The Cabinet is to discuss proposals today for a significant reduction in the amount of greenhouse gases Irish industry will be allowed to emit from the end of next year, writes Liam Reid, Political Reporter.
Ministers are expected to receive an official report recommending a reduction of up to 30 per cent in the allocations for large industrial and energy companies. The cost to industry is likely to be between €500 million and €1 billion during the period 2008 to 2012.
This is the first measure under the Kyoto Protocol to tackle climate change which will have a significant financial impact on the economy.
However, the allocation system is likely to be the subject of a legal challenge by Ecocem, a company which produces environmentally-friendly cement. Ecocem claims that its exclusion from the scheme could drive it out of business.
The report being considered by the Government is expected to recommend that a limit of between 22 and 23 million tonnes a year should be placed on the amount of greenhouse gases Irish industry is allowed to produce.
This allocation will be spread over more than 100 companies and large energy users.
A pilot scheme is already in operation. If companies want to produce more than the amount they are allotted, they will have to buy "carbon credits" on the international market under an emissions-trading scheme.
The current price for a tonne of carbon credits, which lasts for a year, is some €27. However, investment banks have predicted that this price could increase to €50 per tonne.
While the pilot scheme has been in operation since last year, the limits set under it were close to or above the actual emissions being produced by most companies.
The main exception was in the electricity sector, where companies have spent €23 million buying carbon credits.
Yesterday, Ecocem was informed by the Department of the Environment that it would not be receiving an allocation under the scheme as its production process does not result in greenhouse gas emissions.
The company has argued that its exclusion provides other large traditional cement producers with a financial subsidy. They can then undercut Ecocem for the slag raw material used to produce cement.
Ecocem's managing director, Donal Ó Riain, said that the company would be left with no option but to take legal action against the national allocation plan if the Government confirmed its exclusion.
"Ecocem is the single most important CO2-reducing company in Ireland, annually offering 300,000 tonnes in CO2 savings. It is the equivalent environmental benefit of removing 70,000 cars from the roads."
Meanwhile, Fine Gael has accused the Government of failing to tackle the rise in greenhouse gases in Ireland, which will require the State to buy nearly 19 million tonnes of carbon credits between 2008 and 2012 at a current cost of €550 million.