State to spend €40m on carbon credits

The Government will spend at least €40 million next year buying credits that will allow pollution in the Republic to exceed limits set in an international treaty. The money will come from a €270 million fund set aside by Minister for Finance, Brian Cowen, in last year's budget to buy carbon credits.

An spokesman for the Department of the Environment said yesterday the State has agreed two contracts worth €20 million each to buy carbon credits next year.

The National Treasury Management Agency (NTMA) brokered the deals with the World Bank and the European Bank for Reconstruction and Development.

The Republic will pay about €15 a tonne for the credits, allowing it to produce around 2.5 million tonnes of greenhouse gas over agreed limits.

The department's spokesman said that overall, the Government intends buying about 3.6 million tonnes of credits a year between 2008 and 2013. Under the terms of the Kyoto agreement on climate change, countries and organisations can buy credits that allow them to produce more greenhouse gases than allowed under the deal's terms.

The money paid for the credits is then used to fund activities elsewhere in Europe, or the world, that supposedly cut greenhouse gas emissions, or it is paid to nations or organisations that keep their emissions below the levels set down in the treaty.

The credits are traded like commodities and financial instruments on world markets.

The news comes as a new industry body, National Offshore Wind (NOW) Ireland, said the €4 billion that its members are planning to invest in the Republic could save up to €235 million a year in carbon credit payments and other penalties for failing to meet emission targets.

Its members, Airtricity, the Treasury Holdings-backed Eco Wind Power, Fuinneamh Sceirde Teo, Oriel Wind Farm, and Saorgas Energy, are developing offshore wind farms around the coast with a total capacity of 2,000 megawatts (MW) of electricity, close to half the Republic's peak demand.

But they want the State-owned national electricity grid operator, Eirgrid, to spend €600 - €800 million on its power transmission systems to facilitate their wind farms. Airtricity representative Torben Andersen said it would be "feasible at current electricity prices" for the companies to fund this themselves.

However, Brian Britton, NOW Ireland secretary and chief executive of Oriel Windfarm, said the savings generated by offshore wind power would mean the investment would be repaid in two to three years.