Some of the biggest names in European industry have begun a public-private partnership with the EU to produce greener aircraft.
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Half the money will be raised by the European Union and half by industry.
EU Science and Research Commissioner Janez Potocnik said the investment would keep Europe at the cutting edge and help combat climate change.
Public money
The use of public money for a project involving companies such as Airbus could cause friction with its US competitor, Boeing.
But Myriam Goldsztejn of Dassault Aviation told the BBC News website that a public-private partnership was the right approach.
"There is no other way," she said. "The programme is so huge that if we don't work with the European Commission we'll never succeed. It's too big for one company."
She said the project might not be an issue for the World Trade Organisation, as it was all about developing the technology rather than the product.
A spokesman for Boeing said he did not wish to comment at this stage.
Carbon emissions
Last month the European Commission proposed a package of measures aimed at cutting carbon emissions by a fifth by 2020.
Launching the clean sky project in Brussels, Mr Potocnik said aeronautics accounted for 3% of current emissions.
"But with passenger numbers increasing by five per cent every year, these emission levels will grow over coming decades."
He said there would have to be improvements in fuel-efficient engines as well as breakthroughs in wing technology. Research institutes and universities will also be involved.
(BBC)
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