Environmentalists have applauded the Government's move to sign up for "ambitious" cuts in emissions for the 2020s.
Energy Secretary Chris Huhne announced to MPs that ministers had accepted recommendations by their climate advisers which will help the UK reduce emissions by 50% on 1990 levels by 2025.
The announcement is good news for the Lib Dem minister following a rift within the Cabinet in which some ministers opposed the proposals for the fourth carbon budget which runs from 2023 to 2027, saying it could hamper growth.
Mr Huhne said a set of measures focused on reducing the impact of the costs for energy-intensive industries would be announced before the end of the year.
A review of the fourth carbon budget will take place in 2014 and it could be relaxed if Europe is not making similar efforts.
There will also be no tightening of the second and third budgets up to 2020 before the EU decides if it will sign up to stricter goals for the end of this decade.
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