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Cut of 25 % ‘would end onshore windfarms’

The government needs to offer businesses a firm commitment that it believes in green technologies if it wants companies to invest in new environmentally friendly industries, a think-tank has said.

Research found ministers were sending “mixed signals” about their aims to reduce carbon emissions – initially promising ambitious targets before seemingly wavering about the effect they could have on the economy.

Ministers’ caution was making industry leaders in the energy sector jittery about investing in new forms of green technology, the Institute of Public Policy report said.

To shore up business confidence, the Treasury should also abandon plans to introduce a “carbon floor price” – a green energy tax which would set a minimum price for the greenhouse gases.

Energy and climate change secretary Ed Davey has said the scheme, due to be introduced next year, would encourage firms to develop more environmentally friendly technologies. But critics have warned the tax will inevitably be passed on to consumers.

Reg Plant, a research fellow at the IPPR, said the global market for environmental goods and services was worth an estimated £2.27 trillion and was growing by four per cent a year.

He said: “An ambitious decarbonisation policy offers a route to long-term sustainable economic growth, and productive British businesses.

“But businesses need to know the government will provide consistent support for their investments – and at the moment ministers blow hot and cold on their commitment to a green future.

“But the government’s unilateral Carbon Price Floor is a policy which should be scrapped. It is ill-designed as it reduces British competitiveness, won’t cut emissions and will drive up fuel bills pushing more people into fuel poverty.”

The report comes as there are signs from the government it could cut subsidies to onshore windfarms by as much as 25 per cent.

Mr Davey has already said the government is looking to cut the subsidy by about 10 per cent.

But Tory backbenchers and environmental campaigners have been lobbying the government hard to cut the subsidy further, claiming the spread of windfarms across the UK is blighting the countryside. Speaking in the Observer, industry leaders said cutting the subsidy by 25 per cent would mean an end for onshore windfarms.