America and China face trade protection measures from Europe if they fail to join a global climate deal to replace the Kyoto Protocol, EU leaders will caution at their summit in Brussels today.

Nations that refuse to curb greenhouse gases will be told that they face “appropriate measures” — code for trade sanctions — if they try to gain a competitive advantage by continuing to allow cheap, high-pollution production.

EU leaders are particularly concerned to try to stop big companies relocating from Europe to countries that refuse to join a post-2012 climate change agreement in order to avoid the EU's tough CO2 targets.

The two-day European Council will concentrate on financial issues, including calls for greater transparency to head off catastrophes such as the collapse of Northern Rock, as well as a voluntary code of conduct for powerful sovereign wealth funds.