In March 2007, European Union leaders agreed to cut the bloc's emissions of the greenhouse gas carbon dioxide (CO2) to 20 per cent below 1990 levels by 2020.

In January the EU's executive, the European Commission, proposed laws aimed at making EU members achieve that target.

The main planks of the proposal were to make major industries pay for permits to emit CO2 as a way of making it cost-effective for them to invest in clean technology; to set binding targets for how much each member state should cut its non-industrial emissions; and to boost efficiency and the use of renewable energy by 20 per cent.

EU member states are now debating the proposals. The French government, which currently holds the EU's rotating presidency, says it is aiming for an agreement before the end of the year.

However, several key problems remain to be solved.

A number of Eastern and Central European member states, in particular, object to the fact the commission has set each country targets based on its emissions in 2005.

They say that this ignores the emissions reductions they made in the 1990s when their Communist-era industries collapsed, and demand that they either be given targets based on Communist-era emissions in 1990, or else that they be given unspecified "recognition" instead.

Poland, the Czech Republic, Slovakia, Hungary, the Baltic states, Bulgaria and Romania have all made these arguments. Together, they have enough votes in the EU council to block any decision.

Poland, the Czech Republic, Bulgaria and Lithuania also say that their energy generators should be given free permits to emit CO2, since making them pay for permits would make retail prices soar. However, diplomats say they are unlikely to gather a blocking minority on the issue.

Western European states, meanwhile, argue that making heavy industry pay for CO2 permits would drive up production costs and force the businesses to leave Europe, a process known as "carbon leakage."

They demand that the commission set out rules on how to protect energy-intensive industries from leakage. Suggestions range from imposing import taxes on competing goods from areas with less strict climate laws to giving the industries free emissions permits.

Argument is also raging over the question of what member states should do with the money they make selling emissions permits.

Some want the money to be devoted to fighting climate change, others want it paid into national budgets, and some of the EU's poorest states want a high proportion to be given to them so they can reduce their own emissions.

Finally, an increasing number of member states, led by Italy, are arguing that the climate-change laws would be too costly for the EU during the financial crisis, and that the bloc should re-assess the cost of the project.