Government plans to buy €270 million of carbon credits to meet its climate change commitments have been criticised in an international report by the World Wildlife Fund (WWF).
The report, published yesterday, has warned that the plans could "fatally undermine" efforts to reduce emissions within Ireland and Europe.
It also questioned whether projects in developing countries being supported by the carbon-credit system were actually delivering real reductions in greenhouse gas emissions.
The report, entitled Emissions Impossible, examines the climate change plans of nine countries under the EU emissions-trading system.
In relation to Ireland, it found that up to 95 per cent of the emissions reductions required under the Kyoto agreement could occur outside of the country through the Government and companies buying carbon credits.
Under Ireland's Kyoto commitments, greenhouse gas emissions have to be kept in the region of 60 million tonnes per year between 2008 and 2012.
Current emission levels stand at close to 70 million tonnes, and the single greatest element in reaching this target will be to purchase carbon credits from other countries or companies who have made greenhouse gas reductions through UN programmes, called joint implementation agreements (JIs) and clean development mechanisms (CDMs).
According to the WWF report, the emissions-trading scheme could lead to almost all of the reductions required in Europe actually taking place outside the EU, most likely in developing countries.
"This could have serious consequences for investment decisions made within the EU by heavy industry - including the power sector - potentially leading to a 'lock-in' to high carbon investments and soaring emissions from these sectors for many years to come," the report states.
"This would fatally undermine EU emissions reduction targets for 2020 and 2030."
The report also raises serious concerns about the CDM projects in developing countries, and whether they provided "additional" reductions in greenhouse gas emissions or whether they were sustainable.
Ireland has set aside €270 million to purchase credits under the CDM and JI system, with the National Treasury Management Agency having responsibility to decide which projects to invest in.