Lufthansa has suggested it may pass on the cost of the new European Union sponsored Emissions Trading Scheme (ETS) to passengers.

The German flag-carrier said the scheme may cost up to €130 million annually following its adoption on January 1st.

ETS – which was only deemed legal in the aviation industry in late December - will require all airlines operating in European airspace to purchase permits for carbon emissions.

EU officials hope by driving up the cost of polluting, airlines will be encouraged to utilise more efficient planes, eventually cutting damage to the environment.

However, Lufthansa stated earlier it will pass the cost on to consumers through its fuel surcharge.

“In the face of intensive competition, especially of companies from non-EU countries whose production is subject to emissions trading to only a small degree, Lufthansa will have to pass on the burden via ticket prices, as suggested by the European Union,” the carrier said in a statement.

However, Lufthansa raised fuel surcharges in December, making any instant increase now unlikely.

The carrier presently adds between €102 and €122 per flight leg for intercontinental flights and up to €31 for domestic and European flights.

The International Air Transport Association has said ETS will cost the aviation industry €2.8 billion by 2020.