Escalating oil prices have made the introduction of a carbon tax unnecessary, the employers' body IBEC said yesterday.

Mr Brendan Butler, director of enterprise at IBEC, said the Government's carbon tax proposals should be "shelved". The Government has promised to introduce a new carbon tax in January, but has not outlined how it will be levied.

IBEC said the steep rises in energy prices and the fall in Ireland's greenhouse gas emissions for a second successive year make the introduction of a carbon tax "unnecessary". The organisation said the "very reasons" for introducing such a tax no longer existed.

Mr Butler said the original objective of a carbon/energy tax was to increase the cost of fuel so energy usage would drop. "Clearly the trend in rising energy costs over the last number of years and in particular over the last three months, coupled with increased investment, efficiency and innovation by industry, has already achieved this desired result".

He said the Republic, in particular, was greatly exposed to rising fuel prices. "Ireland is 90 per cent dependent on foreign fuel sources compared to an EU average of 45 per cent and approximately 30 per cent in countries such as Norway and France".

Figures published by the Environmental Protection Agency last week showed that greenhouse gas emissions have fallen in the last two years, said Mr Butler.

Emissions from the business community fell by 14 per cent over this two year period, he added.

"The introduction of a carbon tax will expose the Government proposal as a revenue generating mechanism rather than an environmental measure.

"The introduction of a carbon tax at the top rate could yield an additional €600 million per annum for the State. Already the Government takes over €2 billion in taxes on motor fuel," he said.

"Government exchequer figures published a few days ago suggest the public finances are in a strong position and Government policy in the forthcoming budget should be to support business rather than imposing unnecessary additional costs," he said.

Mr Butler warned that a carbon tax could have implications for inflation too. "The impact would not be confined to energy users, as a tax would have an impact on inflation, possibly raising it by as much as 0.7 per cent.

"At a time when oil prices are historically high the Government should be assisting business and not proposing further unnecessary taxes," concluded Mr Butler.

In July the Economic and Social Research Institute (ESRI) claimed the average tax bill on households from the proposed carbon tax could be around €250 per annum.