Northern Ireland motorists' cross-Border fuel purchases adds two million tonnes to the Republic's carbon dioxide global warming emissions and threatens to cost €50 million a year in Kyoto treaty penalties.
Under the international agreement, Ireland must ensure that CO2 emissions are no more than 13 per cent higher than the levels recorded in 1990, though currently the State is 23 per cent above, and rising.
Meanwhile, the Environment Protection Agency (EPA) yesterday lodged the State's plans to meet the Kyoto targets with the European Commission, acknowledging that it would not be able to meet the Kyoto targets.
The significance of Northern motorists was raised last year during negotiations over the Budget between the Department of Finance and Department of the Environment.
The North's motorists account for a quarter of all of the State's production of excess carbon, which will cost the State heavy annual fines from 2008 onwards.
Environment "expressed the view that while the Exchequer benefits from Northern Ireland residents and hauliers from the UK filling their tanks in the State, this increases our greenhouse gas emissions by almost two million tonnes of CO2 per annum, as emissions are recorded to Ireland's greenhouse gas inventory on the basis of fuel sales, rather than consumption.
They note that this is a significant contribution to the inventory in the context of a projected gap in our Kyoto target of eight million tonnes per annum over the period 2008-12," according to a minute of a meeting between officials.
Though it acknowledged that the Government would not raise fuel duties in last year's Budget, Environment, nevertheless, said fuel prices in the Republic should rise to the North's levels. "While appreciating that increases in fuel excise in the short term are problematic because of current market conditions, [ Environment] considers that, in the long term, reducing the gap between fuel prices in Ireland and the UK, through increased fuel excise duty, would serve to remove distortions in recorded emissions in Ireland's greenhouse gas inventory."
However, motorists in the Republic could be compensated for higher fuel prices by cuts in vehicle registration tax to ensure the move had "a neutral impact" on the Exchequer, the Environment officials recommended. Irish petrol duties are "well below" the EU average, though diesel duties are "only marginally below".
Over 100 of the biggest industries and institutions have been given specific CO2 ceilings, and they will have to buy costly carbon credits if they exceed the limits imposed. The burden falls mostly on the ESB and cement manufacturing sectors "due to their ability to pass through the costs involved", the EPA said last night, adding that allocations have been set aside for new competitors.
Over 94 per cent of carbon licences will be allocated free, 5 per cent will be kept for new businesses, while companies that close inefficient factories will be able to keep 75 per cent of their CO2 production. Predicting that CO2 emissions from homes and transport would fall, the EPA acknowledged that the State would have to buy over three million carbon credits annually to meet the Kyoto targets.
EPA director general Dr Mary Kelly said: "By submitting the National Allocation Plan to the EU Commission we have now achieved an important milestone towards finalising an allocation plan for the key Kyoto period 2008-12."
The commission has three months to examine plans from the 25 EU member states. It may reject any of them if it is feels that it is not compatible with EU law.