MPs reviewing the Emissions Trading Scheme have been urged to introduce a carbon tax instead.
The Business Roundtable, Todd Energy and the Domestic Electricity Users Network told the parliamentary committee on Thursday that a carbon tax would be simpler.
Todd Energy's managing director Richard Tweedie told the committee an emissions trading scheme will be at risk of rorts and dysfunction - comparing it to the vulnerability of the banking system.
Mr Tweedie says a carbon tax would allow the money to stay in New Zealand and the charge could be paced to match the economy's ability to pay.
He says the trading of carbon credits, such as oil and foreign exchange derivatives in uncertain times, is asking for trouble.
The Business Roundtable says a carbon tax should be introduced first and carbon trading only when a serious economic market develops for it.
Earlier, a climate scientist told MPs that energy efficiency and encouraging new energy technologies are needed to avert catastrophic climate change.
Professor Stephen Schneider, from Stanford University in the United States, says carbon charging is critical and it is a political decision whether it is a carbon trading system or a carbon tax.
However, he says energy efficiency standards can have a big impact on rising emissions and support from the Government is needed for developing new energy technologies.
Professor Schneider says the coal, nuclear and electronics industries were all started with government subsidies and that support could be in the form of loan guarantees for investment in projects.
