(adds comments from IATA, BA, further details from proposal) By Jeff Mason BRUSSELS, Nov 14 (Reuters) - The European Union, defying the United States, plans to require all airlines flying in its territory to monitor their carbon dioxide (CO2) emissions from 2010 and to join the bloc's emissions trading scheme in 2011. A draft European Commission proposal obtained by Reuters on Tuesday showed a cap would be set on pollution permits issued to airlines based on average 2004-2006 aviation emissions. That limit would come into effect in 2011, it said. "From 2011 emissions from the aviation sector will be subject to a cap and aircraft operators will be required to surrender allowances to cover their emissions," the draft said. The EU's current emissions trading scheme -- its key tool to fight global warming and meet targets for cutting pollution under the Kyoto Protocol -- puts a limit on the amount of CO2 big polluters such as power plants and oil refineries can emit. But it excludes international aviation, a major and growing source of pollution as air travel booms. Companies covered by the scheme buy permits to pollute if they overshoot their target and sell them if they come in below the cap. The Commission's proposal would cover emissions from all international flights landing in and departing from the EU as well as all domestic flights, the draft said. That drew fire from industry and is likely to anger the Bush administration, which has opposed EU plans to include aviation. "We've always been focused on a global solution, so clearly this is Europe going off in its own direction," Anthony Concil, spokesman for airlines group IATA, said. "We would be very concerned if there were areas (of the EU draft law) that had extraterritorial implications," he said. EMISSIONS RISING, COSTS SEEN LOW British Airways <BAY.L> said it was disappointed that the emissions cap would cover any flight departing from the EU. "That will be very difficult to achieve as the EU has no jurisdiction over non-EU states. It could lead to legal challenges (and) delay the release of a workable scheme," a spokesman said. The draft said greenhouse gas emissions from "EU international aviation" rose 7.5 percent in 2004 compared to 2003, creating an 87 percent cumulative jump from 1990 levels. The proposal would exclude government and military flights as well as planes that seat fewer than 20 people or weigh less than 20,000 kg at take-off. The draft said adding aviation to the system would have a small effect on airline traffic growth. Airlines were expected to pass on the costs associated with the scheme to consumers. An accompanying Commission impact study said including all departing and arriving flights in the scheme would raise ticket prices by 4.60 to 39.60 euros ($5.90-50.78). The proposal foresees special permits called "aviation allowances", each equal to one tonne of carbon dioxide equivalent for carriers to use in a specific period. "Allowances allocated to the aviation sector may only be used to meet the obligations of aircraft operators to surrender allowances under this directive," the draft said. Airlines would be able to buy permits from other sectors, such as power generation, and make use of other trading mechanisms available under the Kyoto Protocol. Limits would be set at EU level to avoid problems that have arisen in the current scheme, where member states set caps for their industries, which the Commission can approve or reject. Most allowances would be given to airlines free of charge at the beginning, though some would be auctioned. The draft said legislation being drafted by the Commission on airport charges would likely address airline emissions of nitrogen oxides (NOX). If such measures were not adopted, airlines could be required to submit extra CO2 allowances to make up for their NOX pollution, it said. (additional reporting by Gavin Haycock in London)
