Chancellor George Osborne has reportedly written to Ed Davey with an offer to stave off deeper cuts to the onshore wind subsidy in exchange for the Energy Secretary’s support for more gas in the UK.

In a leaked letter seen by the FT, the Chancellor suggests he is willing to keep a cut to the renewables obligation (RO) to 0.9 ROCs – with the proviso his Cabinet colleague give a signal that “unabated gas” will still play a role.

The Chancellor wrote: “We need to set out an approach which puts the cost to consumers at its heart. This would include: a statement which gives a clear, strong signal that we regard unabated gas as able to play a core part of our electricity generation to at least 2030 – not just providing back-up for wind plant or peaking capacity”.

Environmental campaigners say the Treasury’s green credentials have now been utterly “trashed”.

Craig Bennett, Director of Policy and Campaigns at Friends of the Earth said the Prime Minister and his Coalition partners had to rebuff the Chancellor’s plans.

He said: “David Cameron must stand up to his gas-guzzling Chancellor and the Liberal Democrats must fight hard if they’re to retain a shred of environmental credibility.”

DECC denied this letter was evidence of the Treasury dictating energy policy, a charge increasingly levelled at the Government recently. Over the weekend senior Tory MP and chair of Energy Select Committee Tim Yeo suggested household bills could go up as a result of Treasury meddling.