UK Secretary of State for Energy Chris Huhne has set a target to reduce the carbon emissions by 50% by 2025.
The decision will be reviewed in 2014 to ensure that the targets are in line with other EU members targets.
Huhne said the government will announce packaging measures to help energy-intensive industries adjust to the transformation while remaining competitive.
The Secretary's announcements are in line with the Climate Change Act 2008, which sets a target to reduce greenhouse gas emissions in the UK by at least 80% on 1990 levels by 2050.
Some energy companies reacted angrily to the news, arguing that the proposal risks damaging manufacturing competitiveness. EEF chief executive Terry Scuoler said in a statement: "On its own this is a bad decision for manufacturing so the government must move quickly to address the competitiveness concerns faced across manufacturing, as well as energy-intensive industries."
Smart Grid technology specialist Power Plus Communications UK country manager David Pitcher also raised concerns about how the price of electricity could be affected: "Prices are being driven higher by the cost of generating electricity in a competitive global market – i.e. the cost of raw materials such as gas and coal, or the underlying cost of new renewables generation.
"Ultimately, we are in a global market, meaning we have less control over raw materials price. Thus we need to look at alternative ways of keeping energy affordable."
The act requires the government to set the limit on emissions from 2023 to 2027 by June 2011.
Huhne agreed the recommendations made by the Committee on Climate Change that net emissions over this period should not exceed 1,950 million tons of carbon dioxide equivalent – a 50% reduction from 1990 levels.
"By cutting emissions we're also getting ourselves off the oil hook, making our energy supplies more secure and opening up opportunities for jobs in the new green industries of the future," he added.