THE government strategy for limiting carbon dioxide emissions is likely to be rejected by the European commission on the grounds that it is too soft on big industry. The government’s strategy allocated large companies the lion’s share of carbon tax allowances.

Following pressure from the British and German governments, the commission is to tell the government the strategy it released two weeks ago lacks credibility. They complained that it would give these companies a competitive advantage over European rivals that were forced to pay for emissions under less benign regimes.

Jos Delbeke, a commission official, indicated last week that Brussels would take a tough line to ensure the viability of the plans adopted by member states. It is believed the positions adopted by Ireland and Austria are causing the greatest concern, with one source describing the Irish plan as “hardly even a first step”.

It is understood that Martin Cullen, the environment minister, has been asked to make changes soon rather than be forced into an embarrassing climbdown at the last minute.

Under current proposals, small businesses and consumers will be forced to foot the estimated €370m annual tax bill for excess carbon dioxide emissions following a decision by the Environmental Protection Agency (EPA) to maximise the allocation of free quotas to heavy industry. This effectively allows big polluters such as the ESB and CRH to generate as much carbon dioxide as last year without buying extra credits on the open market.

“The Irish plan proposes that Ireland purchase permits on the open market rather than increase the burden on national industry, this makes it likely that the plan could be rejected,” one source said.

The final plans, which the commission will examine in April and May, are due to come into force next year.

Point Carbon, a carbon emissions consultancy firm, is warning that the price of carbon is also rising from the indicative €10 a tonne assumed by the government. This means the larger the proportion a government decides to buy on the open market to satisfy its obligations under the Kyoto protocol, the more it will have to pay. Those companies who have been granted generous allocations will benefit disproportionately as the taxpayer and small business will have to foot the bill.

Dr Ken Macken, EPA regional manager, said the proposed levels were not unduly lenient. “The minister has indicated he will only allocate between 96% and 98% of industry need so there will have to be some cutbacks,” he said.

However, Donal O’Riain, group managing director of Ecocem, the environmentally friendly cement producer, said the plan gave CRH a huge competitive advantage.