The executive European Commission will lay out its draft law proposals on the subject in December.

Energy Commissioner Andris Piebalgs indicated a preference on Friday for a system that allows richer EU governments to get credit for investing money in the newer, mostly ex-communist members of the bloc, where potential for renewable sources is high but support systems and investment are low. "We know that the biggest potential lies in the new member countries, where actually the support is limited," he told a news conference.

Piebalgs stressed that such a system should not jeopardise existing schemes that support renewable energy production, such as feed-in tariffs, where companies are guaranteed a certain price for electricity generated from renewable sources, which is then fed into the grid.

Germany has expressed concern that its successful feed-in tariff system would be hurt by the new EU rules. Piebalgs said he favoured draft legislation that included a trading mechanism as well as feed-in tariffs.

TRADING EXPERIENCE

An EU official said several trading options were being reviewed. One would involve so-called "guarantees of origin" certificates, which would verify that a certain amount of electricity was generated from clean fuels.

Those guarantees or certificates could then be bought or sold and submitted by EU nations to comply with their individual renewable energy targets.

The EU has some experience already with market mechanisms as a tool to help the environment. Its emissions trading scheme puts limits on the amount of carbon dioxide (CO2) companies can emit and allows them to trade carbon certificates based on whether they overshoot or come in below their targets.

Environmentalists are concerned, however, about the trading concept with regards to renewable energy.

Frauke Thies of environmental group Greenpeace said it could distract countries from installing solar panels and wind farms within their own borders and could hurt support systems that are already in place.

"We believe that trading could undermine national support systems," she said.

Piebalgs said governments were anxious not to have too big a share of the overall EU renewable energy goal, but he said talks with individual countries had not been tense.