Taxpayers could stop subsidising onshore wind farms and solar power providers by the end of the decade, ministers claim.
Cabinet Office Minister Oliver Letwin has confirmed that financial support – currently worth around £400million – will have ‘disappeared’ by 2020.
George Osborne is believed to be arguing for a 25 per cent cut in renewable energy subsidies.
But Mr Letwin revealed in an email to a campaigner that the cut could go much further.
‘I anticipate subsidies… will come down to zero over the next few years and should have disappeared by 2020, since these forms of energy are gradually becoming economic without the need for subsidies,’ he told Terry Stewart, president of the Dorset branch of the Campaign for the Protection of Rural England.
Mr Stewart, who had written to Mr Letwin – his MP – to complain about plans for 160 wind turbines in Dorset, said: ‘The subsidy for wind turbines is iniquitous – it is a stealth tax.
‘It is being paid out to rich land owners and foreign energy companies and developers.’ Electricity companies have to pay twice the market price for energy from onshore wind farms.
This is then passed on through higher bills.
Power from wind turbines is intermittent and wind farms are also politically divisive.
While the Lib Dems are in favour of subsidising ‘green’ energy, more than 100 Tory MPs wrote to David Cameron in January to urge him not to blight the landscape with turbines.
There are currently more than 3,000 onshore wind turbines in Britain, with another 4,500 expected to be erected.
Tory MP Chris Heaton-Harris said: ‘This policy is not green, progressive or sensible. The Chancellor should take an axe to these subsidies.’
The revelation is embarrassing for Deputy Prime Minister Nick Clegg, due to attend the United Nations Rio+20 Earth Summit in Brazil tomorrow.
The Lib Dem leader has argued national wealth should also be measured by how clean a country’s environment is, rather than just how much money it earns.
Ed Davey, the Liberal Democrat Energy Secretary, will announce details of subsidies for renewable energy from 2013 to 2017 in the next few weeks.
It will follow a consultation on whether subsidies should be cut by more than 10 per cent.
John Constable, director of the UK charity Renewable Energy Foundation, said: ‘Extremely high subsidies have harmed the reputation and integrity of the renewables sector, which has been corrupted by easy money and undeserved fortunes.
‘Reductions in subsidies are welcome, but may not be enough to protect the consumer in very hard times, and retrospective cuts, supported by windfall taxes, cannot be ruled out.’
A Department of Energy and Climate Change spokesman said the 2020 date referred to by Mr Letwin was an ‘aspiration’.
She added: ‘It is always our aspiration to end subsidies for any energies.’