Chancellor Gordon Brown has been accused of undermining the energy White Paper by rejecting plans that would have helped to reduce carbon dioxide emissions.
A Treasury discussion paper, quietly issued earlier this month, in effect rules out the use of certain tax incentives to promote energy efficiency in the home.
But the industry, lobby groups and, most worryingly for the Chancellor, the Department of Trade and Industry, believe that without fresh incentives the White Paper's aim of a 60 per cent reduction in carbon emissions by 2050 could be missed.
The DTI refused to comment on the rift, but a Whitehall source said that officials were seeking urgent meetings with the Treasury to discuss the issue.
The source said that energy minister Stephen Timms wanted the Treasury to consider more radical ideas, such a reduction in stamp duty on energy-efficient homes.
A DTI spokeswoman said: "Energy efficiency is a vital part of the development of the White Paper's aims. Fiscal measures are important in delivering the results on energy efficiency."
British Gas said that tax incentives were needed to encourage, in particular, wealthy home owners to switch to an energy-efficient power.
"If the Government is serious about energy efficiency then it needs to do much more to cut through consumer apathy," said Jill Harrison, head of consumer services. "We have successfully targeted poor householders, but unless eye-catching tax incentives are introduced, the majority of more affluent householders may remain beyond our grasp. Without more radical measures, the Government is in danger of missing its own energy-efficiency targets in the White Paper."
British Gas would like to see the Treasury examine the tax system in France. There, employees are rewarded with an increase in their allowance on income tax if they make energy-efficiency improvements to their homes.
The Government-funded Energy Saving Trust (EST) is also unhappy that the Chancellor has dismissed a range of tax incentives.
Philip Sellwood, chief executive, said: "This doesn't tie in with what was set out in the energy White Paper. This is not joined-up government. The targets in the White Paper are pretty stiff anyway. This makes the task of meeting them much harder."
The EST is due to meet Treasury officials this week to raise its concerns. The Trust proposed a range of tax changes to promote energy efficiency, including: a lower VAT rate on clean boilers; a new tax or efficiency charge on less-efficient products; and a lower Council Tax band for energy-efficient homes.
A Treasury spokesman said its final energy tax proposals could be published this autumn and could be included in the pre-Budget report.
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