The Government is facing a bill of €400 million over the next seven years to compensate for failures to reach its Kyoto target on "greenhouse" gas emissions.
Last year the Government revealed it planned to buy carbon credits to make up for an expected shortfall in its Kyoto target, which requires the State to limit carbon-dioxide (CO2) emissions to a certain level.
The price of such credits has ballooned since January when the European emissions trading regime began.
Government plans to buy such credits to cover an expected 3.7 million tonne shortfall, beginning in 2008, would cost more than €80 million a year based on current prices.
The abandonment of a planned carbon tax last year is expected to increase this figure by upwards of 1 million tonnes, or €20 million a year, if further measures are not found.
Yesterday a spokesman for the Department of the Environment acknowledged that the cost of buying such credits had increased considerably, but said the market was at a very early stage of development and the price had yet to stabilise.
However, Green Party energy spokesman Eamon Ryan said the Government was facing "the equivalent of an army deafness bill a year" in terms of paying to make up for expected shortfalls in reaching its Kyoto targets.
He said the failure of the Government to introduce a carbon tax and other policies aimed at reducing CO2 emissions meant taxpayers would be footing a bill in the hundred of millions.
It is understood that there is considerable concern within the Department of Finance and the Department of the Environment about the potential costs facing the Exchequer from current greenhouse gas levels due to the rising price of carbon credits on international markets.
The price of a credit to cover one tonne of emissions, which cost just over €10 in January, now costs €22 on international markets.
Under the Kyoto agreement Ireland is committed to keeping its emissions around 60 million tonnes of greenhouse gases a year between 2008 and 2012.
At present Irish homes and industry produce 67 million tonnes. Current measures are expected to lead to reductions of less than 3 million tonnes.
The main cause of the high level of emissions has been the huge rise in car and vehicle numbers in the State since the mid-1990s.
A high-level interdepartmental group of civil servants on climate change are to hold meetings over the coming months to find measures to reduce levels further.
The officials have to find measures to replace the proposed carbon tax which was abandoned last year amid considerable opposition from industry.
The group is expected to forward the proposals to Government at the end of this year, with a Cabinet decision expected in the first six months of next year.