The Government suffered a defeat in the House of Lords yesterday over the speed at which coal-fired power stations are phased out following a major Liberal Democrat rebellion.
Peers voted by 237 to 193, majority 44, in favour of a move that would force old coal power stations to cut down on their carbon emissions.
The amendment to the Energy Bill was put forward by Liberal Democrat energy spokesman Lord Teverson and backed by 43 Lib Dems with only 26 voting with the Government.
Greenpeace praised the move and urged Deputy Prime Minister Nick Clegg to ensure it becomes law when the Bill is sent back to the House of Commons.
The defeat came despite energy minister Baroness Verma warning it could undermine the country's energy security and increase fuel prices.
"While we do not expect large numbers of coal plants to invest in clean-up equipment a very small number of our efficient plants may wish to do so. This amendment is very likely to deter that investment,” said Lady Verma.
"In this scenario more coal stations would have their operations constrained and there could be more stations closing around the end of the decade than might otherwise be the case. This could require more gas plants to be built early to fill the gap at greater cost, ultimately, to the consumers.
However, shadow energy minister Baroness Worthington said the move would deliver lower carbon reductions "quickly and at least cost".
"If we don't take this most obvious, most easy, most simple way of reducing our carbon emissions and we are serious about decarbonisation, we will be forced to adopt more expensive subsidies,” Baroness Worthington said.
Peers argued the move would mean that coal plants without mechanisms to capture carbon would only be able to be used as back-up by 2030.
Under the amendment, coal-fired plants that adapt to meet European Union regulations on sulphur dioxide and nitrogen oxide would be brought under a new emissions performance standard (EPS) limiting carbon emissions.
The EU directive is introduced in 2023 and supporters argued it had been believed that most coal power stations would shut by then.
Due to the falling price of coal, they claimed some operators might pay to upgrade their plants to meet the EU regulations but continue emitting higher levels of carbon dioxide than new stations would be allowed to produce under the EPS.
The EPS had been designed by the Government to apply only to new power stations and to ensure that they had to capture some of their carbon or only operate as a back-up electricity generator and not run them round the clock.
Lord Teverson, introducing the amendment, told peers: "The Government's trajectory for its carbon plan had always assumed that these fossil fuel unabated coal stations will come out of UK generating capacity in an ordered manner after 2016. All this amendment tries to do is reinforce and make sure that happens,” he said, explaining that due to the falling price of coal, many operators might have lost the incentive to reduce limit coal-based energy production.
"One of the outcomes of that has been in the last year that coal accounted for around 40 per cent of total electricity generation and overtook gas, which is now only about 28 per cent electricity, and hence the UK's carbon emissions went up last year quite significantly," Teverson said.
Lord Stern, a former chief economist at the World Bank and author of a major study on the threat posed by global warming, said coal plants could be phased out by the Government setting a carbon price, but there were signs of ''backtracking'' and called for clarity.
"This amendment would essentially drive out unabated coal from the UK by
2030 other than for back-up. That is exactly what we have to do to meet our targets," he said.