Cross-posted from the World Resources Institute. The post was written by Jennifer Morgan, director of WRI’s Climate and Energy Program.

Today, the government of the United Kingdom took a significant step to shift to a low-carbon economy, providing clear signals to investors that the U.K. wants to host large-scale clean energy projects moving forward.

The agreement announced today takes the form of a legally binding target to reduce greenhouse-gas emissions 50 percent below 1990 levels by 2025, as part of the country’s fourth carbon budget. The agreement of the country’s Conservative and Liberal Democrat parties extends current targets and continues the country on an aggressive reduction path from 2023-2027.

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This move sends a signal to the international community that action on climate is a priority for the economy as well as the environment. As Chris Huhne, the Energy and Climate Change secretary, said in announcing the target:

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It will establish our competitive advantage in the most rapidly growing sectors of the world economy, generate jobs and export opportunities in these sectors, maintain energy security and protect our economy from oil price volatility.

Studies have shown that clean energy investments thrive where there is stable policy support, and setting targets is a critical first step.

The agreement was informed by the Committee on Climate Change, which calls for 80 percent reduction from 1990 levels by 2050, a recommendation that is in line with what most scientists suggest is necessary to avoid the worst impacts of climate change.

While the target is aggressive, in 2014 it will be reviewed against the European Union’s emissions trajectory and the government could adjust the target if the country’s reductions are more aggressive than those in the rest of the E.U. To achieve the target, policymakers both within the U.K. and in the E.U. will have to develop realistic policies that can facilitate the transition to low-carbon energy.

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