Over €800 million should be raised annually from carbon fuel taxes and then used to cut Vat and labour taxes and to increase welfare payments, the Green Party has proposed.
Outlining the party's energy policy, leader Trevor Sargent said the Government's failure to prepare for an era of higher energy prices would cost the public dearly. "We have a government which is not a government. It is an agent for fossil fuel companies, such as Shell," said Mr Sargent, speaking in Dublin.
Acknowledging that carbon taxes would increase fuel prices, the Greens said they would encourage the efficient use of energy, thus cutting millions off the State's Kyoto bill.
Without change, Ireland would have to pay €150 million annually from 2008 for failing to honour commitments to keep the State's CO2 emissions within 13 per cent of 1991 levels - but this bill could rise to €500 million a year, he claimed.
However, the State could completely convert to renewable fuel sources, such as wind, tidal and wood-burning, over the next 50 years if action is taken quickly.
The day-to-day cost of burning wood pellets for heating is currently cheaper than oil, though the burners necessary still make it an expensive change.
Currently 90 per cent of the State's energy has to be imported, much of it from politically unstable regions: "We are reaching the peak of oil," he warned.
Farmers should receive tax breaks to encourage the planting of suitable timbers for wood pellet burning, such as willow, that can be harvested every three years. Set-aside land could be used to grow fuel crops without affecting farmers' EU payments, while such crops should make many threatened farms viable once more.
"Farmers and Greens should be natural allies. Irish farmers have an enormous amount to gain from all of this," said Mr Sargent.
Dublin South TD Eamon Ryan said: "Energy is going to be the new health. Energy is going to become very expensive. When it does, it is going to become a serious political issue."
Under the Green model, energy production would not be concentrated at "a few ESB stations" but would be devolved to thousands of sites around the State. All of these would feed into the national grid, thus providing a secure supply. "We should not be dependent on any type of energy," he said. "For all of its talk about the market, the Government has failed to create a competitive market in energy in the Republic."
The Irish Sugar plant in Carlow, which was closed recently with the loss of several hundred jobs, should have been kept open, and converted to produce ethanol, the party says.
The Green Party policy paper was released shortly after Minister for Justice Michael McDowell sharply criticised the party's attitude to energy and to new motorways.
Mr Ryan said: "I would be nervous to go into debate with Mr McDowell on tort or jurisprudence, but he doesn't know what he is talking about on energy or roads."
