It is been about two decades since debate on New Zealand’s climate policy first started. The speed at which the incumbent governments have modified New Zealand’s climate policy proves that climate policy is one of the most controversial political issues in New Zealand (Terry & Bertram, 2010). The first proposal to reduce greenhouse gas emissions was put forward in 1990 and the latest in 2007. This research explores the factors that informed the New Zealand government’s decision to implement an emission trading scheme (ETS) as New Zealand’s climate policy. To answer the research questions this thesis uses the methodology of content analysis to critically analyse policy documents, relevant books and journal articles along with national newspapers and magazines. The framework considers various factors such as ideology, public perception, economic imperatives, impact on international tourism, impact on New Zealand’s agricultural economy (forestry and dairy), environmental considerations and New Zealand’s international relations that may have informed the Government’s decision to implement an emissions trading scheme. The analysis indicates that amongst other factors competitiveness of local industry and business along with New Zealand’s international relations and reputation were critical factors towards implementing the Emission Trading Scheme. Ideology of the political Party in government has had a significant effect on how the Climate Change legislation was drafted. The government’s argument towards implementing the ETS is to create economic, institutional and market synergy for industry and business to innovate products and services that lead to minimum or no greenhouse gas emissions and address the issue of climate change. The policy adapts a flexibility approach towards preparing business and industry in adapting the costs and uncertainty of climate change. There is also evidence that implementation of an ETS can be used as a unique selling point for New Zealand to establish itself as a greenhouse trading and financial services hub. This research provides a comprehensive assessment of New Zealand’s emission trading scheme along with suggestions on filling up the gaps in the policy.