Business could face a bill of €1.1 billion a year from the combination of the proposed carbon tax and measures to reduce greenhouse gas emissions, says Mr Peter Brennan, managing director of A & L Goodbody Consulting.

The Government has estimated that the carbon tax - due to come into force from the end of next year - could raise €510 million a year from business. In addition, said Mr Brennan, some 40 energy producers and heavy energy users could face additional annual costs as high as €600 million per annum from new restrictions on carbon dioxide emissions, according to an Indecon report for IBEC.

"The enterprise sector is facing a serious challenge to meet the tough target set in 1997 by Government to limit Ireland's greenhouse gas emissions. The cost-compliance burdens arising from the Government's proposals should not be disproportionate to the perceived benefits," Mr Brennan said at a seminar yesterday.

He called on the Government to address the issue through a statement on national energy policy and by encouraging investment in combined heat and power plants, as happened in other EU countries.

Under the Kyoto protocol, the Government has made a commitment to limiting greenhouse gas emissions to no more than 13 per cent above the 1990 base level by 2008-12. This will require a reduction of about 25 per cent from current emission levels, according to Mr Brennan. Part of the Government's strategy to achieve this is the introduction of a new carbon tax by the end of next year, which, Mr Brennan argues, is double taxation "and as a consequence may be illegal under EU law".

The tax makes little economic sense, he argued, as it could tax the enterprise sector by €510 million a year while only reducing greenhouse gases by 200,000 tonnes, a fraction of the 14.5 million tonnes reduction likely to be required.

Heavy energy users will face additional costs as 40 energy and manufacturing plans will be required to have a permit to emit carbon dioxide. The Environmental Protection Agency has indicated that these permits will not cover current production levels, he said. This means that the firms affected will either have to cut production or buy carbon allowances on the open market under an emissions trading scheme, unless they can switch to more energy efficient production systems.

A report by Indecon economic consultants for IBEC estimated the costs to industry from this system could be as much as €600 million a year.