BRUSSELS (Reuters):

European Union (EU) leaders resolved yesterday to slash greenhouse gas emissions and switch to renewable fuels, challenging the world to follow its lead in fighting climate change.

German Chancellor Angela Merkel said the bloc's "ambitious and credible" decisions, including a binding target for renewable sources to make up a fifth of EU energy use by 2020, put it in the vanguard of the battle against global warming.

"We can avoid what could well be a human calamity," she told a news conference after chairing a two-day summit, underlining that the 27-nation EU had opened a new area of cooperation unthinkable a couple of years ago.

European Commission President Jos? Manuel Barroso said: "We can say to the rest of the world, Europe is taking the lead. You should join us fighting climate change."

Targets

The EU package set targets for cutting greenhouse gas emissions blamed for global warming, developing renewable energy sources, boosting energy efficiency and using biofuels.

In a move that will affect all of the bloc's 490 million citizens, the leaders called for energy-saving lighting to be required in homes, offices and streets by the end of the decade.

Barroso argues Europe can gain a "first mover" economic advantage by investing in green technology but businesses are concerned they could foot a huge bill and lose competitiveness to dirtier but cheaper foreign rivals.

While the deal laid down Europe-wide goals for cutting carbon dioxide (CO2) emissions and developing renewable sources, separate national targets will have to be set with the consent of member states, presaging years of wrangling between Brussels and governments.

Diplomatic victory

Merkel scored a diplomatic victory by securing agreement to set a legally binding target for renewable fuels such as solar, wind and hydro-electric power - the most contentious issue.