Brian Cowen (Laois-Offaly, Fianna Fail)

The Deputy will be aware that I made provision of €20 million in the budget for the purchase of carbon credits in 2006. I assure the Deputy that this is already represented as a subhead in the Book of Estimates in Vote 25, for the Department of the Environment, Heritage and Local Government. This amendment asks me to establish a new subhead, but it has already been put in place.

I indicated in my Budget Statement that a national carbon fund will be established to be used for the purchase of carbon credits, and to be funded on a multi-annual basis. The fund will be set up on a statutory basis by means of legislation to be brought forward by the Minister for the Environment, Heritage and Local Government. The State's requirements relate to the Kyoto Protocol commitment period from 2008 to 2012. The market for carbon credits is developing rapidly. For example, it is already possible to invest in multilateral investment funds. It is therefore considered prudent for the State to become active in this market to take advantage of this.

While the carbon fund will be a multi-annual fund established in legislation, it is not appropriate to make an announcement on the envisaged size of the fund until the Government has made decisions on purchasing strategy and the second phase of the EU emissions trading scheme. As part of an overall approach to meeting Ireland's target for the purposes of the Kyoto Protocol, the Government signalled in 2004 an intention to purchase up to 18.5 million carbon credits, that is, 3.7 million credits in respect of each year of the five year commitment period. The annual amount of credits to be purchased will be influenced by the extent to which emission reductions can be identified in areas of the economy other than the sectors involved in emissions trading under the EU emissions trading scheme. The Government is actively engaged in seeking to identify emission reduction measures in the context of the ongoing review of the national climate change strategy.

The Government's approach to meeting its Kyoto Protocol commitments does not simply rely on the purchase of carbon credits. Domestic greenhouse gas emission reductions will be achieved throughout the economy using a variety of measures, many of which are set out in the national climate change strategy and are currently being implemented. Others are being considered in the context of the review of this strategy. Reductions will also be achieved by Irish installations in the EU emissions trading scheme.

Significant initiatives with regard to renewable energy are also provided for in this Finance Bill. People will be aware of the five-year biofuels excise relief scheme, and as a complementary measure, the introduction of a 50% VRT relief with regard to flexible fuel vehicles. In addition, funding for renewable energy schemes costing up to €65 million through Sustainable Energy Ireland was also announced in the budget. This funding will go towards biomass boilers, support for installation of renewable technologies in domestic dwellings, and support to encourage the take-up of compliant heat and power technologies.

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