The commission said it also aimed to spur talks among industrialised countries for a global climate deal by 2009 to arrest the effects of global warming.
Environmentalists say the planned cuts are too small to achieve that goal or give a strong lead to the world and urged the EU to cut emissions unilaterally by 30 per cent by 2020.
Brussels softened its plans at the last minute to placate anxious industry leaders, who fear higher energy costs will tilt competitiveness further in favour of China and India, which have no emissions limits.
The commission agreed that energy-intensive industries, possibly including steel, aluminium and cement, would get all emissions permits for free.
Guenter Verheugen, EU enterprise commissioner and standard-bearer of the interests of heavy industry, told German television: "I am all for setting an example for the rest of the world. But I am against committing economic suicide."
Rising bills
From 2013, power generators will have to buy permits to emit carbon dioxide.
They will pass the extra electricity costs on to consumers, and those costs will rise as the supply of permits is tightened.
Until now utilities have been given most permits for free and derived huge windfall profits as a result.
Power bills for industry and households will also rise as a result of targets to supply more power using clean energy technologies which are more costly than fossil fuels.
The EU estimated that this would add 10 to 15 per cent to electricity prices.
But Barroso dismissed concern over rising cost, telling the European parliament: "The additional effort needed to realise the proposals would be less than 0.5 per cent of GDP by 2020. That amounts to about $4.39 a week for everyone."