The European Union proclaimed a new era in the fight against climate change yesterday as it announced sweeping measures to cut greenhouse gases and boost renewable energy use, and called on the world to join forces in "the great project of our generation".

José Manuel Barroso, the European Commission president, said the EU was supporting its words with actions that laid foundations for an international deal to cut greenhouse gas emissions. "If we want a global agreement it is absolutely indispensable that Europe . . .leads the way to get others to follow," he said.

Acknowledging that the 27-member EU would face costs - about €60bn ($87bn, £45bn) a year, or 0.45 per cent of gross domestic product - from the policy, he stressed the gains. The costs of inaction were 10 times greater, he said, according to the Stern Report from the UK government.

The plan delivers on a decision by national governments last March that the EU should by 2020 reduce greenhouse gas emissions by 20 per cent from their 1990 levels, or 30 per cent if other countries match it, and ensure that 20 per cent of energy use comes from renewable sources, such as wind and solar power.

By 2005 the bloc had cut greenhouse gas emissions by 6 per cent from 1990 levels and was relying on renewable sources for 8.5 per cent of its energy.

Mr Barroso said the proposals would give Europe more energy security and make it less dependent for oil and gas supplies "on regimes that are not our friends". He promised special treatment for heavy industries, which say higher costs would drive them out of Europe to areas with laxer controls. "We want to create jobs, not destroy jobs," the former Portuguese premier said.

The Commission would begin assessing which sectors would suffer most if there was no global deal on curbing emissions, expected to include iron, steel, aluminium, paper and chemicals. By 2011 it would decide whether they could then continue to receive all permits free after 2013.

Importers could also be required to buy the same carbon emission allowances for non-European goods that EU manufacturers will themselves have to purchase, Mr Barroso said. The effect of power price rises - put at 10-15 per cent - would also be taken into account.

Eurofer, a lobby group for the iron and steel industry, welcomed the safeguards but said the plan was "unacceptable". "We still have a lot of uncertainty," said a spokesman, since there were no immediate concrete guarantees, a fact that that would limit investment.

Mr Barroso said the climate change plan was a good example of how the EU can sometimes act more effectively at supra-national level than can its individual members.

The Commission's proposals, hotly contested by business groups and environmentalists alike, must be approved by the European parliament and a qualified majority of the 27 member states to take effect.

Andris Piebalgs, energy commissioner, said several governments were unhappy with their renewable energy targets. Mr Barroso said there was broad support for the plan, although there were bound to be debates.

Another point of friction is a target that biofuels should make up 10 per cent of vehicle fuels by 2020, a fivefold increase. Only fuels that meet environmental criteria can count towards the goal. Accordingly, plant-based fuels must emit 35 per cent less carbon in their production than fossil fuels. Green groups and some governments consider this too lax.

The parliament has previously called for a 50 per cent emissions saving, but this would have ruled out many European-grown crops such as rape seed and sugar beet.

The EU would like to finalise agreement by the end of the year, ahead of a 2009 UN conference in Copenhagen.

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