"Europe continues to waste at least 20 percent of its energy due to inefficiency," a draft copy of the plan, obtained by Reuters, said.

It said failure to use energy more efficiently would lead to direct costs of more than 100 billion euros (US$125 billion) by 2020.

The Commission says reducing energy consumption -- and building houses and products to be less wasteful -- will improve the security of the bloc's energy supply, reduce emissions of greenhouse gases, and boost innovation and technology by spurring industry to design better products.

The plan identifies 10 priority steps the EU should take to reduce energy use. They include:

1) Energy performance standards: new standards for energy performance will be developed for 14 product groups including boilers, water heaters, consumer electronics, copying machines, televisions and lighting.

2) Energy standards for buildings: the Commission will propose expanding rules on energy efficiency in buildings in 2009 to include smaller constructions below 1,000 square metres.

3) Power generation - The Commission will by 2008 develop minimum binding efficiency requirements for new electricity, heating and cooling capacity lower than 20 MW and consider, if necessary, such requirements for larger production units.

4) Cars - The Commission said it would, if necessary, propose legislation next year to limit car CO2 emissions at 120 g/km by 2012. Currently the auto industry has signed up to voluntary commitments, but they are far from meeting the goals.

5) Taxation - The Commission will prepare a policy paper on "indirect taxation" in 2007 and review energy tax rules to better integrate energy efficiency and environmental needs.