From midnight tonight, a new era for industry and environmental policy will come into effect across Ireland and Europe. Liam Reid explains the background.
For the first time, large companies and institutions will no longer have an absolute free rein on the amount carbon dioxide they produce. The reason is the new emissions trading scheme - the European Union's "Big Idea" to tackle the continuing problem of global warming.
An entirely new market has been created, literally out of thin air, through the new system, which will mean that for the first time ever, companies may have to pay for producing carbon-dioxide emissions.
One hundred and six companies and institutions in Ireland and 14,000 in the whole of Europe will fall under the remit of the system, in which they each get a quota of greenhouse gases they are allowed to produce each year for the next three years.
Supporters of the system believe it will do what it has been designed to - dramatically reduce greenhouse gas emissions from industry over the next eight years.
Its critics, however, believe that, good intentions aside, the proposals are ill-conceived and ill-thought-out. The ultimate outcome, they argue, is that consumers will end up paying more for electricity and other products, while there will be little or no benefit for the environment.
With nothing of its size or scope having been introduced before, the proposed system is terribly complicated and almost incomprehensible to many, involving an unseen market for an unseen gas that nobody wants.
Emissions trading is the implementation of pure text-book economic theory. It is an attempt to put a price on the production of the main cause of global warming - carbon dioxide - the most ubiquitous and unwanted by-product of industrial production.
The theory is that by putting a price on it, companies will want to produce less of it and by creating a market for this by creating a quota system, companies which find it difficult to reduce their emissions will buy extra "credits" from companies which have managed to reduce their emissions with ease.
Because of the cost of producing carbon dioxide, the invisible hand of the market will then work to encourage clean energy over systems which generate lots of carbon dioxide - windmills over coal-fired electricity stations, for example.
Emissions-trading was to have been introduced in 2008 under the Kyoto Protocol, but the EU decided to move in advance and introduce it on a three-year pilot basis from 2005.
In introducing the scheme, the EU also made a key decision which could have a significant bearing on its effectiveness. It was decided that rather than requiring every company to buy its entire allocation or credits, each would be given a certain amount for free. This system is called "grandfathering" of rights.
In Ireland's case, it has meant that for the first phase, between 2005 and 2008, it will be business as usual in terms of emissions levels for most companies.
At the beginning of this year, the Government decided that the amount of free credits to be allocated should be almost the same (98 per cent) as the current levels of emissions from 120 sites of the major emission producers in the State. That is just over 22 million tonnes of gases. It means that most of these firms will be able to generate nearly the same levels of CO2 as they have been doing.
For 2008-2012, these firms will receive a further free allocation, which is expected to be about 70 to 80 per cent of their current emission levels.
Some experts, however, believe the scheme will simply not work, either in Ireland or abroad.
Prof John FitzGerald of the Economic and Social Research Institute, who has written a series of papers on the issue, thinks the scheme is fundamentally flawed and will simply not lead to any reductions. He expects that it will merely lead to a rise in electricity costs and other prices for the consumer, while doing little to actually reduce emissions.
Because the EU decided to allot credits for free rather than auctioning them, he argues that it is giving an automatic advantage to existing polluters to continue to pollute. As long as they stay in business, they get some allocation, whereas new entrants do not have the same advantage, while the cost of buying any extra credits to meet the shortfall will be passed on to the consumer.
"It's ill-conceived," Prof FitzGerald says, "but I think the inefficiency of the system as it goes forward will become obvious to people, and I would expect to see action to reform it."
Green Party TD Mr Eamon Ryan is also sceptical. "By giving out emission quotas for free rather than auctioning them, there is now an incentive for certain pollution activities to continue," he says. He believes it would be "churlish" not to acknowledge however that the simple establishment of the scheme is a major step and will create "an invaluable experience".
Mr Donal Buckley, director of environment at business lobby group, IBEC, rejects the suggestion that companies are being let off the hook by giving them such generous free allocations.
Excluding electricity generators, industry accounts for just 7 per cent of greenhouse gases in Ireland, he says. "There's a misperception out there that industry is the cause and the solution to the problem."
He accepts that the industrial sector has fought its corner in terms of minimising the impact of some proposals, but says it accepts global warming is a real problem. "Yes, we've got to do something about climate change, but we have to do it in cost-effective manner."
Dr Ken Macken of the Environmental Protection Agency has been charged with implementing and policing the scheme in Ireland. He is confident the entire system will work, with Irish companies which cannot make reductions buying quotas or investing in schemes in developing countries that will reduce emissions.
He also believes that the three-year pilot phase will focus companies on energy efficiency and bring greater focus onto new technology and away from fossil fuels
"Companies will increasingly pay more attention to energy efficiency and new technology. It's a driver, it will focus minds."
The simple fact that there is a scheme is also hugely important, although it shouldn't be seen as a panacea for solving global warming, he believes. "Even if the scheme in its early stages doesn't deliver as quickly as expected, the fact that it is there, the fact that it is working, will facilitate future action. So it really doesn't deliver answers, but it does deliver hope for the international community to be able to deal with the problem in the future."