CPI director general David Workman said he did not understand why the government had, in its 5 December Autumn Statement exempted Northern Ireland from the scheme, which will set the carbon price at £16 per tonne from April 2013.
He said he suspects that it could have been scrapped to enable Northern Ireland to remain competitive against the Republic of Ireland, which has never been subject to the charge.
However, he said that the start price is disproportionate to the European €7 (£5.60) set for next year, adding: "If there is one measure that will destroy the competitiveness of large parts of UK manufacturing then this is it."
Workman said that his concern mainly laid with the escalation of the CPF, set to rise by £2 each year, reaching a base rate of £30 per tonne by 2020, while he understood that the European CPF is unlikely to swell by the same proportion or even rise above €12 (£9.70).
He said: "We are not only worried about the concept, but the escalator that is contained in the proposal.
"For any industry that produces a fair amount of carbon, that is a worry.
"I would like to see the CPF abolished or at the very least kept at £16 through to 2020, getting rid of the escalator.
"Either that or they compensate us for the costs in the same way that the German government is compensating the energy intensive industries there.
"It is a tax that the energy producers will pass this cost on to household consumers and business and commerce users so it won’t just be the energy intensive sector that is caught by this."
However, he welcomed the government’s decision to review the "costly and complex" Carbon Reduction Commitment, which oversees the CPF, in 2016 with a "high priority for removal when public finances allow".
He said: "There is a whole array of measures that are coming into play over the next few years that will increase direct and indirect energy costs very significantly.
"With this government having an overall objective to grow the economy we [CPI] think it is the wrong thing to do. It moves us into very dangerous water and I think there is definitely a case for us now to seriously rethink our carbon targets, certainly in terms of the speed of which we are aiming to achieve them."
