Delegates to the U.N.'s International Civil Aviation Organization (ICAO) are meeting in Montreal to try to hammer out a global agreement to set a path toward creating a global market-based mechanism by 2020 that would help limit growing carbon emissions in the sector.
Debate at the U.N. body's triennial assembly on Wednesday focused on the most contentious aspect of a global deal - a framework to allow national or regional market-based schemes to apply to airlines before 2020.
The framework is needed to allow the EU's Emissions Trading Scheme (ETS), the only existing regional scheme that applies to foreign carriers, to continue to function for the next seven years.
Several EU delegates stressed that Europe has already conceded a lot in negotiations by scaling back the reach of the EU ETS to sovereign airspace rather than entire routes.
They voiced support for compromise text introduced by ICAO assembly President Michel Wachenheim Wednesday morning to try to clinch a deal by Friday, the last day of the assembly.
But a large group of countries, including India and China, supported an alternative proposal made by Russia that would not allow programs such as the EU ETS to apply to foreign airlines - even if it only applies to sovereign airspace.
A delegate from Pakistan said that allowing regional schemes to apply to foreign carriers - even for portions of sovereign air space, violates the Chicago Convention, an international treaty that ensures fairness for the global aviation sector.
A French delegate disagreed in his speech saying that there is nothing in the convention that "opposes that states be able to take measures over national airspace."
A bloc of over 50 African states also raised sharp opposition to an attempt by the ICAO assembly president's attempt to address festering concerns about which countries would be exempt from complying with regional schemes, drawing opposition from many countries.
His text aimed to exempt airlines from regional schemes based on routes rather than country, and based on a hard number of so-called "revenue ton kilometres" (RTKs) that would be reduced each year after 2014.
That would replace an earlier plan to exempt countries that account for less than 1 percent of global RTKs.
Englebert Zoa Etundi, Cameroon's representative to ICAO, told Reuters Wednesday that the bloc cannot agree to a text that does not include the 1 percent threshold because it is necessary to protect Africa's burgeoning airline industry.
The outcome of the assembly will have implications for international relations, aviation competitiveness and the EU ETS, which is already struggling under a burden of surplus carbon allowances.
The EU had decided to include foreign airlines in its trading scheme after a decade of ICAO talks failed to reach a deal on aviation emissions, which account for 5 percent of global warming, according to U.N. data, and are expected to triple by 2050.
But, after international outrage, the bloc agreed to suspend for one year its law for intercontinental flights.
Sources close to the matter said Britain, France and Germany - which represent some of the EU's biggest aviation interests, including IAG, Airbus, Deutsche Lufthansa and Air France-KLM - were instrumental in agreeing to that delay, and led the way for the EU to back down again at the assembly.
While the three powers dominate the European Council of member states, they have less influence in the European Parliament, which has said it needs a strong deal.
WINDOW OF OPPORTUNITY
Countries will resume debate on the text on Thursday.
European Commission spokeswoman Helen Kearns said any agreement was unlikely before the very end of the talks.
"Europe has already been extremely flexible in agreeing to stop the clock," she told reporters. "In doing this we avoided a probable trade war. We now have a very important window of opportunity between now and Friday."