EU says climate plan mustn't cost the earth

"We’re not calling the reduction targets into question, but even if we have a common European goal, we can still discuss the way to achieve it, and what can be imposed on each industry," German Chancellor Angela Merkel told reporters.

She said she was pressing for a commitment as early as 2009 to give special treatment to energy-intensive industries if there is no global agreement to curb carbon dioxide emissions. Companies needed legal certainty to make investments, she said.

European Commission Vice-President Guenter Verheugen told Germany’s Deutschlandfunk radio measures would have to be taken to ensure European industries were protected against competition from countries with lower environmental standards.

Brussels did not rule out "some sort of compensation for our industries" but a green tariff would not work, he said.

Instead, importers might be included in the EU’s Emissions Trading Scheme to make them bear a share of the cost.

GREEN TARIFF?

After chairing the first day of a two-day summit, Slovenian Prime Minister Janez Jansa told a news conference all 27 leaders agreed to adopt a liberalisation of the European energy market in June and a package of measures to fight global warming and promote green energy in December.

"We must reach agreement in the first months of 2009 at the latest," said Jansa.

Failure to agree on the details by this time next year would delay EU laws and weaken the bloc in United Nations talks on curbing emissions with other countries, including the United States, in Copenhagen in November 2009.

French President Nicolas Sarkozy said he was hopeful of reaching a package deal on climate change under France’s presidency of the EU in the second half of this year.

But several leaders said a deal would be difficult because of conflicting national priorities.

However Britain, Sweden and the Netherlands opposed Merkel’s demand that the EU agree in 2009 on special conditions for big energy users, saying it would weaken the EU’s hand in the U.N. negotiations.

Sarkozy told reporters: "The main concern is implementing a mechanism that will hit imports from those countries that don’t play the game."

But Verheugen said Sarkozy was alone in calling for green import tariffs and had not pressed the issue at the summit.

Leaders also approved a watered-down Franco-German plan for a Union for the Mediterranean to boost ties with the EU’s southern neighbours after months of bitter wrangling.

Highlighting threats to European economic growth, the euro hit another record high above $1.56 on Thursday and oil prices hovered near a peak of $110 a barrel. Jansa said the euro’s rise was a "serious issue" but that the summit would not discuss in detail any possible steps to halt the trend.

Aside from cutting emissions by at least one-fifth by 2020 from 1990 levels, EU states have agreed to use 20 percent of renewable energy sources in power production and 10 percent of biofuels from crops in transport by the same date.

Jansa acknowledged growing debate among scientists and economists about the desirability of the biofuels target, saying: "We’re not excluding the possibility that we’ll have to amend or revise our goals."

(Additional reporting by Markus Krah in Berlin, Darren Ennis, Ilona Wissenbach and Marcin Grajewski in Brussels; editing by Ralph Boulton)