The failure of Government departments to cut their emissions could leave the taxpayer facing large bills under a new carbon trading scheme coming into force next year, MPs have warned.

The Environmental Audit Committee said it was “unconvinced” the Government would exceed its own targets to cut emissions by 12.5 per cent on 1999 levels by 2010/11, after a review showed reductions of just 6.3 per cent by 2007/08.

The committee warned that the Government was “backsliding” on renewable energy use on its own estate, with the proportion used by departments down to 22 per cent last year from 28.3 per cent in the previous year.

As a result, departments could end up paying money to private companies which are doing better than them at cutting emissions under the new Carbon Reduction Commitment (CRC) scheme, in which the Government is participating.

The MPs urged the Government to invest now in insulation, solar panels and energy-efficient combined heat and power boilers in its offices to save money in the long run.

The Government needed to lead the way on green issues, using its “enormous buying power” to drive the transition to a low-carbon economy.

EAC chairman Tim Yeo said: “The Government can’t have one prescription for the country and another for its own operations.”

The CRC will require about 5,000 organisations to buy “allowances” costing £12 a tonne for all the CO2 they emit each year and be judged on how much they are doing to cut their emissions.

The money for buying allowances will go into a central pot and those cutting their emissions the most will get their original payment back plus a bonus, while those doing worst will be penalised by getting less back than they paid in.

The MPs are concerned that if the Government does not cut emissions enough, the taxpayer will end up contributing “large sums” to companies which have done more.

Mr Yeo said: “Unless the Government gets its house in order, taxpayers could end up paying a heavy price to buy carbon credits from the private sector. In too many areas, like emissions of carbon dioxide from offices, it has made little or no progress and in others it is backsliding.

“Cutting Government energy bills with better insulation, solar panels and new heat and power boilers could save us lots of money in the long run – but ministers have so far lacked the vision to invest for the future.”

The committee welcomed successes such as cutting emissions from transport. But its Greening Government report, based on an audit of the Government’s environmental performance by the Sustainable Development Commission, warned that departments were failing to reduce greenhouse gases from buildings – the source of the bulk of emissions.

The MPs found a disparity between the performance of departments.

For transport, there had been an average reduction in emissions of 10.3 per cent but while the best-performing central department, the Treasury, cut emissions by 41.7 per cent, the worst, Children, Schools and Families, saw emissions increase by 16.3 per cent.

The committee criticised officials for not carrying out a thorough analysis of the costs and benefits of green energy to cut bills in the future.

Responding to the EAC’s report, a Government spokesman said: “There is no evidence to suggest the taxpayer will incur additional tax burdens through departmental involvement on the Carbon Reduction Commitment programme.

“Significant progress has been made in improving the Government’s performance on sustainability across its operations and estate.

“Departments continue to perform well against their sustainability targets and have the potential to perform well in the Carbon Reduction Commitment programme and achieve financial benefits from the scheme.”