Mayor Ken Livingstone hopes the launch of a Climate Change Agency for London will make it the most environmentally friendly city in the world.
The mayor wants London lead the way on climate change
He hopes the agency will help to cut carbon dioxide emissions by 20%, from the 1990 level, by 2010.
It will encourage firms to have more energy efficient offices and design renewable energy products such as solar-powered panels and wind turbines.
Prime Minister Tony Blair said: "It is right that London leads the way."
Mr Livingstone promised the agency in his manifesto earlier this year.
It has the backing of big businesses like HSBC and Legal & General and will be run by Allan Jones, who pioneered the use of new energy systems in Woking, Surrey.
Mr Livingstone said the agency would make London "the most sustainable city in the world".
He added: "Climate change has now become a problem the world cannot ignore.
"Large, major-energy consuming cities like London have a responsibility to reduce their carbon emissions."
'Spewing out pollution'
Mr Blair added: "I warmly welcome the launch of London's Climate Change Agency. As one of the world's great cities it is right that London leads the way."
And Greenpeace executive director Stephen Tindale said: "Making major cities zero emission is achievable and urgent if we are to stop the climate spiralling out of control."
But London Assembly Liberal Democrat environment spokesperson, Mike Tuffrey, said: "The mayor has left the Climate Change Agency with a lot of work to do in its in-tray.
"For all his talk, London is now spewing out more pollution than when he took office."