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The government is to set a financial limit on the cost of making a home zero carbon beyond which housebuilders will not be expected to go.

Under new proposals from the Department for Communities and Local Government, developers will also be allowed to hit the government's zero-carbon target by making improvements to the energy efficiency of existing homes.

The proposals are contained in a twice-delayed consultation on the definition of zero carbon, issued today. They are likely to be controversial as they represent a significant weakening of the government's initial stance on zero carbon - in which all energy would have to be generated by on-site micro renewables.

The consultation envisages building homes to very high levels of energy efficiency so that all power requirements for heating would be supplied by on-site renewables or connections to other low-carbon sources of power. Additional requirements for cooking and other appliances would be met through a range of at least seven 鈥渁llowable鈥� solutions.

Any renewable power generated by the development and sold on to other developments would be taken into account, as would section 106 payments towards renewable energy infrastructure.

Also taken into account would be 鈥渞etrofitting works undertaken by the developer to transform the energy efficiency of existing buildings in the vicinity of the development,鈥� according to the DCLG.

In a statement, the department said: 鈥淭he allowable solutions will be reviewed in 2012 to check that they can be delivered at or below a 'capped cost'.鈥� It said this capped cost would be expressed in terms of a cost per tonne of carbon dioxide.

Housing minister Margaret Beckett signalled last month that she was prepared to give housebuilders more flexibility on the definition of zero carbon, particularly in light of the challenging economic environment.

She said today: 鈥淚 am absolutely committed to our 2016 target, and this demanding goal is already spurring action here and abroad. We are confident we will be able to achieve our ambitions while giving the industry flexibility for how they get there.鈥�

The UK Green 好色先生TV Council (UKGBC) has already warned that the move risks 鈥渄umbing down鈥� the definition of zero carbon, and backtracking on a world-leading policy.

Paul King, chief executive of the UKGBC, said: 鈥淪imply offsetting emissions in nearby existing homes through energy efficiency improvements is not a solution - we need radical action in both new homes and existing homes; it's not an either/or. We urge government to stick to its guns. A 'zero-carbon home' built using this mechanism would not be doing what it said on the tin.鈥�

He added that the cap on future costs risked being seen as a 鈥済et-out clause, which could stifle innovation if it is set at the wrong level鈥�.

Imtiaz Farookhi, chief executive of the National House-好色先生TV Council, said the consultation is a 鈥減ositive step in the right direction and allows for the flexibility essential to make this agenda happen鈥�.

He added: 鈥淲e are at a crossroads on the journey to zero carbon, and this is arguably the most significant policy decision for decades. It is therefore critical that we get it right and agree a workable definition. It is particularly important for smaller builders, for whom the challenge is even greater.鈥