Plans to curb UK greenhouse gas emissions produced by industry are to be scaled back by the government, a move branded by green groups as a "major climbdown".
EU permits aim to cut carbon dioxide emitted by industry
Carbon dioxide (CO2) emissions will now be capped at 756 million tonnes over the next three years - up from of 736 million tonnes.
Environment secretary Margaret Beckett said the earlier figure, set in May, could have devastated industry.
The targets are part of the EU Emissions Trading Scheme which begins on 1 January 2005.
Under the scheme, each EU country is allocated a target for CO2 emissions, and different sectors of industry - for example factories and power plants - are given "pollution permits" for the amount they can emit.
These can be bought and sold on the open market.
In May, the government submitted the National Allocation Plan to the European Commission in readiness for 2005. Now the new rules will have to go back to the commission for approval.
Mrs Beckett said the change reflected new forecasts of energy demand, revised once it became clear the UK would need more than detailed in May.
The government wanted to make the new emissions trading a success without damaging industrial competitiveness, said Mrs Beckett.
"The fact of the matter is that we as a government were faced with a genuine and real dilemma," she said.
"Projections suggested that if we stuck with the original formula, it would have had a devastating effect on our industry.
"None of us wanted to do that, but all of us wanted to get the emissions trading scheme off the ground."
Mrs Beckett said the UK was still "on course" to meet it carbon dioxide reduction targets set in the Kyoto Protocol, though CO2 levels had "started to go up again", despite a reduction since Labour came into power.
"But that has happened all over the Northern Hemisphere," she said.
The move has angered opposition parties and environmentalists, who have dubbed the move a massive climbdown.
Many scientists believe carbon dioxide - released through industry, agriculture and the burning of fossil fuels - is exacerbating natural climate change.
"Margaret Beckett is not the villain here at all. It is Blair and the Department of Trade and Industry who have failed to put the environment ahead of industry," a spokesman for Friends of the Earth said.
Liberal Democrat environment spokesman Norman Baker condemned the more lenient permits.
"This is further evidence that Tony Blair will never bite the bullet when it comes to the environment. He always takes the side of the polluter, never of the environment," he said.
But David Porter, chief executive of the Association of Electricity Producers, said substantial investment was needed to get carbon emissions down.
"We must have an allocation for the generating sector which recognises what the industry emits today and allows time for transition to a lower carbon future," he said.