Laying out a sweeping strategy, the commission called on EU members to ratchet up their use of renewable energy and biofuels while also unveiling plans to make industry pay for the right to pollute.

"Responding to the challenge of climate change is the ultimate political test for our generation," Commission President Jose Manuel Barroso said.

"Our package not only responds to this challenge, but holds the right answer to the challenge of energy security and is an opportunity that should create thousands of new businesses and millions of jobs," he added.

While the measures would cost consumers three euros (4.37 dollars) a week on average, Barroso said: "The cost of inaction is up to 10 times more than what we are proposing."

The Commission brandished quickly the threat of restrictions on imports from countries with easier environmental regulations, such as China and the United States, in the absence of international agreement by 2011.

European industry has warned that tough emissions targets could force some companies to move production outside the bloc.

"An international agreement is our absolute priority," Barroso told reporters later. "But let me be clear, if we do not make progress we will protect European companies."

Europe's big polluters accepted the principles of the plan while expressing concern over the cost and impact on jobs.

German Environment Minister Sigmar Gabriel hailed the plan as "courageous" but Economy Minister Michael Glos warned that "it will destroy jobs in industries which consume a lot of energy".

British Environment Secretary Hilary Benn said the proposals sent a clear signal that the EU was taking tough measures on climate change.

French Ecology Minister Jean-Louis Borloo went further, adding that his country "will in 2020 become the most sober carbon-emitting economy in the European Union."

Dutch Environment Minister Jacqueline Cramer, however, said the targets should have been higher. "I shall continue to push in this direction," she added.

And Rajendra Pachauri, the Nobel Peace Prize-winning head of the Intergovernmental Panel on Climate Change (IPCC), said the EU package was "not up to expectations."

The measures are designed to put into action the aim set by EU leaders last year to cut carbon dioxide emissions by 20 percent by 2020, compared to 1990 levels.

The use of renewable energies like biomass, wind and solar power will rise to 20 percent of all energy forms by then. Biofuels will also have to make up 10 percent of fuels used for transport.

It sets the stage for some classic EU wrangling as both member states and the European Parliament will have to approve the measures.

Environmental groups criticised the package for being too modest and even posing a threat to the world's poor.

"Overall, it is a very small effort to cope with a threat that might lead to Arctic melting and displacement of millions of people in developing countries because of increased floods," said Stephan Singer, head of the climate and energy unit at the WWF global conservation group.

While Barroso has estimated that the total cost of the package would amount to around 60 billion euros (86.6 billion dollars), some Commission officials acknowledge the bill might be double that.

Nearly 12,000 energy-intensive industrial plants -- like power plants -- will pay a high price under the EU's emissions trading scheme, set to enter a new phase in 2012.

Aside from this concern, EU countries are also worried about the burden they will have to assume on renewable energy.

Around 8.5 percent of EU energy comes from renewable forms, but future load sharing will be based in part on gross domestic product.

Under the Commission's plans, Sweden alone would have to meet nearly half of its energy needs with renewable sources while Latvia, Finland, Austria, and Portugal would also have to make big efforts.

Swedish Prime Minister Fredrik Reinfeldt told reporters in Stockholm that his country was "well-placed" to meet the new EU targets, but Swedish industry was not so keen.

"The government needs to negotiate down the Swedish targets," Urban Baeckstroem, who heads the Confederation of Swedish Enterprise, told financial daily Dagens Industri's website.

Another plan focuses on promoting carbon capture and storage -- the main global warming gas -- while the package also includes a fresh look at state aid rules and how they should be loosened when it comes to environmental projects.

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