Jorge Moreira da Silva, who is steering a bill through the parliament which will cap industrial emissions of carbon dioxide (CO2), said Europe would have to pay to cut the emissions seen as a contributor to global warming but the EU could show the world it can be done without bankrupting the economy.
"In the short term we will pay. Our products will have the environmental costs included in the price," the centre-right politician from Portugal told Reuters in an interview at the Brussels-based assembly.
The EU pledged to cut its greenhouse gases to eight percent below 1990 levels by the period 2008 to 2012 under the Kyoto climate change treaty from which the United States, the world's biggest emitter, withdrew, saying it would harm the economy.
Moreira da Silva's bill will cap the amount of CO2 that refineries, power plants and many large factories can emit, allowing them to buy or sell excess credits under an "emissions trading" system.
Swedish power utility Vattenfall has said the cost of buying extra emissions allowances could increase electricity prices by up to 75 percent.
EU lawmakers say emissions trading will ensure cost-effective emissions reductions as companies that can afford to reduce greenhouse gases easily will do so and sell allowances to firms that can not afford to make the cuts.
Moreira da Silva said if the scheme can be made cost-effective and credible, it could eventually help convince the United States to come back to the international climate change table.
"If we can prove that this scheme will remove emissions at lower cost, if we prove it works in Europe and it works in the rest of the world when we link it to other (emissions trading) schemes, I guess the U.S. administration might find a reason to ratify Kyoto," he said.
Moreira da Silva believes that, as the climate change problem becomes more evident, eventually all countries will have to reduce CO2 emissions and those that learn how to do so earlier, like the EU, will be at a competitive advantage.
"It might not be now, not in five or 10 years, but some day we will all be obliged to (cut emissions)," he said.
"Some companies in the United States have realised that Kyoto will be an obligation in the future because global warming, unfortunately, will happen."