The planned multi-billion pound project at Hinkley Point, Somerset – to be operated by NNB Generation - will be one of the largest power stations in the UK.
However, despite the decision, the department for energy and climate change and EDF are still negotiating how much subsidy the company will get during the life of the plant. It is thought officials are discussing a contract that would guarantee the French company being paid nearly £100 for each megawatt hour of electricity produced over 30 to 40 years.
Under the "contracts for difference" system, if the market price, which is about half that level, is lower than the agreed minimum "strike price", electricity suppliers will have to pay the difference by making a surcharge on customer bills; if the market price rises higher, then the company would forfeit the difference.
EDF and government officials also have to agree how much the company will pay for long-term storage of nuclear waste.
There are additional concerns that when a deal is agreed with EDF, the European commission could launch an inquiry into the subsidies, which would qualify as state aid.
Keith Allott, chief adviser on climate change at WWF-UK, a wildlife protection group, said: "Backing nuclear means shifting a huge liability to British taxpayers for the cost of building, electricity and, crucially, dealing with the waste.
"Unlike renewable energy, the costs of nuclear keep on rising, as witnessed by the fact that the only reactors currently being built in Europe are massively over-budget and far behind schedule. Focusing on renewables and energy efficiency, on the other hand, where the UK has huge potential to be an industrial leader, could deliver both huge cost reductions and a substantial boost to UK economic growth and manufacturing."
Analysis on the consequences for renewables in the UK to follow...