed out for free."
He said the bill should remove the possibility of existing businesses adding new emissions intensive activities that would be eligible for free allocation.
It should also eliminate the possibility of new emissions-intensive businesses being attracted to New Zealand because they qualify for free allocations and nor should existing businesses be able to increase their free allocations by increasing their production levels without limit, he said.
The Climate Change Response (Emissions Trading Reform) Amendment Bill contains clauses that propose reducing free allocation by varying amounts, up to just under 1 percent a year.
But Upton said this process would be slow so that payments might still be going out in the year 2100.