The 27 EU heads of state and government recognise that "the risk of carbon leakage is a concern in certain sectors particularly exposed to international competition," according to a draft statement prepared ahead of the summit.

"Carbon leakage" is a term coined to describe the phenomenon of industry moving from a more regulated to a less regulated, and cheaper, country.

This risk "needs to be analysed and addressed urgently in order for appropriate measures to be implemented in the event that other countries do not commit to taking adequate measures to reduce greenhouse gas emissions".

For some this draft text agreed by EU ambassadors remains too vague, with Germany in particular wanting particularly vulnerable sectors, such as heavy industry, be cited for special attention at the Brussels summit.

The Commission, the EU's executive arm, has proposed waiting until 2011 to deciede whether to set up a system to combat unfair competition from industries outside the bloc that are not bound by the same strict goals.

Slovenia's Economy Minister Andrej Vizjak, whose country holds the EU's rotating presidency, said Tuesday that market mechanisms are needed "because with carbon leakage we also move jobs out of the European Union."

During a meeting of EU foreign ministers on Monday, Germany found some support for its position from fellow member states France, Finland, Slovenia, the Czech Republic and Spain, according to a European diplomat.

However the Netherlands, Sweden and Estonia, champions of a more open European market, favour the vaguer text, the diplomatic source added,

The summit could relaunch debate over a "carbon tax", which would allow the EU to levy taxes on industrial goods imported from countries which are not doing as much to reduce greenhouse gas emissions.

In January, the European Commission presented a package of measures for EU members to slash greenhouse gases, calling on them to boost renewable energy use while also unveiling plans to make industry pay for the right to pollute.

The proposed strategy is aimed at putting the European Union on track to meet an agreed target of cutting overall greenhouse gas emissions by at least 20 percent by 2020, compared to 1990 levels.

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

Also at the summit, the European leaders will receive a report warning them that climate change is a reality not a potential threat.

The report by EU foreign policy chief Javier Solana and External Relations Commissioner Benita Ferrero-Waldner says "significant potential conflicts" are likely in years to come because of "intensified competition over access to, and control over, energy resources".

The report describes the accelerated melting of polar ice caps, especially in the Arctic, as having "potential consequences for international stability and European security interests".

It also predicts increased instability in countries in central and Asia and the Middle East as a result of climate change.

From Africa to Asia, and from pole to pole, climate change has become "a threat multiplier which exacerbates existing trends, tensions and instability," warns the seven-page report on "Climate change and international security".

Time is pressing for the deal to be agreed so that the European parliament can approve it before elections next year and so that the EU can have a strong voice in international climate talks in Copenhagen at the end of next year.

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