The International Energy Agency (IEA) says that Irish motorists should be taxed on the basis of the fuel they use rather than for owning their vehicles.

The agency's outgoing executive director, former French cabinet minister Claude Mandil, said yesterday that the Government needed to consider whether it was giving motorists the right "price signal for fuel".

He argued that the Government needs to shift from the current approach of taxing motorists for owning cars, through vehicle registration tax (VRT), to charging them for using their cars. "That means that you tax the oil, if it gives the right incentives," he said.

Reacting to Mr Mandil's remarks, Energy and Natural Resources Minister Eamon Ryan said he understood Minister for Finance Brian Cowen had indicated in his last budget that he would consider looking at this option.

The IEA yesterday published its latest report on Irish energy policy. Mr Mandil said that the Government had made a lot of progress and he praised the fact that it had set ambitious targets for the use of energy generated from renewable sources.

But he warned that the key issue facing the Government was hitting these targets. "Implementation is the issue now," he said.

He also pointed out that while many proposals on areas such as expanding public transport were positive, they were long-term solutions and needed to be underpinned by immediate measures.

Mr Mandil also said that the Republic needed a diverse range of fuel and energy sources. He warned against moves to increase costs for firms involved in offshore exploration for oil and gas. "These companies should not be taxed unnecessarily," he said.

Fergus Cahill, chairman of the Offshore Operators' Association, which represents firms involved in offshore exploration in Irish waters, welcomed his statement.

Mr Cahill pointed out that there had been a lot of debate around whether the fees the Government charges for exploration licences were too low. He said the IEA's position showed that increasing these charges would be the wrong move.

Mr Mandil said that the so-called "nimby" syndrome needed to be dealt with. "You have people who say we are happy to have energy services but say we do not want to have the investment that provides these services in our back yard," he said. "This means that public opinion is not informed, and media has a role in informing it."