Prime Minister David Cameron has made an agreement on emissions that extends past the 2020 boundary, it has been reported. Expected to be announced in full tomorrow, the decision will extend the UK’s carbon budget beyond the existing 2020 deadline up to 2027, and call for a shake-up in the way the country’s energy is produced.

The new carbon budget for 2022 to 2027 is expected to increase the pace of cuts and could effectively set the country on course to halve carbon emissions by 2025 on 1990 levels. The existing commitment outlines a cut of 34% by 2020.

Recent reports suggest that the decision process has been held up due to a disagreement between Energy and Climate Change Secretary Chris Huhne and Business Secretary Vince Cable on whether to accept the recommendations of the Committee on Climate Change on emissions cuts. The commitment was due to have been finalised at the Cabinet’s Economic Affairs sub-committee on Monday but disagreements were so serious that negotiations were concluded outside the committee.

Cabinet Office Minister Oliver Letwin is said to have played a major role in negotiations, while the Prime Minister personally intervened to establish a final agreement. This move comes as Cameron remains under scrutiny over environmental policy, with adversaries saying he has failed to keep his promise to create the ‘greenest Government ever.’ Had he rejected the climate committee’s advice, environmentalists claim he would have lost all credibility.

While most green campaign groups welcome this news, others have suggested that this addition to the existing commitment could have a negative impact on the economy, and place a burden on UK industry.

Greenpeace described the agreement as a “rare victory for the green growth agenda” in the face of what it said was “vehement” opposition from the Treasury and the Department of Business.

However Tata Steel, chemicals giant Ineos, and Syngenta, the seeds and pesticide group, have all cautioned against cutting carbon too quickly as they fear that green taxes on pollution – introduced to force companies to cut carbon – could drive companies abroad and result in numerous job losses.

Yet Tesco, Unilever, the John Lewis Partnership and Kingfisher (the company that runs B&Q) all back tougher carbon budgets, arguing that ambitious targets will actually drive growth in green jobs and make Britain a leader in renewables.

Friends of the Earth said Huhne should have gone further and accepted advice to tighten the UK’s existing target of 34% reduction in emissions by 2020, to compensate for the cuts already achieved due to the recession.