Plans will have repercussions for the food, drink and farming industries, which were recently highlighted as big contributors to carbon emissions in the UK by the country's environment minister, David Miliband.
The emissions trading and biofuels proposals were part of several strategies put forward by the UK Chancellor in his pre-budget report.
Climate change has taken on a higher profile in recent weeks, following a UK government report claiming the cost of inaction could be up to five per cent of global GDP, possibly causing an economic disaster worse than the Wall Street Crash in 1929.
Chancellor Gordon Brown said four of Europe's non-EU states, Switzerland, Norway, Iceland and Lichtenstein, had agreed in principle to the creation of a pan-European carbon trading scheme - seen as the first building block towards a global trading system.
UK industry, including food, has supported the government plans.
Food packagers and processors could play a major part in the scheme because of their reliance on cooking, refrigeration, freezing and air compressor systems that pump out greenhouse gases.
Carbon trading works by assigning quotas to companies and then allowing those who want more to buy up surplus quota from others. Quotas are capped so that overall emissions are reduced.
The system would work alongside plans to promote new technologies and renewable energy sources, Chancellor Brown said.
There has also been support from the UK National Farmers' Union on the government's plan to invest in biofuels.
"Even after allowing for the cost of harvesting, processing and transportation, biofuels still yield net savings of 70 per cent in greenhouse gas emissions compared with fossil fuels."
Britain's biofuels market is expected to double in 2006 to around 250m litres, the government predicted. It aims to encourage their development through lower tax rates for biofuel users until at least 2008-09.
Critics have repeatedly questioned whether biofuels can be produced on the scale needed to significantly impact climate change, however.
Several other strategies for dealing with climate change were also laid out by the UK government Wednesday.
These ranged from tax rises on fuel to more audacious plans, such as capturing carbon and burying it under the North Sea - a project underway between the UK and Norway.