Legislation to cut the renewable energy target (RET) has passed Federal Parliament, along with the contentious inclusion of native wood waste as a possible fuel source.

After protracted negotiations, Labor and the Government agreed to reduce the original 41,000 gigawatt hour target to 33,000 to reflect lower overall energy demand.

The legislation passed an extended sitting of the Senate with 41 votes to 14.

The two major parties had been negotiating the gigawatt hour figure for several months.

The target was initially created in 2001 by the Howard government and subsequently strengthened by Labor to "at least 20 per cent by 2020", calculated at the time as being 41,000 gigawatt hours of electricity.

As part of the Coalition-Labor agreement, trade-exposed industries will be exempted from the target and two-yearly reviews which threatened to derail the deal were scrapped.

Instead, the Clean Energy Regulator will provide an annual statement to Parliament and the government of the day on progress towards the target, what impact it is having on electricity prices, and whether the scheme is at risk of default.