Poland says a "polluter pays" approach will raise energy prices even further
European MPs have refused to dilute pollution reduction targets despite widespread concern about the cost to business in an era of low growth.
The European Parliament's Environment Committee backed a tougher Emissions Trading Scheme (ETS) and plans to install carbon capture technology.
MEPs say industry should buy emission permits, and not get them for free.
But Poland is among several countries seeking to protect their industries from having to buy the permits.
EU leaders have pledged to cut CO2 emissions by 20% by 2020.
The planned reduction - compared to 1990 emission levels - will rise to 30% if an international agreement emerges embracing developing countries.
As part of the plan, full auctioning of emission permits will be introduced for the power sector from 2013.
The ETS will also be expanded gradually to include CO2 emissions from aircraft.
At present, heavy industry gets some permits for free and has to buy others only if it exceeds the allowances.
Poland, which relies on coal for more than 90% of its electricity, says the ETS will reduce the nation's energy independence and put up prices.
Poland's Environment Minister, Maciej Nowicki, told Reuters news agency that he was close to assembling a blocking minority among EU member states which would force the European Commission to revise the CO2 emissions proposals.
But a report from policy network Climate Strategies warns that if the group succeeds, the EU will lose its most powerful weapon in the fight for a new global climate treaty.
Climate Strategies says that the existence of carbon pricing in the EU puts up electricity prices anyway - so it is important that polluters all pay into a fund that could be used to cushion the poor from the price rises.
The MEPs' decisions on Tuesday will feed into the revision of EU policy on climate change, which France - current holder of the EU presidency - wants finalised by the end of this year.
MEPs are trying to fast-track the legislation so that it is in place in time for next year's big international climate negotiations and the European parliamentary elections, Linda McAvan MEP, deputy leader of the Socialist group, told the BBC.
Italy and Germany are both warning that forcing their industries to buy pollution permits will damage competitiveness.
But Climate Strategies argues that giving some industries a "free ride" in the ETS will harm the wider economy.
"Free allowance allocation creates distortions for the carbon price signal and reduces the efforts of some sectors to reduce emissions, which in turn increases the costs for the remaining economy," the network said in a statement.
The MEPs on the committee voted on Tuesday in favour of fitting carbon capture and storage (CCS) technology to power plants - a technology that would help meet the emission targets.
A pilot power plant in Germany is the world's first to capture and store its own CO2 emissions.
The climate package envisages that the auctioning of emission permits will help pay for carbon capture. Revenues from the ETS could total 50bn euros (£39bn) annually by 2020, the European Commission estimates.
MEPs now agree that ETS revenue should be used to finance 12 commercially viable carbon capture plants across Europe, with plans for more in future.
Under the commission's ETS "cap and trade" plan - now backed by MEPs - EU-wide limits will be placed on the supply of carbon permits, to stop energy firms making windfall profits from the ETS, Linda McAvan said.
"We're giving five years' lead time to firms to adjust - it's important to send a signal," she said.