Also known as the Emissions Trading System, ETS was originally launched in 2005 by the European Union to reduce carbon emissions of power stations and industrial plants. It was the first large emissions trading scheme in the world to combat climate change and is a major pillar of EU climate policy.

Under the ETS, carbon dioxide emitters operating within the EU must pay for their polluting rights based on the amount of emission allowances accorded to them by the EU government.

International airlines who fly in and out of the EU countries are officially included in the ETS system starting in 2012 because they are responsible for three percent of global emissions. Airlines will have to pay for 15 percent of the polluting rights in 2012 and 18 percent between 2013 and 2020. The inclusion of international airlines in the ETS can potentially trigger a trade war between China and other countries with the EU due to the fact that it's a unilateral policy.