European Greens are considering a challenge to the UK's tax breaks and incentives for shale gas under state aid rules, as the government holds out against a new renewable energy target for the EU.

Ministers have offered tax breaks to shale gas companies, and incentives to local communities to encourage them to accept drilling in their area. The government believes its plans comply with EU rules restricting state aid to companies.

On Wednesday, the European commission is expected to announce proposals for a new target to cut greenhouse gas emissions by 40% by 2030, compared with 1990 levels, which is broadly accepted by large member states. Britain opposes an accompanying target on increasing the use of renewable energy, from 20% by 2020 to a possible 24-30% within 10 years after that.

The threat to challenge the government's shale gas incentives is retaliation for that, and for Britain's attempts to foil a proposed directive on shale gas that would impose firm regulations on its exploitation.

The Guardian understands several European commissioners are still objecting to the proposed emissions target, favouring a lower goal of 35% cuts by 2030. A compromise may be reached by Wednesday, potentially by introducing greater flexibility on renewable energy.

The UK, France and Germany are in favour of a 40% emissions target, making it more likely that it will be accepted. Member states are also likely to pledge that if other leading economies, such as the US and China, pledge stringent cuts then the goal could be raised to a cut of 50%.

Green MEPs are arguing in favour of much stronger targets. Emissions in the EU are set to be about 25% below 1990 levels in 2020, leaving a further cut of about 15% by 2030.

At stake is the future of world governments' response to climate change, which will be decided at a crunch conference in Paris in 2015, under the United Nations. In the next year, all of the world's leading economies are expected to come up with their pledges on emissions cuts to take effect from 2020 onwards. This is seen as essential to avoiding the worst ravages of climate change, but so far the talks have made slow progress.

A study by several academic research institutions, under the banner of the Stanford Energy Modelling Forum, found that increasing the current target of a 20% emissions cut by 2020, compared with 1990 levels, to a 40% target by 2030 would cost less than 0.7% of economic activity. Leading companies under the umbrella of the Prince of Wales EU Corporate Leaders Group have also endorsed the target.

The UK is holding out against a renewables target, arguing that a mandated emissions reduction is enough. It is understood that the Treasury wants to be able to include nuclear power and fears that a renewable energy target would mean less investment in its favoured alternative, shale gas. Other member states, including Germany, are firmly in favour of an EU-wide target, as the current renewables goal is credited with bringing about strong growth in clean energy across the EU.

The European commission argues that an EU-wide target enables greater flexibility, as some member states, including the UK, can take on a lower share of the target as others, such as Germany, power ahead on renewables. The target would also allow for investment in renewable energy overseas to be counted.

But the government's position has been criticised by campaigners and are understood to have discouraged renewable energy companies. RWE recently announced plans to drastically scale back its investment in clean energy in the UK.

Asad Rehman, international climate campaigner at Friends of the Earth, said: "Genuine commitment on climate would see binding carbon cuts of at least 70% by 2030, as well as mandatory targets on energy efficiency and renewable power. But despite all the rhetoric about the need to slash emissions, the Commission is still dancing to the tune of big polluters and energy-guzzling firms."

Claude Turmes, vice chair of the Green Group of MEPs, said: "It is important that we ensure ambitious and coherent binding targets for greenhouse gas reductions, renewables and energy savings. This would provide much-needed investor certainty, not only in the energy sector but for industrial sectors and innovation across Europe, and give a boost to employment and the economy. The EU should not repeat the mistake made with the lack of ambition in its 2020 greenhouse gas reduction target, as this has undermined the effectiveness of overall climate policy and key instruments like the emissions trading scheme. To this end, we should be aiming for a 60% reduction by 2030, which a number of independent studies have shown is possible."

He added that a renewable energy target was needed to encourage investment in clean technology. "Given the undeniable success of the 2020 renewable energy target, it is imperative that the EU continues the momentum and adopts a binding 2030 target. Failure to do so would cause massive uncertainty at a time when we need to be rapidly moving ahead towards a renewable-energy-based economy."