The House of Commons voted down the Energy Bill amendment that would have required Prime Minister David Cameron to set a goal by April 1 2014 for removing most carbon emissions from energy production by 2030.
The Energy Bill is the most dramatic attempt to alter Britain’s energy policy in the past 20 years.
The major overhaul would move the country away from fossil fuels and towards a more diversified mix of energy sources such as wind, nuclear and biomass. The bill’s supporters argue it is crucial if the UK is to meet its target of halving greenhouse gas emissions by 2025.
Senior Tory backbencher Tim Yeo’s decarbonisation target amendment divided government MPs and was marked a “rebellion” by the British media.
It was, however, recommended by the government’s own adviser on carbon policy, the Committee on Climate Change which called for a 90% reduction target of 50 grams of carbon dioxide per kilowatt-hour by 2030.
As it stands, the bill requires the government to consider targets in 2016.
Renewable energy companies and other supporters of the amendment argued it was necessary to encourage investment in renewables.
Its opponents such as Business and Energy Minister Michael Fallon said the UK’s legally binding European Union target to cut greenhouse gas emissions 80% below 1990 levels by 2050 already offered certainty to investors.
The overall consensus following the vote was that the target would have placed too many restrictions on businesses during a difficult financial period.
Yeo argued though that delaying setting a target could prove more costly and would appear as a sign of uncertainty from the government.
"The Commons has missed an opportunity today to provide more clarity for investors on the future direction of energy policy,” he said in a statement following the decision.
“Unfortunately this could mean that urgently needed investment in our energy infrastructure will be slower and the risk of a capacity crisis greater.
"The continuing uncertainty that will result increases the perceived risk of investment and will therefore raise capital costs, meaning that consumers may ultimately pay more for the new power plants that need to be built."
The bill moves to the upper chamber of parliament, the House of Lords.
Yeo urged his colleagues there to “continue the fight” for the amendment.
The bill will have three readings in the House of Lords before returning before both houses for consideration of amendments.