Airlines would be able to meet pollution-reduction quotas either by reducing their own emissions or buying credits from other industries.

Several environment ministers welcomed the proposal, pointing to the symbolic effect of the decision just after an international climate change meeting in Bali last week in which the EU took a strong position in persuading other countries to commit to long-term green goals.

"This is a bold step by Europe - in the week after the Bali agreement - which shows the EU leading in the fight against dangerous climate change," said Hilary Benn, British Environment Secretary.

But green groups and MEPs in the European parliament have strongly criticised the deal for being too week, with the aviation sector the fastest growing pollutant source in the transport sector.

The share of transport in carbon dioxide emissions was 21 percent in 1990, but had grown to 27 percent by 2005.

"If environment ministers get their way, the scheme simply won't cut emissions, and will end up being yet another subsidy to the aviation industry. It's a shameful end to a year filled with promise for action on climate change," said João Vieira, of green lobby group Transport and Environment.

"This is a Christmas gift to the aviation industry which should be required to do its fair share in tackling climate change," said the WWF.

Meanwhile, deputies in the European Parliament are angry that the ministers watered down their proposal and vowed to make them toughen it up when the legislation passes through the EU assembly for a second time next year.

MEPs had proposed that the scheme start in 2011 and also suggested that the greater climate impact of aviation - when compared to ground sources - should be reflected in the trading scheme.

EU deputies also said restrictions should be tight enough to force airlines to reduce their emissions rather than just buy pollution credits from other sectors.

"The European Parliament as co-legislator will not accept that this weak decision comes

into force unchanged", said Peter Liese, German centre-right MEP in charge of the dossier in the EU assembly.

Although it is too weak for some, the proposal is still likely to rile the US which has threatened the EU with legal action if it pushes ahead with the plans.

In addition, it comes just a day after the European Commission sparked controversy by proposing that all new cars must cut CO2 emissions by 2012 or face fines.