Angela Merkel was once the Green Goddess who pushed through tough climate change targets to show that Europe could lead the world in beating global warming.

Under huge pressure to shield German industry from the cost of going green, however, she has been transformed into Frau Nein — fighting to reverse key goals that she once championed.

As EU leaders meet to complete the targets today the German Chancellor, who was so firmly in Europe's driving seat just a year ago, also seems off-message over the other main item on the agenda: the size of the recovery plan needed to beat the recession.

Berlin is being accused of resorting to national self-interest just when Europe needs to pull together. Moreover, the importance of Europe sticking to its ambitious target of cutting CO2 by 20 per cent by 2020 has never been greater, with the chance of liaising with a sympathetic new US president to push for a global successor to the Kyoto Protocol fast approaching.

“On a broad range of issues the Germans seem to think the European Union no longer advances their interests and are more prone to go their own way,” said Charles Grant, director of the Centre for European Reform.

“In Brussels, Paris, Washington and other capitals, one increasingly hears the same complaint: Germany is acting unilaterally.”

A fierce battle has been raging behind the scenes in Europe's capitals ever since Mrs Merkel proudly announced the so-called 20/20/20 targets, under the German presidency of the EU in March last year.

The goals would be for a 20 per cent cut in emissions by 2020 compared to 1990 levels, combined with 20 per cent of fuel to come from renewable sources and a 20 per cent improvement in energy efficiency.

The targets themselves have survived — just — but the hard part has been putting them into practice by making sure that each country does its share.

One of the key mechanisms is the EU's emissions trading scheme, which, from 2013, will force companies to buy carbon credits — each worth one metric tonne of CO2 — which they can trade if they cut pollution.

Since the scheme was drawn up, however, the recession has given extra weight to arguments that the rump of European industry will be forced out of business by the extra costs.

German industry, in particular, has complained that it faces “carbon leakage” — the relocation of steel, aluminium and cement production to countries much less scrupulous about pollution and free from targets and emissions trading.

Mrs Merkel arrives in Brussels today demanding free carbon credits for 90 to 100 per cent of German factories until 2020 - blowing a hole in a key climate change scheme.

Where Germany leads, others follow. Mrs Merkel's demands have strengthened calls from a group of nine former Iron Curtain countries, led by Poland, for free credits and for massive cash subsidies from Western Europe to fund green technology.

The European Commission has proposed a “solidarity fund” for the coal-dependent countries worth 7.5 billion euros (£6.5 billion) in sales of carbon credits. They want twice as much; Britain opposes the principle of the subsidy.

President Sarkozy, who holds the EU's rotating leadership until the end of the month, is determined to resolve the climate clash over the two-day EU gathering, not least to send a positive signal to UN climate change talks held at the same time in Poznan, Poland.

His relations with Mrs Merkel have been difficult and he has not been helped by a piece of clumsy diplomacy which took him to London on Monday to meet Gordon Brown and José Manuel Barroso, President of the European Commission, in what looked to some Germans like a conspiracy.

Frank-Walter Steinmeier, the German Foreign Minister and also Mrs Merkel's rival for the Chancellorship in next year's elections, took the opportunity to make a barbed comment. “I do not think it is good that the three are meeting alone and that the Chancellor is not there,” he said.

It showed that open sparring has already started before next summer's election, which will serve to make Mrs Merkel more likely to put domestic self-interest first at the EU summit.

Jan Kowalzig, a climate change campaigner with Oxfam in Germany, said: “Angela Merkel was the first Environment Minister that Germany ever had. We were surprised at how progressive she was at first but she has now come back more to her conservative party position. In the context of the elections next year, she is giving the impression that German jobs are more important than climate change.”

Mr Sarkozy faces a tough job to forge a compromise that will not be seen as the abandonment of the green dream. He has one trick up his sleeve to save the summit from failing by tomorrow night: he has let it be known that he is prepared to convene another heads-of-government meeting between Christmas and the New Year to finish the job.

And nobody wants to interrupt their holidays to stay up all night arguing over the emissions trading scheme.

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