Ministers face the first major test of their environmental credentials as they discuss whether to accept an independent committee's advice.
Last week reports emerged that the Committee on Climate Change's (CCC) fourth report, which calls for rapid action to cut carbon emissions by 2030 to 60% of 1990 levels, had split the Cabinet.
The Cabinet's economic affairs sub-committee is set to meet to discuss the issue at the beginning of the week, politics.co.uk/i> understands.
A leaked letter from business secretary Vince Cable to deputy prime minister Nick Clegg and George Osborne had suggested rapid cuts in emissions would endanger Britain's economy.
The Observer newspaper reported that David Cameron had stepped in to resolve the dispute by backing the committee's recommendations in full, however.
A source close to energy secretary Chris Huhne said there had been "intensive discussions" between all departments.
"There are obvious business arguments on both sides," the source told politics.co.uk.
"A lot of businesses have been talking to all government departments, saying we should accept this advice because it sends a very clear message about the level of investment that's necessary in the low carbon economy."
Mr Cameron said in prime minister's questions last week it was "very important" that the government got its policy on carbon budgets right.
"We have strict timetables and targets laid out in terms of our carbon reduction, and this government are committed to making sure that we meet those," he said.
The CCC recommendations, which cover the 2023-2027 period, aim to achieve Britain's ultimate goal of cutting emissions by 80% by 2050.
Other government sources suggested the final decision has yet to be taken, however.
The Sunday Times cited some firms fearing they would have to move out of the UK if the government heavily punished high polluters.
Labour leader Ed Miliband wrote to Mr Cameron warning him that anything other than complete acceptance of the CCC's recommendations would send a "terrible message to business and the rest of the world".
"A rejection of the fourth carbon budget risks turning uncertainty into a spiral of doubt," he wrote.
"The decision you make will also have profound international repercussions. It is vital we restore momentum towards a global deal on climate change. We must not weaken the UK's influence on the world stage by rejecting the committee's advice."