The Government's long-awaited legislation that aims to secure billions of pounds of investment in low-carbon energy will not include a target to slash emissions from the power sector by 2030.
An estimated £110 billion is needed in the next decade to renew the UK's ageing electricity infrastructure, with much set to go into low-carbon power sources such as wind farms to cut emissions and keep the lights on.
The forthcoming Energy Bill, which aims to drive the investment, has been the subject of political wrangling within the coalition and mixed messages about how committed the Government is to supporting a greener economy or backing new gas power. But agreement has now been reached on contentious areas.
Significantly, the Bill will not include a limit for the amount of carbon dioxide that can be emitted per megawatt hour of power from the electricity sector by 2030, although the legislation will include the power to set a target in 2016 if it is considered necessary.
Earlier, opposition leader Ed Miliband added his voice to calls from business leaders and campaigners for the Energy Bill to set a goal to decarbonise power supplies by 2030 to give investors certainty to back renewables, carbon capture and storage technology, and nuclear reactors in the UK, rather than taking their money elsewhere.
Liberal Democrat Energy Secretary Ed Davey has expressed his backing for a target to cut emissions from the power sector, which supporters say is necessary to show the Government is committed to moving the UK to a greener economy and will stick with low-carbon policies.
But he has faced opposition within the Cabinet, led by Chancellor George Osborne, who has spelled out his backing for a second "dash for gas" with support for new gas power plants as a cheap source of electricity and tax relief for unconventional shale gas exploration in the UK.
Although there is no 2030 target, the inclusion of a power to establish one in 2016, when the Government's advisers on climate change are set to recommend how much carbon emissions should be cut by 2030 across the economy, is being claimed as a victory for Mr Davey.
The Government believes the spending level agreed for low-carbon power subsidies will allow the UK to meet goals to supply 30% of electricity from renewables by 2020 and also fund other low-carbon technology. But officials insist that, overall, the subsidies combined with measures to improve the energy efficiency of home mean bills should be £94, or 7%, lower on average at the end of the decade than they would otherwise be without all the energy policies.
Terry Scuoler, chief executive of manufacturers' organisation EEF, said: "This is a decisive move towards a balanced energy policy. A decarbonisation target will send a clear signal to investors that the Government is committed to low carbon energy for the long haul. Making the target reviewable will lessen the risk that the UK locks itself into an energy policy that turns out to be overly expensive for consumers."