Willie Walsh, the chief executive of British Airways, and other leaders in the aviation industry have criticised the European Union's proposed emissions trading scheme claiming it will financially damage airlines.

Mr Walsh told a sustainable aviation conference at the Farnborough Air Show this week that he was broadly in support of emissions trading but had "serious reservations" about the current EU proposals.

He said: "If implemented as it now stands, without a global solution for aviation in place, the scheme will lead to a significant competitive disadvantage for EU airlines, resulting in a loss of jobs and reduction in services as international passengers bypass European hubs."

European airlines have predicted that the emission trading system could cost €4 billion a year at a time when many are struggling to survive because of the high price of fuel.

The airline industry is estimated to contribute 2 per cent of greenhouse gases and this is predicted to rise to 3 per cent in the coming decades. The EU emissions trading scheme, which will start in 2011, will require airlines to purchase permits that penalise them financially for producing carbon dioxide.

Giovanni Bisignani, director general of the International Air Transport Association, a trade body that represents the world’s airlines, said that this scheme would penalise carriers based outside Europe, which could prompt lawsuits from countries claiming that it was unfair for the EU to tax non-EU airlines.

International taxation law prevents double billing, so, for example, airlines in the United States only pay US taxes. The requirement for carriers wanting to enter European aerospace to buy a carbon permit could be seen as double taxation, Mr Bisignani said. He added that this would probably be challenged legally, probably by the US first.

He said: “Instead of cleaning up the environment, this will create an international legal mess. States outside Europe are already threatening legal action. Why should a US carrier have to pay Europe for emissions over US territory?” Tom Enders, the chief executive of Airbus, added that he was concerned the trading scheme would be imposed “irrespective of the burden put on airlines by the oil price”.

During the seminar, Mr Bisignani also criticised the British government for introducing the new air passenger tax (APT), which will be charged per flight rather than by passenger numbers as in the past.

He said that this was only a tax-raising exercise and the government could more effectively tackle aviation’s contribution to greenhouse gases in other ways.

Mr Walsh also outlined a number of strategies that BA was pursuing to reduce its carbon footprint, including developing alternative fuels and purchasing more fuel-efficient aircraft.

Mr Walsh also believes that a more efficient air traffic control network could cut the amount of fuel expended while planes are stacked waiting to land at Heathrow airport.

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