Climate Change Secretary Chris Huhne says it is "all to play for" in the UN climate talks in South Africa, with indications from China that it may be "flexible" on efforts to make progress on a new global deal.
Europe wants the current round of negotiations in Durban to agree a roadmap to a new global agreement for all major economies to cut their emissions.
The bloc has said it will only sign up to a second set of commitments to cut greenhouse gases under the existing Kyoto climate treaty to follow the first period of commitments which ends in 2012, if it gets progress on the wider deal.
But major polluters including China, the US and India have expressed opposition to the EU bid to get countries to agree to negotiate a legally binding deal by 2015 and have it start taking effect by 2020.
Arriving in Durban for the second week of the talks, which will see ministers negotiating on efforts to tackle global warming, Mr Huhne was upbeat about the possibility of progress.
Mr Huhne said he believed China was being more flexible because it recognised it was not a vulnerable developing country that was unable to play a part in tackling emissions, and because the country stood to gain from a burgeoning clean-tech industry if the world shifted towards low-carbon growth.
"There's a real sense from some of the things China is saying publicly that there may be a flexibility in their position.
"If that comes to pass in terms of real movement on the ground - and obviously there are still questions about what the Chinese delegation are prepared to accept - then a tremendous outcome from Durban will be possible.
"We could see a commitment to a global, legally binding agreement that would offer a real possibility to reduce emissions globally by 2020."
He added: "There's an increasing number of business people within China who have an interest in making sure the world is tackling this problem because they are going to be supplying the world with the solar panels to do it."