The issue of setting a mandatory target – that 20 per cent of EU energy consumption should be met by renewable sources by 2020 - was the main sticking point in a long-term EU climate change and energy strategy due to be adopted on Friday.
EU leaders had been pushing more reluctant member states to accept tough, binding targets for slashing carbon emissions and the use of renewable sources of energy.
Angela Merkel, the German chancellor who is chairing her first summit, had challenged the leaders to back ambitious proposals to cut greenhouse gases and said the union's credibility was at stake.
"We know that we have tough negotiations ahead of us," she said before the first session of the two-day gathering in Brussels on Thursday.
"But I hope and trust that at the end of the day the results will be such that we are credible in the face of the people here in Europe and can show the rest of the world we can make a substantial contribution," she said.
Jose Manuel Barroso, the European commission president, had urged the EU leaders not to miss "a great occasion for Europe to make a real contribution to a transition to a low carbon economy".
In an effort to limit the rise in average global temperatures to 2 C above pre-industrial era levels, the leaders will commit to cut carbon dioxide emissions by 20 per cent from 1990 levels by 2020.
To entice other developed countries to take bigger steps, the EU will also offer to slash emissions by 30 per cent - which green groups say is the minimum needed to achieve Europe's goals - if those nations also agree to participate.
Merkel said: "Europe can only be the pace-setter on climate change and energy policy if we manage to set ourselves clear targets."
But while everyone agreed on the need to cut emissions, views diverged on how to achieve them.
Some newer EU members such as the Czech Republic, Hungary and Poland depend heavily on carbon-heavy fuels like coal, and had opposed setting a mandatory target that 20 per cent of EU energy consumption should be met by renewable sources by 2020.
A showdown expected between Merkel and Jacques Chirac, the French president, appeared to have been averted despite French opposition in recent days to have binding standards.
But Chirac said he wanted nuclear energy to be taken into account.
In the US on Thursday, Democrats in the House of Representatives beat down Republican objections to create a special panel to study and offer recommendations on how to deal with global warming.
Nancy Pelosi, the house speaker, said: "Global warming may be the greatest challenge of our time, setting at risk our economy, environment and national security. The House is giving these issues the high visibility they deserve."