The extent of the divisions in Government over the introduction of a new carbon tax aimed at reducing greenhouse gas emissions are made clear by pre-Budget papers released yesterday.

The proposal, championed by the Minister for the Environment and Local Government, Mr Cullen, is meeting particularly stiff opposition from the Tánaiste's Department of Enterprise, Trade and Employment, which fears it will damage competitiveness.

The issue was the subject of heated debate in the Tax Strategy Group, a committee of senior civil servants and advisers which discusses budget issues. Its deliberations were published yesterday under the Freedom of Information Act. As a result of this disagreement, the Minister for Finance, Mr McCreevy, turned down Mr Cullen's proposal to introduce such a tax this year and instead announced on Budget day that it would be introduced at the end of 2004.

In the meantime, the Government will have to agree the terms on which the tax will be introduced. Earlier this month Mr Cullen warned that failure to introduce such a tax and reduce emissions as set down could cost Ireland hundreds of millions of euro in 2008-12, under the terms of the Kyoto Protocol, an international agreement on reducing emissions.

A carbon tax would be levied on fuel, with the highest charge going on fuels which emitted the highest amount of greenhouse gases.

A proposal from the Department of the Environment and Local Government for the introduction this year of a carbon tax was discussed in detail at meetings of the Tax Strategy Group. The proposal was for a new excise-type tax at a rate equivalent to €7.50 per tonne of CO2 emitted by the fuel, rising to €20 per tonne over three to four years. It would be levied as a separate charge, in a similar manner to an excise duty.

The proposal would have increased household energy bills by an average of 6 per cent this year and pushed up industry's fuel bill by almost 9 per cent.

For residential users, this would have led to an estimated 10 per cent rise in peat briquette prices this year, rising to 28 per cent if the full tax was imposed.

Coal prices would have risen 8 per cent this year and 21 per cent over three to four years, while home heating oil would have risen by 7 per cent this year and 19 per cent eventually. Somewhat smaller rises were estimated for gas and electricity prices.

However there is sharp disagreement on the impact of such a measure on the economy. Mr Cullen's Department argued that it would not hit any sector unduly and would not significantly affect competitiveness.

But Ms Harney's officials said they were "seriously concerned" that it would undermine competitiveness, while also questioning its efficiency in reducing emissions.

Under the Kyoto Protocol, Ireland must reduce greenhouse gas emissions to 13 per cent above their 1990 level in the 2008-12 period.

By 2000, however, emissions were already 24 per cent above their 1990 level. To achieve the target will require "considerably greater decoupling of emissions from economic growth than achieved heretofore", according to the paper from the Department of Environment and Local Government considered by the Tax Strategy Group.

Ms Harney's Department argues against the kind of global carbon tax envisaged in the paper, saying the goal is to get industry to reduce its emissions and that some of this could be achieved through negotiated agreements.

It also pointed out that 75 per cent of industry emissions would be subject to an emissions trading scheme, under which industry could meet its commitments by "purchasing" emissions from other states.

If such a tax is introduced, the Department argued, the rate should be considerably lower than proposed in Environment's paper.

Other Departments also raised objections. The Department of Communications, Marine and Natural Resources, where the Minister is Mr Ahern, said it did not believe the proposal was in line with the National Climate Change Strategy, the Government policy paper on this area. It expressed reservations about the impact on electricity and gas prices and said it did not believe the tax would reduce emissions from the electricity sector.

The Department of Social and Family Affairs pointed out the impact on low-income families, who typically spend heavily on fuels. At present 300,000 households receive fuel allowance payments and these could be severely hit by price rises, the Department warns. The Department of Agriculture, meanwhile, expressed concern about the impact on farming and the food sector.