The House of Lords has voted to kill off Britain's coal-fired power plants more quickly than expected as Labour defeated the government in a vote to amend the energy bill.

Peers led by shadow energy minister Lady Worthington supported the closure of a loophole allowing some of the UK's oldest coal stations to get around applying a new emissions performance standard (EPS) to cut their carbon emissions.

The government was defeated by 237 to 193, as the Lords voted to bring old coal power stations under new regulations forcing them to cut down on their greenhouse gas emissions. Most of the dirtiest coal stations are expected to close anyway under laws to cut down on pollution. But without a change to the law, the ones that choose to upgrade their systems to meet these standards could stay open and avoid regulations on cutting down their carbon emissions.

The amendment would force them to apply the EPS, which sets a maximum level of carbon that can be produced by a plant. It is likely to make operating coal stations uneconomic unless they fit carbon capture and storage technology that is still yet to be used at scale.

It will now be considered by MPs who could vote to overturn it when the energy bill returns to the House of Commons.

"Low coal prices and high gas prices have caused coal stations now to be operating at higher levels than ever before and as a result we have seen UK emissions going up and not down and our carbon intensity increasing last year, not decreasing," Worthington said.

"How are we going to hit decarbonisation targets if we do not have a tool in our armoury to do something about this issue?

"If we don't take this most obvious, most easy, most simple way of reducing our carbon emissions and we are serious about decarbonisation, we will be forced to adopt more expensive subsidies.

"This is a policy which will deliver us carbon reduction quickly and at least cost. Supporting this amendment is an indication that we are serious about climate change but more importantly we are serious about achieving our objectives at least cost for the consumer – this is an amendment that supports the consumer."

However, Lady Verma, an energy minister, warned the amendment could undermine the country's energy security and increase fuel prices.

"The government's goal is an orderly transition away from coal to lower carbon fuels over time in a way which was does not create unnecessary costs for consumers.

"While we do not expect large numbers of coal plants to invest in clean-up equipment a very small number of our efficient plants may wish to do so. This amendment is very likely to deter that investment.

"In this scenario more coal stations would have their operations constrained and there could be more stations closing around the end of the decade than might otherwise be the case.

"This could require more gas plants to be built early to fill the gap at greater cost, ultimately, to the consumers. "