Approximately €4.5 billion will be made available to at least 34 innovative renewable energy and eight carbon capture and underground storage (CCS) projects.
The money will be raised by selling 300 million carbon permits from the 'New Entrant Reserve' of the EU's emissions trading scheme (EU ETS) for greenhouse gases.
In total, the funding could reach €9bn when more money is injected by member states and participating energy companies, the Commission estimates. Each member state should get at least one and a maximum of three projects.
The first call for proposals covers 200 million allowances and a second round will be arranged later to allocate the remaining money. The Commission is expecting to take decisions on which projects to award in the second half of 2012.
Eligible projects will cover renewable technologies like solar power, offshore wind and various ocean energy technologies, which are not yet commercially viable but regarded as key ingredients of a future low-carbon economy. The CCS projects will test CO2 capture in different industrial applications and storage into various geological formations.
Launching the programme, EU Climate Action Commissioner Connie Hedegaard warned that the EU's leadership in low-carbon technologies is being challenged by China, India, Brazil and others.
"This means we have to do more to drive innovation in clean technologies if we are to stay at the forefront of the low-carbon revolution," she said, warning that complacency could cost Europe green jobs.
How the money will be split between renewables and CCS has not been determined and will depend on the quality and demonstration needs of proposed projects, the Commission said.
The European Investment Bank (EIB) was tasked with scrutinising the project proposals submitted by member states and ranking them for the EU executive, which will make the final decision. The EIB will sell the allowances and then disburse them to member states.