EU lawmakers voted overwhelmingly on Tuesday to force airlines to rein in their fast-growing greenhouse gas emissions from 2012, infuriating a sector struggling to cope with soaring fuel prices.
Under a draft law, all airlines operating in the 27-nation European Union, including foreign carriers, will have to participate in the bloc's emissions trading scheme, the EU's main mechanism for fighting climate change.
According to the plans, airlines will have to meet pollution targets from 2012 either by reducing their emissions or by buying carbon dioxide credits from other industries with surpluses.
Additionally, airlines will have to buy 15 percent of their emissions allowances through auctions, although the rest they will receive for free.
"Air travel across Europe has never been so cheap as it is now but the real price will be paid by future generations if we don't apply pressure to curb the rise in carbon emissions," British Liberal Democrat Chris Davies said.
"Greenhouse gas emissions from international air transport are increasing faster than from any other sector in the EU," Environment Commissioner Stavros Dimas said in a statement.
"This agreement will enable the aviation sector to make a fair contribution to Europe's climate change targets as many other sectors are already doing," he added.
Although emissions from the aviation sector currently make up about only three percent of the EU total, they are growing fast -- up 87 percent since 1990 and likely to more than double by 2020, according to the European Commission.
The draft law -- a compromise between the parliament, EU members and the European Commission -- was adopted with 640 votes in favour, 30 against and 20 abstentions.
Once EU governments clear the decision, they will have a year to transpose the rules into national legislation.
Airlines are furious about the plans which they say threatens their very survival as they struggle to cope with record fuel prices and have warned that it could spark trade wars with other countries.
The plans have also sounded alarm bells in Washington which has raised the prospect of launching litigation if Europe goes ahead with them.
Livid at the decision, the Geneva-based International Air Transport Association warned it could have dire consequences for the sector which lawmakers ignored.
Blasting the parliament's move as "absolutely the wrong answer to the very serious issue of environment," IATA director general Giovanni Bisignani said: "Fuelling legal battles and trade wars is no way to help the environment."
At a time when the industry was weighed down by soaring fuel prices, the scheme could add 3.5 billion euros (5.46 billion dollars) to industry costs in the first year of operations, IATA said.
However, the Association of European Airlines estimated that the cost could be as high as 5.3 billion euros annually in the first years of the scheme,
"It will lead to bankruptcies and liquidations, communities will lose air service and regional economies will be devastated as tens of thousands of jobs are put at risk," said AEA secretary general Ulrich Schulte-Strathaus.
The rules approved by the EU parliament were watered down in order ease some of the pressure on carriers.
Instead of emissions caps, airlines have long called on the EU to shake up the way it manages its highly fragmented airspace so that carriers fly more directly from point A to point B, wasting less time, money and fuel.
However, member states have been reluctant to yield any authority over air traffic control.