Speaking at the end of a two-day European summit in Brussels, British Prime Minister Gordon Brown said the EU leaders had made "substantial progress" on the issue.

"I think people have been persuaded by the argument that we should look at this very carefully," he said

"If -- whether it be fridges or household goods generally, or whether it be the insulation materials that make for more energy efficient homes -- we can cut the rates of VAT, then I believe that will be a good thing for Europe.

"So the debate has started, we have got this review happening, I believe that that is very substantial progress in only two days," he told reporters.

French President Nicolas Sarkozy told a separate press conference that he and Brown had "worked hard to develop an environmental tax system".

He added: "I am very happy to see that the council (summit) is asking the (European Commission) to consider all fiscal instruments that would allow the development of clean products."

The idea of an environmentally friendly tax regime was first launched by Paris and London last year, but met strong resistance from their European partners.

Sarkozy admitted that some countries said they remained opposed.

"Over the next few months I think other countries will join the debate that France and Britain have already started," Brown said.

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