Cuts in carbon emissions will fail to meet election-pledge targets

David Miliband, the Environment Secretary, revealed yesterday that the amount of carbon dioxide released in Britain would be cut by just 16 per cent in the two decades to 2010 - well short of the 20 per cent target set in Labour's election manifesto.

But he insisted that Britain was still a world leader in the battle against climate change. He told MPs that he would be issuing permits to British industry that allow companies to emit 238 million tons of carbon per year in the period from 2007 to 2012, which he claimed was a cut of eight million tons a year.

The news was greeted with some relief by environmentalists, because it came only 24 hours after the German and French government had told their industries that they would be allowed, in effect, to increase their output of carbon over the same period.

Each EU government has until today to announce its targets under the EU's emissions trading scheme.

The scheme allows firms which emit less than their permitted level of carbon to sell their permits to high emitters, creating a powerful incentive to invest in clean technology.

Stephen Tindale, executive director of Greenpeace, said: "This proposed 3 per cent reduction in CO2 from British industry is not ambitious enough. It won't even be enough to meet the Government's own target. But at least it's a reduction from what was allowed before, and at the top end of the range of cuts the Government consulted on. It's a step in the right direction, though still too small a step."

John Cridland, the deputy director-general of the CBI warned: "Such a demanding cut is likely to feed through to higher electricity prices and, with firms already struggling to meet current energy costs, the Government is taking a risk with the competitiveness of UK business."

The announcement suggests that a long-running battle between two government departments over climate change has been settled in Mr Miliband's favour. Earlier in the year, his department, Defra - then headed by Margaret Beckett - was arguing for a cut of at least eight million tons, after a rise in world gas prices caused power stations to switch to coal, pushing up the UK's carbon emissions. But the Department of Trade, then headed by Alan Johnson, warned that any figure above about 3 million tons could damage the competitiveness of British industry.

Defra and the DTI announced yesterday that they were launching a joint Transformation Fund to boost investment in green technology.

The Institute for Public Policy Research, a leading Labour think-tank, said the disappointing announcement from EU governments showed that the emissions trading scheme should be run from Brussels rather than by national governments.

Simon Retallack, head of the IPPR's climate team, said: "You can't have a situation where each country expects others to pick up the slack on their behalf."

* Britain and Norway will join forces in a scheme to store carbon dioxide emissions under the North Sea oilfield, the Chancellor, Gordon Brown, has announced. "The development of carbon capture in the North Sea is such a big challenge it will require new infrastructure, a new regulatory framework and new market mechanisms," he told a press conference in Westminster.