"Our decision is of utmost importance in our fight against climate changes," Portuguese Environment Minister Francisco Nunes Correia, whose country holds the EU's rotating presidency, told a news conference.

The plan has irked the United States, which has threatened litigation at international arbitration bodies, and has drawn criticism from airlines and top officials of the International Air Transport Association (IATA).

But the ministers insisted the EU must show global leadership on combating climate change, which scientists say results from growing emissions of greenhouse gases, notably carbon dioxide (CO2).

"This is a bold step by Europe ..., which shows the EU leading in the fight against dangerous climate change," said British Environment Minister Hilary Benn.

The trading scheme is the EU's key instrument to fight global warming. It sets limits on the amount of CO2 that industry may emit. Companies buy or sell permits based on whether they overshoot or undershoot their targets.

Under the scheme, internal EU and intercontinental flights would receive, and buy in auction, carbon permits -- certificates that essentially assign rights to emit.

NOT ENOUGH?

The ministers agreed the amount of permits that airlines must buy upfront at auction at 10 percent in 2012, compared with 25 percent proposed by the European Parliament. The figures for the following years are still to be agreed.

The sector's cap was at 100 percent of average emissions from the period 2004-2006, higher than the 90 percent proposed by the parliament.

Airlines now account for nearly 3 percent of global CO2 emissions, but the figure has doubled over last 10 years.

The EU proposal excludes all military flights and some public aviation services in the EU's overseas territories. EU governments' flights will be included, but those of foreign governments excluded.

The ministers set aside a special quota reserve, amounting to 3 percent of the total, for new entrants or operators in full expansion.

IATA director-general Giovanni Bisignani was quoted as saying last month that the proposal, as tabled originally by the European Commission, would cost the industry some US$3 billion a year, while the draft approved by the European Parliament would cost the industry US$7 billion a year.

Some environmental groups have, however, complained that the proposal does not go far enough.