Hampshire County Council has been hit by a £1.4m “green tax” for services such as street lighting and heating schools.
Large public and private organisations have to pay a levy for every tonne of carbon emissions as a result of electricity and gas use.
And the authority is ranked in the bottom half of the first-ever national energy efficiency league table, it has emerged.
Now the Conservative-controlled council is drawing up a new strategy with the aim of cutting its £15.7m energy bill after ditching plans for solar power last year.
In the long-term, it could sell electricity from its three energy from waste incinerators.
However the council is locked into a contract with Veolia Environmental Services to manage its waste until 2023-25. Veolia sells the electricity and pockets the proceeds.
Meanwhile council chiefs have been warned they will have to factor in carbon taxes alongside escalating energy prices in setting budgets.
A report from three chief officers to Cabinet said: “Over time as energy prices increase the county council could be using a higher percentage of its total budget for energy.” This means less money for services.
The green tax – known as the Carbon Reduction Commitment – was introduced by Chancellor George Osborne last year.
Government officials say it is a financial incentive to cut emissions but it has been criticised nationally as a stealth tax.
The Cabinet report revealed the county council – which had 670 sites including schools, libraries and care homes - had to pay a carbon tax of £1.4m just for 2011-12.
It also warned of the “reputational risk” to the council from the league table although it failed to say how it scored.
In fact, Hampshire is among 17 organisations jointly ranked in the 14th lowest place with a weighted score of 943 for 2010-11.
Southampton City Council performed better with a score of 1,012. Winchester and other Hampshire district councils were not included.
The compulsory scheme requires large organisations which use more than 6,000 MWh of electricity per year to measure and report carbon emissions.
It gives credit for installing smart meters and complying with Carbon Trust standards of energy management.
Hampshire produced 88,482 tonnes of carbon emissions last year and used meters to monitor five per cent of its energy use compared to 100 per cent for the highest-ranked organisations.
By comparison, Southampton – with a smaller estate – was responsible for 27,604 tonnes of carbon emissions. It had meters for eight per cent.
Council leader Ken Thornber said: “Rising energy bills are of significant concern, particularly with the continued cuts in funding for the foreseeable future.
“It therefore makes good sense to look at how we can save energy to drive down costs and cut carbon emissions as well as potentially generating our own energy.”
Councillor Keith House, leader of the Liberal Democrat opposition group on the council, backed a new energy strategy.
He said: "We must all find ways of reducing carbon emissions. Hampshire County Council has been slow to get into the energy issue and tackling its emissions.
“The County failed by acting slowly to make full benefit of Feed-in-Tariffs from solar power.
“It can hardly object if it then has to pay taxes for burning up excess carbon".