Australia is under pressure to cut its carbon emissions deeper after the European Union agreed on a new target of 40 per cent by 2030.

The agreement, labelled by the EU as a new global standard, also includes a 27 per cent target for renewable energy by 2030.

Labor and the coalition have agreed on a bipartisan emissions cut target of at least five per cent by 2020, but the parties differ on how it should be achieved.

The coalition government will consider a new post-2020 target in early 2015 before a United Nations conference in Paris, where a new commitment will be discussed and possibly settled.

The government has said that while cutting emissions is vital, economic growth and global competitiveness must be at the forefront of climate policy.

Climate advocates say the EU decision sets a new benchmark. At their summit in Brussels, EU leaders agreed to cut emissions by at least 40 per cent compared with 1990 levels.

“The EU’s announcement yet again underscores how much the rest of the world, and our major trading partners like the EU, China and the US, are leaping ahead of Australia while we are going backwards,” Climate Institute deputy chief executive Erwin Jackson said.

“The EU’s 2030 target is an opening gambit as major emitters are now defining what their post-2020 emissions reduction targets will look like.”

The US and China, and other major emitters, are expected to follow the EU and announce their new targets in early 2015.

Greens leader Christine Milne said Australia’s target should be better than the new European target.

“For the health of our communities and the health of our economy, Tony Abbott needs to pull his head out of the sand and get real about action on climate change,” she said.

Having abolished Labor’s carbon pricing scheme, the government is in talks with crossbench senators to pass laws setting up its $2.55 billion emissions reduction fund.

Talks opened this week with Labor on the future of the renewable energy target (RET), which aims to produce 20 per cent of electricity, or 41,000 gigawatt hours, through renewables by 2020.

The government wants to adjust the RET to a “real 20 per cent”, in effect cutting it to about 27,000GWh.

Labor says such a cut will undermine investment in renewable energy and not achieve the environmental benefits.