The landmark agreement to cap emissions from aircraft was reached by the EU on Thursday, raising the stakes in an increasingly ferocious battle with the United States over how to regulate global greenhouse gases.

Including airlines in the system is the boldest move yet by Europe to stamp its environmental policies on the rest of the world.

For consumers, it could mean further fare increases in the wake of a steady rise in fuel surcharges imposed by airlines - a trend that looks set to continue.

At the end of the day, it is the people who fly who will pay more under the new system, said Mr Anthony Concil, a spokesman for the International Air Transport Association (Iata), the airline industry's biggest lobbying group.

US officials warned that the requirements would probably be illegal under the convention governing international civil aviation. 'The mandatory application of the European Emissions Trading System to US airlines and airlines of other non-European countries is, we think, both contrary to international law and ultimately unworkable,' said Mr Robert Gianfranceschi, a spokesman for the US Mission to the European Union in Brussels.

The compromise was reached on Thursday by representatives of the European Parliament and European governments represented by Slovenia, which currently holds the revolving presidency.

It states that Europe 'should continue to seek an agreement on global measures to reduce greenhouse gas emissions from aviation', according to a copy of the text seen by the International Herald Tribune.

The proposal still needs the approval of the European Parliament and individual countries. But people involved in the negotiations say those steps are likely to be a formality, given the political agreement.

Including airlines in the pact is a victory for European regulators, who are seeking to include more polluters in the system. That could help blunt criticism by those who see the EU as unfairly targeting heavy industry.

The carbon trading market, which was started in 2005, caps the overall amount of pollution emitted by industries such as electric utilities and steel-makers.

Mr Concil said the costs to the airline industry of buying permits to comply with European emissions regulations would be more than US$4 billion (S$5.4 billion).

Imposing new, costly rules on airlines was 'incredible' at a time when the industry is expected to lose more than US$6.1 billion this year, he said.

Opponents argued that the plan would be an ineffective regional effort to tackle a problem that requires a global solution.

European airlines and charter companies said they would be at a disadvantage compared with overseas competitors that operate fewer European routes.

Iata director-general Giovanni Bisignani said negotiations on an emissions trading programme for the world's airlines should be conducted by the International Civil Aviation Organisation, a United Nations body.

The European Commission, which first proposed the rules, has said a global deal would take too long. And European officials are determined to put forward their own plans, which would cover the emissions from aircraft flying both legs of journeys to and from major destinations such as London, Paris and Frankfurt.

NEW YORK TIMES