The European Union’s Emissions Trading Scheme is likely to face its sternest test to date with China having banned all airlines for participating.

The scheme is designed to levy a charge on flights in EU airspace based on carbon emissions.

However, the China Air Transport Association has confirmed it would not support the ETS.

With the European Union having invested a great deal of credibility in the scheme, it is unlikely to back down, setting the stage for a lengthy court room battle.

Airlines in the Asian powerhouse are also barred from increasing their fares or adding new charges for the scheme.

ETS was introduced on January 1st, despite persistent opposition from airlines in India, the United States and China.

In theory the EU could prevent aircraft from China from landing or taking off from European airports.

Such a decision would however be highly controversial and could see China retaliating with a similar ban.