The Cabinet is split over the proposed introduction of carbon taxes amid concerns it will damage the economy, writes Liam Reid.
Proposals by the Minister for the Environment, Mr Cullen, for significant levels of green taxes on fossil fuels have met resistance from the Minister for Finance, Mr McCreevy, and other Government colleagues
They are concerned that a high carbon tax could damage the competitiveness of Irish industry and lead to a public backlash.
At Wednesday's Cabinet meeting, Ministers agreed to start a formal consultation process on the introduction of carbon taxes, which Mr McCreevy has agreed to in principle. In December's budget he said he intended to introduce carbon taxes from the end of 2004.
According to a Cabinet source, attempts to find a consensus between Ministers and social partners on the tax have proved fruitless to date, and the consultation process is an attempt to find common ground.
"There's a bit of concern about a public and industry backlash on the taxes," said the source.
"There's quite a bit of confusion on the issue in general, so the consultation process was seen as the best way to gauge opinion and get some form of consensus.
"The Minister for Finance knows the taxes have to be introduced sooner or later, and he'll have to make tough decisions on it, but the consultation process pushes it down the road a bit."
Mr Cullen, however, is adamant that carbon taxes are a vital tool in his bid to reduce Ireland's greenhouse gas emissions.
He has warned Mr McCreevy and other colleagues that Ireland will face fines and levies of up to €4 billion if it fails to meet its commitments under the Kyoto Protocol.
Under the agreement Ireland is legally committed to greenhouse gas emissions of no higher than 13 per cent above 1990 levels.
By 2001 emissions were at 31 per cent above 1990 levels, and were the fifth highest in the world on a per capita basis.
Mr Cullen has proposed a carbon tax level of a minimum of €7.50 per tonne of greenhouse gases across the board on all fossil fuels, rising to €20 over a four-year period. Last year his officials made a detailed submission to the Government's tax strategy group on the phased introduction of the €20 tax.
Mr Cullen is still pressing for the tax to be introduced in this way, claiming the effect on industrial competitiveness would be minimal.
However, Mr McCreevy has been warned by industry and by officials within his Department that proposals put forward by the Department of the Environment could damage competitiveness.
His concerns about the effect on the economy last year saw him going against a recommendation from the Tax Strategy Group that a carbon tax be introduced this year.
Mr McCreevy's concerns are shared by the Tánaiste, Ms Harney. Her Department vehemently opposed the Department of the Environment's proposals to the Tax Strategy Group last year, and it is understood this opposition has not changed.
She has asked that carbon tax levels be brought in at a low rate, with an advance warning of two years before they are introduced.
Yesterday Mr Cullen refused to be drawn on the divisions within Government on how to proceed with the tax.
However, he reiterated his belief that the taxes, when introduced, would not damage the competitiveness of the economy.
"My view is that we can decouple [energy taxes and economic growth] going forward," he said. Industry, however, would "have to bear some of the pain" in relation to the taxes.
Mr Cullen made his comments at the publication of a report by the Environmental Protection Agency, which predicts more extreme weather conditions in Ireland because of global warming.
The research predicts that winter rainfall in this country will increase by 10 per cent, but summers will be significantly hotter and drier in the south and east of the country.