Oct. 16 (Bloomberg) -- Eastern European countries warned about the cost of fighting climate change as economic growth slows, undermining Europe's push to set stricter emission curbs and higher renewable-energy targets by the end of this year.

The Polish-led group of eight poorer European Union nations called for special treatment amid ``serious economic and financial uncertainties,'' threatening EU goals to cut greenhouse gases by a fifth in 2020 from 1990 levels and more than double the current share of renewable energy such as wind power. The group, which also includes Bulgaria, Estonia, Hungary, Latvia, Lithuania, Romania and Slovakia, picked up support from Italy.

EU environmental and energy policies ``must be tolerable for the poorer member states,'' Polish Prime Minister Donald Tusk told reporters after a meeting of the 27-nation bloc's leaders today in Brussels. The policies ``must not prove lethal for economies.''

The resistance challenges the EU's timetable for reaching an agreement meant to spur global talks on curbing greenhouse gases, which are linked to fossil fuels and blamed for higher world temperatures. Proponents say a deal between rich and ex-communist EU countries would help persuade the U.S. and China, the biggest emitters, to sign up to a new global accord that would curb these gases after the Kyoto Protocol expires in 2012.

The alarm sounded by the eight eastern European countries, which have joined the EU since 2004, and Italy, a founding member of the bloc more than 50 years ago, is the latest fallout from the worst financial crisis in decades.

`We Have Time'

``We don't think this is the moment to push forward on our own like Don Quixote,'' said Italian Prime Minister Silvio Berlusconi. ``We have time.''

France, current holder of the EU's rotating presidency, aims for an accord on the package in December. That's also when Poland will host an international conference that is supposed to help come up with a post-Kyoto Protocol plan.

``We have to find a solution before January,'' said French President Nicolas Sarkozy. ``We are not going to hide behind the crisis. Europe must set an example.'' The EU negotiations are based on a package of draft laws proposed Jan. 23 by the European Commission, the bloc's regulatory arm.

The legislation would tighten EU emission caps on energy and manufacturing companies in 2013-2020 and impose country-specific targets in 2020 for limiting discharges by other industries including agriculture. The package would also set varying renewable-energy targets for individual nations so that the EU average would rise to 20 percent of consumption by 2020 from 8.5 percent now.

Fewer Allowances

As part of the plan to tighten annual quotas on power plants and factories currently in the EU emissions-trading system by 11 percent on average, the draft legislation would also allocate fewer allowances that make up those quotas for free. The companies affected range from utility RWE AG and oil refiner Royal Dutch Shell Plc to steelmaker ArcelorMittal and paper producer Stora Enso Oyj.

The commission said power producers should purchase their whole allotment of allowances as of 2013 and full auctioning should apply to the other industries from 2020 after a phase-in starting at 20 percent in 2013. The permits cover carbon dioxide, the main greenhouse gas.

Poland objects to 100 percent auctioning for power plants in 2013, saying domestic energy prices would rise too much and calling for a phase-in. Other countries are seeking relief from auctioning for manufacturing companies judged to be exposed to global competition and liable to relocate to non-EU countries without emission curbs.

`Flexibility'

``There are points of flexibility,'' Sarkozy said. ``We have to take account of the specific problems of a certain number of colleagues.''

The draft legislation needs the backing of EU governments and the European Parliament. The Parliament's environment committee endorsed the main elements on Oct. 7.

Under voting rules for EU governments, the alliance of eight eastern European countries would fall short of the votes needed to block the package without Italy's support. Sarkozy said he didn't expect Italy to try to block the legislation, calling Berlusconi a pragmatist open to compromises.

The maneuvering at the EU summit draws the battle lines for closed-door negotiations that will take place over the coming weeks.

``There's going to be some very hard talking over the next couple of months,'' said U.K. Foreign Secretary David Miliband.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

Last Updated: October 16, 2008 09:33 EDT