BRUSSELS- European Union states have rejected a set of rules governing which financial products can be called "green" and "sustainable", an EU official said, in a major setback for the bloc's climate ambitions.

The decision overturned a deal struck just last week by EU lawmakers and the Finnish presidency of the EU, which negotiators hailed as a landmark compromise that could establish a global standard on green bonds and other financial products aimed at climate-conscious investors.

Britain, France, the Czech Republic, Hungary, Poland, Slovakia, Romania, Bulgaria and Slovenia opposed the deal at a meeting of EU diplomats in Brussels, fearing it would prevent investments in nuclear and coal projects from being labelled as green.

Such investments were not explicitly excluded from the EU's new classifications, known as taxonomy, but under the rules it would be very difficult to label them as green, potentially reducing future funding for those industries.

France relies on nuclear energy, while European countries are still largely dependent on coal.

The setback came on the same day the EU commission unveiled plans to make the bloc greener and drastically cut carbon emissions.

The taxonomy is considered a key pillar of that strategy as it could increase funding for renewable energies and other green projects while tackling so-called "greenwashing", whereby firms boost their green credentials without merit.

Under EU rules, lawmakers and governments have to find a compromise over proposed legislation when their views differ. Talks were conducted on behalf of EU states by Finland, which holds the six-month EU presidency until the end of this year.

Usually states support compromises struck by their representatives, but the blocking of the green finance law highlights the deep divisions in the bloc over the matter.

States saw the compromise text as going beyond the mandate given to Finland to lead the negotiations, the official said. A new mandate will now have to be agreed, probably next week.

Talks with the European Parliament should resume in coming days with the aim of finding a deal before the end of the year, the official added.

(Reporting by Francesco Guarascio and Jonas Ekblom, editing by Louise Heavens, Kirsten Donovan) ((Francesco.Guarascio@thomsonreuters.com; +32 2 287 68 17;))