Britain's plans for combating global warming have been rejected by the European Commission for being too lenient to industry, throwing them into disarray.
The rejection - which comes just days before the Kyoto Protocol, tackling climate change, comes into force on Wednesday - is a personal humiliation for the Prime Minister, who insisted on watering down the plans in response to industry pressure.
It further undermines his credibility as he seeks to use Britain's presidency of the European Union and the G8 group of wealthy countries to push the issue up the international agenda this year.
The Secretary of State for the Environment, Margaret Beckett, will tomorrow announce that the Government has no alternative but to accept the EC's rebuff, and will outline measures to try to keep Britain's programme on track.
This is only the latest of a series of government climbdowns since Mr Blair announced his intention to lead the world in the fight against climate change. Late last year Labour had to admit that it was not on target to meet an election promise of reducing pollution by carbon dioxide - the main cause of global warming - by 20 per cent below 1990 levels by 2020.
Britain will meet a less stringent target laid down under the Kyoto Protocol but only, to ministers' huge embarrassment, as a result of action taken by their Conservative predecessors; carbon dioxide emissions have actually increased since Labour took power.
Yet 10 days ago leading experts from around the world, meeting - at Mr Blair's invitation - in Exeter, warned that global warming was proving to be more catastrophic than previously predicted, and that there was only a decade left in which to take effective action against it.
The latest embarrassment arises from Britain's contribution to Europe's main instrument for tackling global warming, a so-called emissions-trading scheme.
Under it, industries are given pollution allowances but are allowed to trade them. So firms that succeed in reducing their emissions below the limit can make money by selling part of their allowances to those that overshoot. The scheme offers a flexible, and fashionably free-market, way of cutting pollution, but crucially depends on tight limits on the allowances.
Under the scheme, each EU country has to submit a national limit to the EC, and then share it out to individual industries and firms.
Britain submitted its plan by the deadline of March last year, adding the proviso that it might revise it later. In July, having heard no more, the EC formally accepted it.
However, industry, which had originally pressed for the scheme as the most business-friendly alternative, then put pressure on ministers to relax the limits. Patricia Hewitt's Department of Trade and Industry took up its cause, leading to a row with Mrs Beckett's Department for the Environment, which insisted on sticking with the original plan.
Eventually Mr Blair personally resolved the row, deciding to increase the limits by 6.6 million tons of carbon dioxide. His decision caused a political and public outcry, with opposition spokesmen accusing him of hypocrisy.
But the EC has now called his bluff. It told the IoS late last week that it had "no intention" of accepting Mr Blair's revised figures, adding: "Britain submitted its plan, and we are sticking to it."
In a desperate attempt to save face, Mrs Beckett will tomorrow accept the EC's ruling, but will announce that Britain will not reduce the individual, more relaxed, limits for individual businesses under the revised plan.
She believes that industry, despite its protestations, will not need to emit as much pollution as it says. But if it does, she will crack down on emissions later to ensure that the EC's ruling is observed.
Last night Michael Jack MP, chairman of the parliamentary select committee shadowing Mrs Beckett's department, described the episode as a "bungle". And Peter Ainsworth MP, chairman of the powerful Environmental Audit Committee, added: "Mr Blair's habit of trying to please everybody all the time has landed him in a predictable mess.
"It is time he translated his expressions of concern about climate change into action at home. Until he does, he cannot expect the rest of the world to listen to him."
