The European executive Commission, author of the draft, says the new rules could save 180 million tonnes of carbon dioxide emissions by 2010, helping Europe meet ambitious climate change targets.

German conservative MEP Peter Liese said consumers would also save on electricity bills.

A household spends 100 euros a year on electricity for appliances that are turned off but not plugged out. Consumers pay an extra 400 euros a year in electricity bills for all energy inefficient devices at home.

"The directive will mean great progress for the protection of the environment in Europe and it will take the strain off the consumer because electricity and water bills will be reduced," Liese said in a statement.

The legislation will apply across the 25-nation bloc from 2007. The Commission will monitor industry's progress towards agreeing common standards. It can threaten to impose energy efficient criteria if firms fail to work together.

"The Commission will prepare studies on the improvements we need to make," EU Energy Commissioner Andris Piebalgs told a news conference. "By the second half of 2007, we should be able to adopt the first eco-design requirements for products."

But environmental organisation WWF said voluntary agreements with industry were ineffective to promote cleaner technology.

"This is the biggest loophole of the new law," WWF Head of European Climate and Energy Policy Unit Dr. Stephan Singer said in a statement.