The Economic and Social Research Institute has recommended that the Government should introduce a carbon tax on fuels including coal, gas and peat in order to reduce pollution.
In its latest review of the Irish energy market, the ESRI acknowledges that such a move would increase the cost of coal by 22%, peat by 32% and home heating oil and gas by 11%.
It also calls for a new gas pipeline from Scotland to Ireland to guarantee security of gas and electricity supplies in the future. The wide ranging review examines all aspects of the Irish energy markets - from competition, to infrastructural and environmental issues.
On the effects of a carbon tax, the ESRI argues that subsidies could be introduced to offset the hardship to the 220,000 families who struggle to afford fuel - but it says the tax is essential to ensure that Ireland meets its international commitments on reducing pollution.
By the end of the decade, 80% of the Republic's electricity supply will be generated from gas - all of which currently arrives via one pipeline from Scotland. If that pipeline broke, the consequences for Ireland would be disastrous. The ESRI recommends the immediate construction of a second 'back-up' pipeline to ensure that supply cannot be disrupted.
It also calls for the Corrib gas supply to be brought on shore as soon as possible to reduce dependence on one source of gas.
* The Minister for Communication, Marine and Natural Resources has categorically ruled out the introduction of a carbon tax on fuels.
Noel Dempsey told RTE that a carbon tax was 'not a runner' at this time, because it would damage the economy at a time when oil and gas prices were rising.
He said the last thing the Government should do would be to add to those price rises and cause problems for competitiveness.
He said that putting such a surcharge on fuels could trigger demands for higher wage increases.
