The Government is to spend some €185 million to compensate for failures to reduce greenhouse gases within Ireland to levels required under the Kyoto Protocol.
On the eve of the introduction of a new system of emission trading limits for major industries, the Department of the Environment confirmed the Government also plans to buy 18.5 million tonnes of carbon dioxide allowances in order to make up a predicted shortfall in the strategy to reduce greenhouse gas emissions.
However, it denied that the plans were an admission that the Government's climate change strategy had already failed.
Under the Kyoto Protocol, which comes into force in three years time, Ireland is committed to reducing carbon dioxide emissions to 60 million tonnes, from an estimated current output of over 67 million tonnes.
However, figures indicate that emissions trading and other initiatives will not achieve these required reductions.
The emissions trading system, which starts on a pilot basis tomorrow, is expected to achieve just a third of the reductions required nationally for Ireland to achieve its Kyoto target.
Despite this and other measures in the Government's climate change strategy, it will be a minimum of 3.7 million tonnes a year short of its targets.
This shortfall could be significantly greater due to the fact that plans for a carbon tax have been abandoned and because the current downward trend in emission levels could be reversed due to increases from the transport sector.
Under the Kyoto Protocol, a country which is not going to reach its commitments can buy credits from countries which have excess quota or gain credits by investing in carbon dioxide reduction projects in developing countries through the Clean Development Mechanism.
In a statement to The Irish Times, the Department of the Environment confirmed the Government now planned to buy 3.7 million tonnes of carbon dioxide credits each year for the five years of the Kyoto Protocol between 2008 and 2012, or 18.5 million tonnes in total.
The current market price for a tonne of carbon dioxide allowances is €10, although this price could rise or fall.
The Department denied that its purchase of credits was an acknowledgement that sufficient reductions will not be made to meet the Kyoto target for Ireland.
It has also emerged that the industry emissions trading scheme that comes into force from January 1st is not likely to achieve very large real reductions in carbon dioxide emissions in Ireland.
Because of high demand for energy from the ongoing economic boom, and the relatively low cost of purchasing carbon credits, many companies in Ireland are also likely to buy quotas from abroad or invest in projects in developing countries to gain credits.
One hundred and six companies and institutions are taking part in the pilot scheme, which runs to 2008, and which sets limits for over 120 sites around the country that produce large carbon dioxide emissions, including electricity stations, factories and cement plants.
The Irish Times has learned that the ESB, the largest producer of CO2 emissions in the State, has already bought a significant amount of credits to make up a potential three million tonne shortfall this year alone between the amount of emissions it has been allotted and the amount it is expected to generate.
However, Dr Ken Macken of the Environmental Protection Agency, which is overseeing the scheme, said that the greenhouse gas problem was a global phenomenon and that whether Irish companies achieved the reductions in their own plants or through buying credits or investing in carbon reduction schemes abroad, was not an issue.
"It doesn't matter, as long as the reductions are made," he said.