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Europe's environment chiefs have, as predicted, delivered a politically charged salvo to the world's airlines over plans to wrap international flights into the European Union emissions trading scheme (EU ETS).

The compromise deal hammered out between the EU's 27 member states on 20 December at the Council of Ministers represents the collective state-level response to the European Commission's original proposal to impose a cap on aviation's CO2 emissions in the same way other energy-intensive industries are already treated.

Under the political agreement - which is still subject to the scrutiny of a European Parliament with a much more ambitious green agenda - all airlines flying into EU airports will join the scheme in 2012.

This, the Council says, sends out "a very political signal" that Europe is serious about its efforts to tackle aviation's small but fast-growing impact on climate change, as the EC had proposed that non-EU operators should be spared until an intra-EU flight scheme had been in operation for a year.

Airlines will have to maintain emissions levels at average 2004-06 levels, with 90% of carbon credits distributed for free, something that will disappoint the Parliament and environmentalists who fear airlines will make windfall profits by passing on non-existent costs.

No measures were proposed for dealing with the additional climate impact caused by nitrogen oxides (NOx) whereas MEPs want the value of carbon credits bought by airlines doubled in the absence of specific new legislation.

Airlines with very thin routes to, from or within the EU would also be exempt thus allowing operators from developing countries and those operating publicly subsidised routes to far-flung EU regions to opt out. Also, 3% of the total number of sector carbon credits will be set aside in a special reserve for new entrants or very fast-growing airlines.

Simon McNamara from the European Regions Airline Association says: "What the Council has come out with is far more balanced than what the Parliament wanted, which was rather radical and not really what emissions trading was designed to do."

He says industry will continue to lobby both Council and Parliament vigorously as a compromise deal between the two institutions is worked out, something expected to take much of 2008 through a second reading process.