Ed Balls, the shadow chancellor, has accused George Osborne of caving in to right-wing backbenchers by pursing an anti-green agenda that has put Britain on an "economically reckless path".
In a scathing attack on the Chancellor, Mr Balls claimed that Mr Osborne has scared off desperately-needed investment in both low-carbon and fossil-fuel electricity generation by failing to set out a clear objective for UK power creation.
"My fear is that the UK currently risks snatching defeat from the jaws of potential victory. At the heart of this failure is George Osborne's unholy alliance with his troublesome backbenchers," he wrote in an article for the New Statesman.
"Faced with the choice between short termist nods to hard-line Tory opinion or the strategic leadership that Britain needs, the Chancellor has chosen the politically easy but economically reckless path," added Mr Balls, in his strongest comments on the green economy since becoming shadow chancellor.
He accused the chancellor of undermining the confidence of potential investors by refusing to agree a target in the recent Energy Bill to make Britain's electricity supply almost entirely green by 2030, by favouring gas over renewable energy and by "shackling" the green investment bank, set up to back new low-carbon energy generation projects.
"By failing to implement the scale and certainty of policy needed to effectively de-risk investment, the government has actively undermined business plans to create jobs and growth," said Mr Balls.
Investors in energy projects need to know the likely demand for the electricity generated so they can determine whether the investment will be worthwhile. However, without clear targets on renewable energy production - which is more expensive than gas and coal power - it is very difficult for potential investors in any form of generation to predict the long-term demand for their electricity.
A Treasury source said: "The energy sector had 13 years of under-investment under Labour – which this Government is reversing. Six new gas plants, two on-shore wind-farms and two off-shore wind-farms have opened since the Coalition took power – with many more in the pipeline.
“All Labour's ‘policy’ would mean is massive energy bill rises for hardworking people and pensioners.”
Meanwhile, a Department for Energy and Climate Change source pointed out that £29bn has been invested in renewable energy projects since the government was formed in 2010.
Separately, a new report from the Green Alliance think tank, out today found that £180bn of new green infrastructure investment is at risk "because of uncertainty about the UK's commitment to its current low carbon direction".
Responding to the report by Green Alliance - backed by WWF-UK, Greenpeace and Christian Aid - Greg Barker, Minister for Climate Change, said: "The Coalition is unleashing an unprecedented investment in clean energy and low carbon infrastructure. Investment certainty is key but now, as our ambitious electricity market reforms near the finish of their progress through parliament, we have that in spades."