From 1 January next year, the EU's flagship Emissions Trading Scheme (ETS) will be expanded to include carbon emissions from all planes passing through European airspace.
But US airlines are challenging the move in the courts and China has threatened to retaliate against French planemaker Airbus if its airlines are forced to participate in the ETS.
"We are always open to discuss concerns with our partners but we don't have any intention of revising a very important directive that is meant to lower emissions and protect our common planet," European Commission President José Manuel Barroso told reporters in Brussels yesterday (8 June).
Some European nerves have frayed lately. In a letter to Transport Commissioner Siim Kallas on 31 May, German Transport Minister Peter Ramsauer warned that foreign airlines should only be brought into the ETS if European airlines did not suffer as a result.
The French letter to Commissioner Kallas, seen by EurActiv and dated 26 May 2011, firmly backs the ETS but asks how the Commission intends to ensure that foreign airlines respect it when their governments do not.
It says: "Rapid action must therefore be taken in order to avoid a situation, within a few months, where only the European airlines will be subject to the obligations of the ETS Directive when their competitors from third-party countries will not comply and will thus benefit from an unwarranted competitive advantage."
The letter, which is signed by French Foreign Minister Laurent Wauquiez and Ecology Minister Nathalie Kosciusko-Morizet, continues: "We shall have to identify, quickly, what realistic methods of persuasion can be applied."
In a technical missive that is subtle and highly coded, the ministers propose a revision of EC regulation No. 868/2004 (21 April 2004), which offers protection against subsidies and unfair tariff practices, to airlines in third-party countries.
They also suggest that air traffic liberalisation between third-party countries and the EU only take place "when conditions of equitable competition are guaranteed".
Such measures might not count as direct responses to any Chinese actions against European companies but analysts say they implicitly make the case for equivalent counter-measures.
"It is a weird letter but if you have the right codes to decipher it, it is also quite explicit," Fabio Gamba, deputy secretary-general of the Association of European Airlines (AEA), told EurActiv.
"The message is: 'Commission! Pay attention! We are right behind you, watching you. We have accepted the ETS but it doesn't mean you can do anything you want. We want to make sure that it does not give rise to retaliation. You are its guard,'" he said.
Airline industry worries
The European airline industry is "extremely worried" about the developing carbon trade row, and what concessions the EU might offer China to resolve it, according to one senior air industry source.
While in Brussels Barroso was calling "all the world to unite in some kind of directive like this one," the source claimed that the world was rather uniting against the ETS.
"The loudest voice so far has been China," he said, "but of course the US is not in favour of this [either] and will probably soon say so".
"Russia has said 'nyet' and a number of other countries may see this as an opportunity to tax aviation if the Commission accepts this as an equivalent measure."
The source proposed an "intra-EU ETS", targeting European networks, even though this could increase carbon emissions from firms re-routing flights through third countries outside the EU.
Under the ETS, which aims to reduce planet-heating pollution, 85% of emissions allowances are provided to air carriers for free.
But many air industry insiders are sceptical about attempts to put a price on carbon without simultaneous global implementation.
The EU fears that may never happen.