It was a striking photograph. The young leader of Britain's Conservatives grinned as he posed with huskies against a crisp Arctic backdrop of snow and blue sky.

David Cameron was not only declaring that he cared for the environment on that spring day two years ago. He was also engaged in a drive to modernise Britain's oldest political party - and nothing seemed more in tune with the mood of modern Britain than to express solidarity with a region suffering the early effects of global warming.

Now, by contrast, the Tories are subtly shifting their emphasis as environmental concerns slip down the list of public concerns. Mr Cameron appears to have cooled on the Arctic - in recent speeches, he has scarcely mentioned climate change and, when he set out the priorities for a Tory government this month, he made no mention of green issues.

At a time of falling house prices and rising household costs, people are telling pollsters that they are no longer quite so interested in saving the planet. Ipsos Mori has found that environmental concerns reached a pinnacle in January 2007, when 19 per cent of people, unprompted, named the environment as one of the biggest issues facing Britain today, compared with just a few per cent several years earlier. But by January 2008, that figure had fallen to 8 per cent, while the economy was rated a top concern by one in five. One very senior member of the shadow cabinet put it more strongly: "People hate this green stuff."

The Labour government, which promised to "put concern for the environment at the heart of policymaking" when it came to power 11 years ago, also appears to have shifted its stance. In recent months Gordon Brown, the prime minister, has slipped into reverse gear on a number of green policies ranging from landfill to transport to renewables targets.

On May 1, Mr Brown's party was hammered in the local elections over bread and butter issues such as inflation, house prices and a fiscal change - the abolition of the 10p tax band - that had hurt low-paid workers. Within hours of the result it emerged that the prime minister was minded to drop the "bin tax", which would allow councils to charge households that do not recycle.

The government claimed that five pilot schemes were going ahead on the unpopular measure but few now believe that the policy is a runner. Last week, in an interview on breakfast television, Mr Brown seemed to insert a barge pole between himself and the bin tax: "We've got no commitment to go any further - not at all. And it couldn't happen for years," he said.

An imminent 2p per litre increase in fuel duty, due to take place in the autumn, yesterday looked increasingly likely to be shelved in a bid to head off the vociferous motoring lobby. Plans for a new vehicle excise duty regime that would penalise high-emission cars may also be watered down amid protest, including from some of Labour's own backbenchers. The government has gone silent on national road pricing - a policy it once talked boldly about as a means to force motorists to cut back on unnecessary journeys. Cowed by a petition of 1.8m criticising road tolls, the Department for Transport is now limiting such policies to a few isolated pilot schemes.

Nor, argue critics, does the government's record of meeting its green targets provide environmentalists with grounds for optimism. Of 138 set by ministers, 60 per cent have been missed, according to a recent report by Policy Exchange, a centre-right think-tank. Others have been tweaked, "chopped and changed" or were always too vague and meaningless, the report said.

Yet while environmentalists begin to ask whether the progress made in recent years in winning support for their cause is slipping away, the imperative for action on climate change is stronger than ever. Lord Nicholas Stern, whose official report into the economics of global warming has influenced political action around the world, recently told the FT that he would have written an even more hard-hitting document in the light of recent research. But he dismissed fears that a downturn would reduce the impetus for environmental action in the coming years: "We will go through many economic cycles on the way to solving this problem. It's a long-term issue."

A key question, however, is how businesses will react to the green agenda in the new tougher climate. Environmental measures intended to cut greenhouse gas emissions usually impose a cost on businesses. For example, the European Union's flagship environmental policy, the greenhouse gas emissions trading scheme, imposes limits on the amount of carbon dioxide companies may produce. The heavy industries covered by the scheme are awarded a quota of emissions each year, and if they want to emit more they must buy permits from other companies with spares.

In order to achieve the deeper emissions cuts scientists say are needed, the cap on emissions must be made tighter in successive years. The European Commission, the EU's executive, is currently mulling where the cuts should fall from 2013 to 2020.

But the Commission is coming under heavy pressure from the industries involved in the scheme to water down proposals they say would penalise them compared with industries based abroad. The Commission wants companies to have to buy their permits at auction in the future, instead of receiving them free, but industries such as steelmaking fear this extra cost will make them less competitive with overseas rivals.

