Poolbeg 3, the third unit of three power plants at the ESB's Poolbeg site in south Dublin, has not produced any electricity since last January. It was, however, included in the ESB's submission to the Environmental Protection Agency (EPA) last year when calculating the carbon credits due.

Green Party TD Eamon Ryan described the carbon credit allocation as "effectively a cash subsidy" and said the fact that the ESB received an allocation for Poolbeg 3 despite the plant being out of service "shows up a fundamental flaw in the emissions trading system".

In accordance with EU law, Irish companies have to adhere to agreed levels of carbon emissions. If they exceed those levels they have to buy credits through the Emissions Trading Scheme (ETS), effectively a financial penalty on pollution.

To ease the transition and allow companies time to reduce their emissions, the government has been buying carbon credits and allocating them to companies for free based on their historic emission patterns.

In the December budget, finance minister Brian Cowen made a provision for Euro270m to purchase carbon credits over the next year.

Under the state scheme, the ESB was allocated 11.8 million tonnes of free carbon credits last year. It was given an allocation of 1.95 million tonnes to cover emissions from the three plants at Poolbeg.

The company does not break down the allocation for each individual unit at Poolbeg in figures provided to the EPA but industry sources said it was likely Poolbeg 3 would be entitled to around 450,000 tonnes worth of credits based on its usage patterns.

Carbon credits have been trading at a range of between Euro4 and Euro15 over the past year, putting the open market value of those credits anywhere between Euro1.8m and Euro6.75m.

Although the ESB received an allocation for the entire Poolbeg site, Poolbeg 3 was forced out of service for maintenance and has not supplied power to the national grid since.

A spokesman for the ESB said the allocation of carbon credits, given on the assumption that the plant would be in service for the entire year, was instead used to generate electricity elsewhere.

"The benefit is passed on to consumers. There is no bottom-line gain for the ESB here, " he said. That claim was rejected by Eamon Ryan of the Green Party.

"There is a real cash benefit to the company from not producing power because they have been given their allocation on the basis of their [past] production, " he said.

The ESB spokesman confirmed that Poolbeg 3 had not been included in the ESB's submission to the EPA for the purposes of calculating its 2007 carbon credit allocation.