Leading article: A black week for green energy

The boast that the coalition would be "the greenest government ever" came to a sad end last month. Its death can be dated precisely to the declaration by George Osborne, the Chancellor of the Exchequer, at the Conservative annual conference that Britain would cut carbon emissions "no slower but also no faster" than other European countries. "The greenest government ever" thus becomes "as green a government as the others but no greener". David Cameron's promise, made when he spoke to civil servants at the Department of Energy and Climate Change three days after becoming Prime Minister, lasted less than 18 months.

The decision to pull the plug on solar power is part of that retreat from green ambition. As we report today, that decision has provoked a reaction from an unusual alliance, including the Confederation of British Industry and housing associations. The breadth of this revolt suggests that Chris Huhne, Secretary of State for Energy and Climate Change, should think again.

That means thinking again about the tension between Mr Cameron's desire to show leadership and Mr Osborne's determination that the Government should not become carried away with expensive gestures. This newspaper had hoped, in the dying days of Tony Blair's premiership, that Britain had opted for the role of green leadership. It was David Miliband's idea, when he was Mr Huhne's predecessor, that this country should set a green example to the world. Mr Miliband made a powerful case that this combined the national economic interest with green principle. Britain should aspire, he argued, to be a leading supplier of green technology, one of the guaranteed global growth markets.

Mr Cameron, to his credit, seemed not only to accept this argument but to insist that it was not weakened by hard times in the world economy – on the contrary, it was all the more important that Britain should seize first-mover advantage in leading the way to low-carbon technologies. And Mr Huhne, to his credit, has been an effective minister in negotiating the balance between green idealism and the compromises required of any democratic government, especially at a time of high fuel prices.

Mr Osborne, however, put paid to all that with his conference speech. "We're not going to save the planet by putting our country out of business," he said, which suggests that Britain cannot afford the luxury of green fripperies in hard times. Of course, we accept, and Mr Huhne accepts, that green prices have to be set at the right level. It would seem that the subsidy for solar power – the price paid, through a levy on electricity consumers, for power sold back to the national grid by people who have installed solar panels – was set too high. The scheme was "too popular" in that people rushed to put panels on their roofs and companies sprang up to meet demand. It had, in other words, precisely the desired effect in stimulating the production of green energy, creating jobs and boosting the economy, but had not been calibrated correctly. Mr Huhne warned that if he allowed the scheme to carry on unchanged it would either run out of money abruptly or a further levy would have to be imposed on electricity consumers.

Mr Osborne's argument is that solar power is easily the most expensive of the renewable technologies, and it makes sense to focus public subsidy on sources such as offshore wind. The counter-argument is that the more that solar panels are made and installed, the cheaper they become and the greater the incentive for firms to invent cheaper technologies. Ernst & Young consultants predict, for example, that in the four years from 2009-2013 the price of installing panels will have more than halved. With the Fukushima disaster back on our screens, the case for investing in different carbon-free energy sources is reinforced.

There is still a chance that Mr Cameron and Mr Huhne can rescue something from this mess. As we also report today, Liberal Democrat MPs have pressed Mr Huhne to push for a better deal from the Treasury, so the internal politics of the coalition are in favour of compromise. As the Autumn Statement approaches, and Mr Osborne seems more desperate for schemes that can be sold as part of a "growth strategy", the case for finding some way to continue with the solar-power scheme seems strong.

This may no longer be the greenest government ever, but it can still be credibly green if it finds a way to continue to subsidise, if at a lower price, solar power, which is a green fiscal stimulus that creates jobs.