Fine Gael is to table a Private Members' Bill in the Dáil to amend the Finance Act 2006 to make it compulsory that all motor fuels contain a blend of fuels from renewable sources.
The Bill proposes to remove excise duty on biofuels produced from renewable energy crops, a move that would feed through to cheaper fuel prices at the pumps, the party claims.
According to the proposal, all petrol sold at filling stations would include a 5 per cent bioethanol mix, and all diesels a 2 per cent biodiesel mix.
"We also propose to require all public transport and service vehicles to convert to forms of biofuel where practical, in either pure or blended form," Fine Gael finance spokesman Richard Bruton said yesterday.
Mr Bruton said Ireland was over-reliant on oil and the State must take steps to promote the use of biofuels.
He added: "Ireland is one of the most vulnerable countries in the EU to fluctuations in the global oil market, and it is imperative that we take steps to meet our obligations under the Kyoto Treaty."
In recent years Ireland had become increasingly dependent on oil, with oil consumption doubling since 1990.
He said the amount of oil used for transportation in Ireland had trebled between 1972 and 2002, leaving the country consuming at least 50 per cent more per capita than the EU average.
Mr Bruton said that immediate progress could be made in moving Ireland away from oil dependency by promoting the use of biofuels in all vehicles.
He said the Fine Gael plan would help deliver targeted reductions in CO2 emissions.
It would also help towards compliance with EU Directive 2003/30/EC on the promotion of the use of biofuels or other renewable fuels for transport.
Mr Bruton said in Budget 2006 a five-year biofuels excise relief package was announced. This was aimed at placing 163 million litres of biofuel on the Irish market by 2008 at a cost to the Exchequer of some €200 million in excise relief.
"However, Ireland is facing a potential charge of up to €230 million per annum from the purchase of carbon credits to meet the Kyoto commitments.
"In the long term this policy is utterly unsustainable, and does nothing to develop alternatives to oil in Ireland."