The Chancellor is a man who chooses his words carefully. So his remark, in a speech to the Green Alliance on Monday, that, like many others, he had not realised the full scale of the challenge on climate change, was significant. And his description of the Government’s new draft targets for carbon dioxide as carbon “budgets” gives them a heftier status than the previous Kyoto figures that Britain has struggled to meet. If the man who gave independence to the Bank of England can create a Monetary Policy Committee for carbon, as seems to be his intention, then the draft Climate Change Bill published yesterday was possibly the most significant step yet taken by any government. But much will turn on whether these targets can be fashioned in such a way as to give businesses the confidence to make the large-scale and long-term investments in low-carbon technology that are needed.

The draft Bill aims for a 60 per cent reduction in carbon dioxide emissions by 2050. That reduction is broadly in line with the findings of Sir Nicholas Stern’s review, an important but flawed document. David Miliband said yesterday that the intention is to set carbon budgets for meeting this goal in five-year blocks, fifteen years ahead. That seems sensible: if the auditing is sufficiently rigorous and transparent, there is less need for the annual targets called for by the Opposition.

But although the budgets will be “legally binding”, it is not clear on whom. No minister is likely to go to jail. Nor is there any suggestion of fines, which currently underpin the EU’s carbon trading regime. The only sanction for failing to meet the “budget” every five years will be judicial review. It seems unlikely that businesses will consider that provides a sufficient guarantee on which they can make big gambles.

Some big gambles will be vital if the Government is to achieve the drastic reduction in greenhouse gas emissions that is envisaged. While it is correct to emphasise the importance of international carbon markets, there are still tough policy choices to be made at home. It is hard to see how the 60 per cent reduction can be achieved in the timescale without, for example, significant investment in carbon sequestration and storage technology to remove carbon from electricity generation. It will also entail a widespread shift to low-carbon or hybrid cars, a move away from gas for domestic and commercial heating, and a commitment to nuclear power far beyond the current plan to replace existing capacity.

The current proposals are, nevertheless, a step in the right direction. And Mr Brown is right not to indulge some of the wilder fancies of the green movement, particularly some of Mr Miliband’s more stratospheric ponderings about personal carbon allowances. While some green groups hope that allocating individual quotas could help to show people how far they are living beyond planetary means, this could never be workable in practice. Worse, it is absolutely Stalinist in philosophy. There is simply no place for such dictatorial coercion in our democracy.

It is absolutely right that Britain should seek to set an example for others to follow. Without Tony Blair’s lead, it is unlikely that the EU’s carbon market would have been born. But ministers are complacent if they think that Britain has already broken the link between economic growth and the environment. That link has been weakened, but there are still painful decisions ahead.

Carbon “budgets” will never be within the State’s control in the way that Mr Brown has controlled his Budget. But Ministers could at least start by considering the government estate itself. A report by the Sustainable Development Commission last week found that many government departments are failing miserably to reduce carbon and waste. It is time for the public sector to put its own house in order. Some of the more apocalyptic visions of climate change are pure fantasy and scare-mongering, but the planet does deserve the benefit of the doubt.