Airlines have warned the European Union risks sparking an international trade war if it insists on imposing a carbon tax on carriers flying into its air space as per a report in CNN by Hilary Whiteman.

From January 1 next year, airlines landing or taking off within Europe will have to buy permits for carbon emissions over and above a pre-set cap. Airlines argue that Europe is overreaching its authority in imposing the Emissions Trading Scheme (ETS), which they say penalizes carriers with bases far away from Europe.

"I think the realization is now this is no longer a climate change issue. This is no longer about emissions trading scheme. This is a big political hot potato," Paul Steele, executive director of the Air Transport Action Group (ATAG) told the Greener Skies conference in Hong Kong.

The air industry says the EU is risking retaliation by threatening to punish airlines found to be flouting the rules. Penalties range from fines to flight suspensions. "While the EU sees the ETS as environmental policy, the rest of the world sees it as an attack on sovereignty," said Tony Tyler, director-general of the International Air Transport Association (IATA).

"The colonial era, when Europe imposed taxes on the world ended some time ago," he added. Asian carriers are among those who say the charge unfairly targets airlines operating long-haul flights.