Power generators are set to win a reprieve this week when the Government announces that they will be able to increase the amount of pollution they produce under a new carbon emissions trading scheme.
The decision follows a row between officials at the Department of Trade and Industry, who were backing generators' demands for the new pollution targets to be scaled back, and the Department for the Environment, Food and Rural Affairs.
Defra, which wanted to keep the original pollution targets, is expected to announce the concessions this week, after intervention from the Office of the Deputy Prime Minister.
Under the original proposals, power generators were expected to cut carbon emissions by around 20 million tons a year, or over 10 per cent, by 2007. But the generators - which were being asked to make the bulk of the UK's carbon cuts - complained that the targets were too high, and would result in closure of the "dirtiest" power stations.
The European Union emissions trading scheme, which will be introduced in January, allows heavy industries to trade their emission allowances, buying or selling depending on whether they beat or go over their pollution targets.
Under the revised plan to be announced this week, generators will instead be able to raise carbon emissions by up to 15 million tons per year by 2007. The UK's overall carbon target will not be affected because the power generators will be given some of the carbon allowances reserved for new factories and power stations which have not yet been built.
Defra will present the revised allocations as a compromise, but the U-turn was prompted by Government concern that the original targets could have led to soaring electricity prices as generators' costs went up.
Michael Cupit, the emissions trading director at Ernst & Young, said that the revised scheme will still lead to higher electricity prices.
The UK has committed itself to cutting its emissions from 1990 levels by 15.2 per cent by 2010.
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