The European Union will freeze for a year its rule that all airlines must pay for their carbon emissions for flights into and out of EU airports, the EU executive said, following threats of international retaliation.
Flights by within the European Union will still have to pay for their carbon emissions. The year-long exemption will apply to flights linking EU airports to countries outside of the bloc.
Climate Commissioner Connie Hedegaard said she had agreed "to stop the clock" to create a positive atmosphere for international talks on an alternative global plan to tackle airline emissions.
"But let me be very clear: if this exercise does not deliver - and I hope it does - then needless to say we are back to where we are today with the EU ETS. Automatically."
The United States, China and India have put intense pressure on the European Union. Debate in the U.S. Congress is set to resume this week on legislation to counter the EU rules.
U.S. politicians welcomed Monday's news, but wanted more.
"While I am pleased the EU has temporarily suspended its efforts to unilaterally impose a tax on our airlines flying over U.S. and international airspace, the EU's announcement does not rule out future efforts to tax foreign carriers," said Senator John Thune, who has led the push for the blocking law in the U.S. Senate.
EU member states still have to formally endorse the Commission's proposed freeze. Hedegaard said she had informed representatives of all 27 member states of the Commission's plan but could not specify how long the EU approval process might take.
Representing Europe's biggest economy, German Environment Minister Peter Altmaier said the Commission decision was justified.
"It made clear that the EU is holding on to its view, but at the same time it is also in the position to stick to its international commitments and actions," he said.
Some airline associations welcomed Monday's announcement, but said the moratorium meant EU carriers operating flights within the bloc could be at a competitive disadvantage.
Environment campaigners said the European Union was giving up too much, too soon.
But they said opponents could no longer blame the European Union for any lack of progress at the U.N.'s International Civil Aviation Organization (ICAO), which is seeking an alternative global deal.
"The Commission, with today's decision, has moved further than necessary given the little progress made so far at ICAO level," Bill Hemmings, programme manager at campaign group T&E, said. "There is no excuse for inaction left."
DECADE OF DITHERING
The European Union agreed on its law after more than a decade of talks at the ICAO failed to find a way to curb aviation emissions. It always said it would modify its legislation if the ICAO could deliver an alternative.
Hedegaard said the ICAO had made good progress at a meeting in Montreal on Friday.
Efforts have intensified since the start of this year, when the EU's requirement for all airlines to buy carbon emissions began to take effect.
The law is being phased in slowly, which means the first bills would only be sent out in April next year after the calculation of this year's emissions. Any airline that does not submit carbon allowances by then would face stiff fines.
The proposed year-long waiver - meaning no carbon payments before April 2014 for international flights - gives the ICAO until its general assembly late next year to reach a global deal.
The Association of European Airlines (AEA) said the ICAO was the right body and that now the onus was on it.
"In their opposition to EU ETS, countries such as the USA, Russia, China and India have repeatedly stated that the issue should be dealt with in ICAO. Now they have the chance to show that they mean it," Athar Husain Khan, acting secretary general of the AEA, said.
The cost of the EU's aviation law is minimal, at 1-2 euros per passenger per flight, given the weakness of the EU Emissions Trading Scheme, on which the carbon price has sunk under a glut of surplus permits following the region's economic slowdown.
The cost to aviation is expected to rise, though, and on Monday, the Commission also published draft legislation to temporarily withdraw some of the surplus allowances.
International opponents of including aviation in the EU scheme say it is a question of principle. They argue the European Union is imposing an extraterritorial tax, although the Commission says its market-based mechanism is not a tax.
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