UPDATE 2-EU drops plan to extend CO2 rules to international flights
* EU Parliament agrees to scale back plans to regulate international flight emissions
* States feared expansion would anger China, U.S
* EU to revisit plans if no global deal ready in 2016 (Adds details of legal threat by airlines, reaction)
By Ben Garside and Susanna Twidale
LONDON, April 3 (Reuters) - The European Parliament on Thursday voted to exempt international flights from paying for their carbon emissions following intense pressure from national governments not to extend current rules beyond domestic air travel.
On Thursday the European Parliament voted by 458 votes to 120 to back a proposal which would limit the current regulation to domestic flights until at least 2016, a spokesman for the Parliament said in a statement.
The vote marks the end of three years of wrangling, during which China and the United States had threatened retaliation if the EU forged ahead with plans to regulate flights originating in their countries in a bid to curb the aviation sector's rising output of heat-trapping gases blamed for climate change.
The European Commission had proposed extending the regulation to also cover the portion of international flights over EU territory, insisting Europe was within its rights to regulate within its own airspace.
But EU member states came out against the plan, fearing it could spark a trade war with major trading partners and hamper progress toward a globally-agreed deal to curb fast-rising aviation emissions.
"We invite the European Commission to rethink the usefulness of unilateral strategy that hits Europe without environmental gain," said centre-right MEP Eija-Riitta Korhola on Twitter.
Other lawmakers criticised the move, which will reduce by around three-quarters the amount of aviation emissions regulated via the EU Emissions Trading System (ETS), and accused the EU of caving under international pressure.
"It is reckless to dismantle this effective climate policy instrument in exchange for a vague promise on a global scheme in the distant future without guarantees of environmental integrity or ambition," green party MEP Satu Hassi said in a statement.
Aviation accounts for around 5 percent of man-made emissions blamed for causing climate change.
In 2012 the European Union started charging all airlines for emissions for the full duration of their flights into and out of the bloc via its ETS but confined application to domestic EU flights, initially for one year, to give the United Nations time to craft a global alternative.
Last September, nearly 190 nations at U.N. aviation body ICAO agreed to design a worldwide scheme to limit aviation emissions by 2016 to take effect in 2020, but rejected letting Europe apply its own plans in the meantime.
Peter Liese, the MEP who steered the legislation through the Parliament, said the assembly had won important concessions including a requirement for the Commission to immediately come up with a new proposal following the ICAO meeting in 2016, four years earlier than member states had wanted.
"If no meaningful progress is made in ICAO in 2016, the pressure on decision-makers to stand by their promise to revert back to a full aviation ETS will be overwhelming," said Bill Hemmings, an environmental campaigner for Brussels-based NGO Transport and Environment.
Thursday's vote outcome means operators of EU flights will still have to pay but delays a deadline to cover 2013 emissions by one year to April 2015.
Low-cost airlines such as Ryanair and Easyjet , which fly almost exclusively within Europe, argue that the measure puts them at a competitive disadvantage versus rivals with more long-distance flights such as Lufthansa and Alitalia.
The European Low Fares Airline Association (ELFAA) said unless the EU reverses its decision it "will have no option but to reactivate its currently stayed legal challenge against such discrimination." (Editing by Jason Neely and Keiron Henderson)
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