European leaders have secured an agreement on a package of measures to fight climate change.

The historic deal, agreed at a Brussels summit, outlines how countries will cut carbon dioxide emissions by 20 per cent by 2020 has been criticised by environmental groups for allowing extensive exemptions for industry.

Measures were agreed to reduce the risk that carbon curbs would hurt European industry and reduce its ability to compete with less regulated rivals overseas. The biggest threats are seen for steel, aluminium, cement and chemicals.

European industries exposed to international competition will receive free emissions permits if they will see a 5 percent increase in costs, a measure that is viewed as covering over 90 percent of EU industry.

French President Nicolas Sarkozy described the agreement as "quite historic."

"You will not find another continent in this world that has given itself such binding rules as we have just adopted," he added.

"This is a flagship EU policy with no captain, a mutinous crew and several gaping holes in it," said Sanjeev Kumar of environment pressure group WWF

The agreement came after a year-long battle dominated by a struggle between eastern and western Europe over the costs.

The nine east European nations were seen as the final obstacle to agreeing a package of measures aimed at tackling climate change but which will ramp up costs for their highly polluting coal-fired power sectors.

Two swathes of funding will be distributed to them taken from around 12 per cent of revenues from the EU's flagship emissions trading scheme (ETS), which makes industry buy permits to pollute.

The money is partly framed as a reward for the massive drop in emissions they experienced when their industry collapsed in the wake of communism.

Their power sectors were also partially exempted from paying for emissions permits from the ETS on a sliding scale starting with paying for 30 per cent of emissions in 2013, rising to 100 per cent in 2020.