Warning carbon credits could cost €1bn

The Government's greenhouse gas policy could cost the taxpayer up to €1 billion over the next five years, according to a leading renewable energy company.

Under current policy, the State intends buying carbon credits from Russia and eastern Europe instead of cutting emissions.

Carbon credits are "licences" traded between countries and organisations. Under the Kyoto and Marrakesh treaties, countries or groups with low or falling emissions can sell credits to those with high emission levels. They allow the purchaser to continue producing high levels of greenhouse gases.

In the Republic's case, the State is buying credits from eastern Europe and Russia because the numbers of industries in those countries have fallen over the last 20 years, which means they have had a related fall in greenhouse gas emissions.

However, Mark Ennis, Airtricity's chief executive of supply in Ireland, warned at the weekend that the Government has underestimated both the price of credits on the open market and the rate at which the Republic's greenhouse gas emissions are going to increase.

"If you take Ireland's projected growth rate between now and 2020, we're going to generate 33 million tonnes [of greenhouse gas] above our 1990 levels.

"At the same time, the projected price of carbon credits is likely to be €15 to €20 per tonne in 2008; that's projected to rise to €38 by 2012, and it's reasonable to assume that it will be €40 to €50 by 2020.

"The Government's figures are showing that this will cost €270 million over the next five years. They've underestimated the quantity and the price. It's going to be at least €500 million and it could go up to €1 billion."

Airtricity's group chief executive Eddie O'Connor also warned yesterday that the final bill for carbon credits could be as high as €1.5 billion by 2020, a little more than €115 million a year.

"It is inexplicable why the Government would contemplate purchasing licences to pollute from Russia," Mr O'Connor said .

"They say that the cost will be €270 million. The cost is more likely to be €1 billion to €1.5 billion, all taxpayer money."

He added that this would be enough to build wind farms with the capacity to generate 3,000 megawatts of electricity, over half the State's current needs.

Mr Ennis said the policy of purchasing carbon credits would not reduce greenhouse gas emissions as the countries from which the State was purchasing them have already had their carbon output cut by the closure of many of their industries.

The Airtricity executives said the Republic should be taking the lead in investing in renewable energy and in developing interconnection.

Mr Ennis said while the company was involved in developing wind-generation projects, it favoured support for all types of renewable electricity generation.

"We've missed an opportunity in this country. The Government declared a moratorium on all offshore wind projects in 2003, and no new projects have been connected up to the grid since then."

All other European countries with a coastlines were "falling over themselves" to get offshore wind generation off the ground.

The recent Government White Paper on energy includes a commitment to have one-third of all energy needs met from renewable sources by 2020. Mr Ennis described this as an aspiration.

"They have no chance of delivering on that with no investment in green energy and interconnection."

He said to meet this target Eirgrid (which manages the national electricity grid) and the Commission for Energy Regulation needed to join forces with the industry and focus on developing renewable energy infrastructure.