EU Energy Commissioner Guenther Oettinger put forward the world's "most stringent" certification regime to make "sure our biofuels meet the highest environmental standards." Biofuel makers must prove they do not create greenhouse gas emissions or destroy forests or wetlands.
The rules take effect immediately.
They foresee a regime of certificates to guarantee that all biofuels - whether grown in the 27-nation European Union or imported - are sustainably produced on land already used for farming in early 2008.
Production must be independently monitored to see how much fertilizer is used to grow the crop, how much to process it into fuel and how much to transport it to the market.
Only biofuels that represent at least a 35 percent saving in greenhouse gas use compared to oil or diesel would be allowed and would get financial help from governments, such as low taxes or direct payments to suppliers.
The European Commission says it could revoke the certificates at any time biofuel suppliers are not providing truthful information.
About 26 percent of biodiesel and 31 percent of bioethanol used in the EU in 2007 was imported - mostly from Brazil and the United States.
Environmental groups took a dim view of the plan.
They said it will not tackle the most acute problem: that the move toward more biomass production drives deforestation, damages the environment, creates greenhouse gas emissions and encourages land-grabbing in Asia and South America.
The EU has set a target that by 2020 at least 10 percent of transport fuel comes from biofuels - up from 3.4 percent in 2008 and 0.5 percent in 2003.
Biofuels are mostly bioethanol made from sugar and cereals and biodiesel from vegetable oils.
"Europe's policy on biofuels is inherently unsustainable," said Adrian Bebb, food and agriculture campaign coordinator for Friends of the Earth Europe.
"The EU should abandon this folly and invest in genuine energy reductions in the transport sector."
The environmental group Greenpeace said the certification scheme does nothing about the displacement of agriculture that happens when farmers move crops or cattle ranching elsewhere to make room for biofuels for EU clients.
To make sure most of its biofuel reduces real greenhouse gas emissions, the European Commission will create a system to calculate how much greenhouse gas is used to produce and transport the fuel until it arrives at the gas pump.