The chancellor Alistair Darling has today resisted calls from some of his cabinet colleagues to launch a "green new deal" as part of his Pre-Budget Report to help stimulate the economy, but has pledged to bolster spending on energy efficiency and the rail network, while extending incentives for renewable energy projects.

Speaking in the House of Commons earlier today, the chancellor insisted that the government's plans to tackle the current recession "must support our environmental objectives, not come at their expense", adding that the transition towards a low-carbon economy will continue.

To support this goal he announced plans for £535m of capital spending projects to focus on energy efficiency programmes, rail transport and environmental protection.
In particular, he said that an extra £100m would be invested to accelerate the government's high-profile domestic insulation programme, while 200 new trains would be added to the country's rolling stock and funding for flood protection would also be increased.

Darling said that such projects would not only help to cut carbon emissions but would also create "high-value, green-collar jobs", contributing to the government's goal of generating one million green jobs in the UK over the next decade.

In a surprise move, the chancellor also announced that the Renewables Obligation (RO) – the primary incentive scheme for renewable energy projects, which allows developers to sell so-called Renewable Obligation Certificates to the energy firms that purchase electricity from them bolstering their returns – would be extended by 10 years to 2037.

The move was immediately welcomed by the renewable energy industry, which has been lobbying hard for the scheme to be extended.

"Our main worry was that relatively soon after some planned wind projects were coming online the RO could be axed," said Nick Medic of the British Wind Energy Association (BWEA), adding that the 2027 deadline was beginning to affect investor confidence.

"If you look at some of the planned offshore wind farms that are likely to be completed around 2015, they are going to last 25 years or more, but they would only have the RO in place for the first 10 years of operation," he explained. " Developers trying to work out returns on their investment had no way of knowing what their returns would be for the second half of the development's life."

However, while the renewables sector welcomed the changes, other green groups as well as some senior cabinet ministers, green businesses and trade unions, were left disappointed by the Pre-Budget Report's perceived lack of ambition.

Energy and climate change secretary Ed Miliband and environment secretary Hilary Benn had reportedly been lobbying for a wide-reaching package of low-carbon measures to be included in the report.

Meanwhile, former cabinet minister and chairman of the government's green watchdog, the Environment Agency, today issued a similar call, telling delegates at the Agency's annual conference that the UK should follow the lead set by US president-elect Barack Obama and deliver a "green new deal".

However, beyond the increased spending on home insulation and rail, and extension to the RO, their calls appear to have been largely rejected by a Treasury already facing criticism over the government's soaring borrowing levels.

Friends of the Earth was quick to accuse the chancellor of missing a "golden opportunity" to accelerate the development of a low-carbon economy, while simultaneously helping to drive the economic recovery.

"Creating new jobs by insulating homes is a step in the right direction," said Friends of the Earth's executive director, Andy Atkins. "But political ambition, of speed and scale equal to that shown to the economic crisis, was urgently needed to tackle global climate change and safeguard a clean and prosperous future for us all."

He added that if the government is to increase public borrowing then that funding "must be invested in creating a successful, low-carbon economy", and not wasted on "a spending spree that won't avoid the climate change collision course we are currently on".