The 27-nation European Union has long claimed to be a world leader in the fight against climate change, adopting more ambitious carbon cuts than most of its industrialised peers.
But Hedegaard said: "Europeans must not be mistaken -- other regions are moving and they are moving very fast. If we stand still we lose our frontrunner status."
Environmental supporters stress the added benefits under low-carbon policies of fostering green jobs and energy independence, as recession-hit governments balk at the cost of curbing the use of cheap, imported fossil fuels.
Speaking in London at the International Institute for Environment and Development (IIED), Hedegaard said China's economic stimulus package included the world's largest green investment programme, earmarking $230 billion compared with the United States' $80 billion and about 25 billion euros ($31.76 billion) in the EU.
The EU has pledged to cut greenhouse gas emissions by 20 percent by 2020 from 1990 levels. The target was intended to spur a green revolution, but recession has slowed down industry, meaning the target can be met with little effort.
RECESSION CUTS COSTS
Hedegaard said the global economic crisis had cut the estimated 70-billion-euro cost of achieving the 20 percent goal by about a third.
She said the European Commission would unveil at the end of May or early June an assessment of the cost and possibility of moving the target to a 30 percent cut.
"The cost of a 30 percent reduction would be only modestly higher than what we were willing to pay for 20 percent."
Hedegaard said Europe had to look at long-term growth and green investment would bring jobs, increased energy security and other benefits such as clean air and water.
She said a legally binding, global accord on reducing greenhouse gas emissions -- which she said Europe was ready for -- looked unlikely to happen at U.N. climate talks in Cancun, Mexico, at the end of the year.
But Hedegaard said she would push for deals in areas where there was consensus. "Let's focus on substance," she said, such as forestry and funding for developing nations to help fight climate change.
Hedegaard said she was concerned that scepticism about climate change was rising in some countries, despite the fact that the global temperature in March was the highest on record.
"On current trends we could be at 2 degrees C as early as 2035," she said.
A U.N. summit in Copenhagen in December ended in a weak, non-binding accord which aspired to limit global warming to less than 2 degrees Celsius above pre-industrial levels, beyond which scientists warn the climate system could become unstable.
"At present we are very far from delivering on 2 degrees C," Hedegaard said.