George Osborne defeated in attempt to weaken UK carbon budget

The chancellor, George Osborne's hopes of weakening the UK's carbon budget for the next decade were quashed on Tuesday when Lib Dem energy secretary, Ed Davey, said the target would not be changed.

The legally-binding target – of a 50% across 2023-2027 against 1990 levels, the most ambitious in the developed world – was agreed three years ago after a huge political battle between the Conservatives and Liberal Democrats, with David Cameron having to intervene in the target's favour.

As a compromise, Obsorne, who was opposed to the target, secured a review of the so-called fourth carbon budget this year. Osborne has warned of the UK being too far out in front of other countries in action on global warming, and claimed green policies were a burden on business.

But on Tuesday Davey said: “The fourth carbon budget, which caps the UK’s emissions, will not change. It covers 2023 to 2027, and will cement the UK as a global leader in combating climate change in an affordable way. We are increasingly seeing other countries who recognise our shared responsibility to tackle climate change join us in ambitious action.

“We are close to a new EU climate deal that would cut emissions by 40% across Europe by 2030 – meaning that there would be a level playing field for British business and industry with our biggest trading partners when it comes to cutting emissions.

“In reviewing the fourth carbon budget, I was reassured by the vast majority of business groups, investors and environmental groups who agreed that any change would be unjustified, would deter investment and undermine our efforts to get a global climate deal in 2015.”

The Committee on Climate Change, the government's statutory advisers on climate change, which sets the carbon budgets, welcomed the decision.

Lord Deben, the former environment secretary and committee's chairman, said: “I am very pleased that the government has accepted our advice given under the terms of the Climate Change Act. This was that the fourth carbon budget should not be changed because the basis upon which it was drawn up had not altered. This confirmation is a further example of the commitment of government and parliament to the battle against climate change."

The committee had published a review of the targets last December, concluding the targets should not change and were cost-effective.

Nicholas Stern, author of the 2006 influential report on the economics of climate change, said: “It is good that the government has followed the expert advice of the independent committee on climate change. The decision not to weaken the budget should increase the confidence of private investors and provide a boost to UK economic growth. It is clear that there were no solid grounds for weakening the budget."

David Nussbaum, chief executive of WWF UK, said: “The government has made the right decision by committing to continue the UK’s move towards a low-carbon economy well into the 2020s. This degree of clarity is essential to ensure we can build a secure and low-carbon energy system in an affordable way.”

In the autumn, the EU is expected to finalise a target of cutting the bloc's greenhouse gas emissions 40% by 2030. World leaders will meet in New York this September to discuss action on emissions, ahead of a landmark conference in Paris in 2015, where countries hope to agree the first ever global deal on climate change.

The EEF, the manufacturers' association, said that while it supported Tuesday's decision, it was concerned over the EU 2030 target. Gareth Stace, its head of climate and environment policy, said: “It was vital that HM Treasury took the opportunity to carry out its own review of the evidence before making a decision based on the UK’s ability to meet the 2025 target at least cost and consistent with the objective of rebalancing the economy towards manufacturing.

“This was the correct approach to take in opposition to voices who wanted the chancellor to simply accept the target without even examining the evidence and carry on regardless."

Osborne's concession on the carbon budgets was part of a coalition energy deal which also included measures to tackle fuel poverty. Official EU data shows the UK has the highest levels of fuel poverty of a dozen comparable EU nations, as well as one of the worst proportions of homes in a poor state of repair.

The proposals revealed on Tuesday will make it a legal requirement for the government to improve the energy efficiency of fuel poor homes. As “many fuel poor homes as reasonably practicable” will have to be improved to band E energy efficiency by 2020, band D by 2025 and band C by 2030.

Currently only 5% of England’s 2.3m fuel poor homes reach the band C standard, according to the government, with a typical band C home costing £1,000 a year less to heat than a band F or G-rated home.

Derek Lickorish, chairman of the government's independent Fuel Poverty Advisory Group, said: “I am cautiously optimistic that the new law will drive significant improvements to the living conditions of the fuel poor across England. The new target should galvanise much-needed activity across the country so that we can make a real difference to people’s lives by reducing anxiety and ill health.”

Lickorish previously described plans to cut the funding for insulation programmes as “unforgivable”.