Given these extra costs, the clamour for concessions on this key green policy is likely to grow if the economy cools. If public interest in green issues is also waning, politicians may find it easier to concede to industry groups than to hold out for environmental ends.

"Politicians will need nerves of steel to continue with this," says John Roberts, former chief executive of United Utilities and a board member of the Royal Bank of Canada. "If the economy is doing well and we are prosperous, we can afford the luxury of dealing with climate change - or that is how it is seen. But when times are difficult for the economy and we are caught in the vice of inflation, from a politician's point of view it becomes much more difficult to press ahead with policies that will increase prices."

Richard Lambert, head of the CBI, the business lobbying group - itself a recent convert to tackling climate change - has also warned that the issue could lose traction. Green policies that looked like "no-brainers" in rosy times could look "less alluring" if economic growth slowed, says Mr Lambert.

Companies that have made a great deal of their environmental policies in recent years are unlikely to back down on them, however. The loss of face would be too great to contemplate for companies such as Tesco, Marks & Spencer and HSBC, which have all trumpeted their greenness. Instead, these companies have hit upon a new tactic. They are fighting the perception that being green is costly by pointing out to consumers how they can save money by investing in energy efficiency.

Ian Cheshire, chairman of the retailer B&Q, says: "In the current economic climate we are all looking for ways to save money." His company is looking to use consumers' sense of household economy to increase sales of its insulation materials, as "insulation remains one of the most effective ways of reducing your energy bills and your carbon emissions".

Other companies are singing the same tune. British Sky Broadcasting says it is helping its customers to save money by downloading technology to their set-top boxes that automatically shuts them off at night, which the company says has saved customers £12m on their electricity bills in the past year. Jeremy Darroch, chief executive, says: "We want to keep giving customers practical ways to save energy - and money, as we fight to tackle climate change."

A group of such companies has joined forces under the name Together.com to make the point to consumers. They have calculated that households could save more than £1,100 a year by taking a range of simple measures, ranging from loft insulation to switching to low-energy light bulbs. David Hall, campaign director of Together, says: "People can save hundreds of pounds a year by making greener everyday choices. The green penny is definitely dropping for British shoppers feeling the pinch from rising living costs."

Politicians have been taking up the message, too. Phil Woolas, environment minister at the Department for Environment, Food and Rural affairs, explains: "The green pound really can go further - people can cut their carbon footprint and save money into the bargain." He is upbeat on the prospects of success: "The signs are encouraging. We know that people want to cut their impact on the planet - recycling rates are at a record high, emissions from people's homes are dropping, and since last June we've had nearly a million visitors to our online carbon calculator."

Hilary Benn, environment secretary, also made the case recently, pointing out that the Stern review found that it would be cheaper to deal with emissions in the short term than to delay: "We must resist the temptation to put off dealing with climate change for another day, when the world economy is stronger. We would be betraying future generations if we did so, and [it] will cost us more if we delay."

Mr Roberts is sceptical. He thinks companies that have a close relationship to consumers, such as retailers, have more of a motive to take action on climate change and cannot risk being seen as backsliding if the economy cools, for fear of the damage to their image. But companies less in the public eye have much less to worry about. "When times are hard, companies tend to focus on the familiar, so they look to cut people or overheads. In fact they should look at their energy use, but my worry is that they will not do that."

A recent report from the House of Commons public accounts committee appears to bear out that view. It found that companies were failing to act on the emissions-cutting advice provided to them using public money, because of the perceived costs.

John Sauven, director of the campaigning group Greenpeace, says the government must do more to get this message across to businesses and consumers. "We don't have a choice about what to do about climate change. The government must show that cutting emissions is not a case of all pain and no gain, but that climate change also creates a lot of opportunities. But the government's wobbling, indecision and backtracking on the climate does not give people that confidence."

Politicians will undoubtedly continue to vacillate as they seek to please all constituencies. Ironically, however, an economic downturn, especially if painful and prolonged, may do more for the climate than all of the policies that governments have come up with so far. The simple fact is that shrinking economic output inevitably also means shrinking energy use and lower greenhouse gas emissions. But that is exactly the sort of environmental policy governments do not want.