The EU wants to ban new petrol cars by 2035 and pressure airlines to cut emissions under a sweeping new package of measures to slash its carbon footprint.
Polluters will face steeper charges for emitting greenhouse gases, generating funds which EU nations will be ordered to spend on green initiatives.
As part of the overhaul, Brussels is committing to producing two-fifths of its energy from renewable sources by 2030.
The package is billed as a concrete set of measures to reach a 2030 target of reducing emissions by 55 per cent compared to 1990 levels.
This is seen as a necessary step towards reaching net zero by 2050 and meeting the Paris Agreement's goal to limit global warming to 1.5°C above pre-industrial levels.
Governments around the world are under pressure to submit ambitious climate plans in the run-up to November’s Cop26 summit in Britain.
“The fossil fuel economy has reached its limits,” said European Commission president Ursula von der Leyen as she unveiled the EU package on Tuesday.
“Europe was the first continent to declare to be climate neutral in 2050, and now we are the very first ones to put a concrete roadmap on the table.”
Tuesday’s announcement kicks off what could be years of political wrangling between EU leaders, green activists and industry lobbyists.
The proposals will need to be negotiated and approved by EU member states and the European Parliament before they become law.
Environmentalists see the plans as insufficient, with Greenpeace describing them as eye-catching announcements unfit to tackle the crisis.
It criticised the EU’s plans to keep using biomass as a fuel source, which will count towards the 40 per cent renewable target.
“Celebrating these policies is like a high-jumper claiming a medal for running in under the bar,” said Greenpeace’s EU director Jorgo Riss.
The EU, which accounts for about eight per cent of global emissions, touts its plans as being among the most ambitious in the world.
At the heart of the proposals is the EU’s Emissions Trading System, under which polluters are charged for emitting carbon at rates which become steeper every year.
Airlines will lose exemptions from the scheme and will be ordered to blend more sustainable products into their jet fuels.
The trading system will be widened to include shipping emissions for the first time in order to tackle pollution from sea voyages in the EU.
Member states will be expected to spend the entirety of their emissions trading revenues on climate-related initiatives.
The auto industry faces a 2035 deadline after which only zero-emission cars will be registered in the EU.
Britain announced a 2030 deadline last year, and German car giant Volkswagen last month said it would stop selling combustion engine cars in Europe by 2035.
Zero-emission transport will be one of the key topics at Cop26 in Glasgow, with Britain gathering pledges from countries and businesses to work towards net zero by 2050.
Carmakers say they need backing from governments to make the transition to an electric future.
In order to enable this, EU countries will be required to expand charging capacity in line with sales of electric cars.
Electric charging points will be required at 60km intervals on major highways, with hydrogen refuelling points every 150km.
There are expected to be 3.5 million charging stations for cars and vans by 2030.
Brussels will provide €72 billion ($85.1bn) under what it calls a Social Climate Fund to finance spending on energy efficiency and cleaner transport.
“We’re going to ask a lot our citizens. We’re also going to ask a lot of our industries, but we do it for good cause,” said EU climate chief Frans Timmermans.
“We do it to give humanity a fighting chance.”