UN airline emissions pact gets cold welcome from EU lawmakers

* UN agency approved deal to curb aviation emissions

* EU has own emissions trading scheme for internal flights

* Agreed to exempt international flights until 2017

* EU has to decide whether to extend exemption in view of UN deal (New (KOSDAQ: 160550.KQ - news) throughout, adds comment from Greens MEP)

By Julia Fioretti and Allison Lampert

BRUSSELS, MONTREAL Oct 7 (Reuters) - European Union lawmakers said on Friday they would keep the bloc's existing emissions trading system for flights within Europe, and would weigh a future decision to apply it to foreign carriers because the world's first global aviation pollution deal is not "ambitious" enough.

The European system actually reduces pollution from flights, according to EU lawmakers, while a United Nations approved deal on Thursday merely curbs it at 2020 levels.

The EU ETS is a "cap and trade" system in which emissions are capped at certain levels. The deal reached by the International Civil Aviation Organization in Montreal allows carriers to increase emissions without limit as long as they offset them by purchasing carbon credits from designated environmental projects.

"This (the ICAO deal) is historic, but unambitious," said German MEP Peter Liese, from the centre-right group, the largest, in the Brussels legislature.

EU lawmakers recently passed a resolution saying intra-European flights would still be covered by the ETS (MCX: UTSY.ME - news) .

"It (the ICAO deal) is a first step of action from countries who until now didn't do so," said Bas Eickhout, a green member of the European Parliament. "But other countries are allowed to go beyond that."

Two EU diplomats said the bloc was unlikely to dismantle its internal emissions trading scheme, with one calling it a 'red line.'"

Industry has argued the ICAO deal should be the only emissions scheme for international aviation. But as a concession, the deal's text was drafted in a way that allows the EU to keep its scheme for flights between European countries, said two sources familiar with the matter.

"Of course this ICAO deal is not enough to really decarbonise aviation," said EU Transport Commissioner Violeta Bulc at a news conference. But "without this deal, there is no other progress."

"We will now build on it."

The European Commission, the EU executive, said it would soon present a report on the future of the ETS.

Following the ICAO deal, the EU must decide whether to extend an exemption for international flights from its ETS beyond next year. The issue almost sparked a trade row ahead of the 2013 ICAO assembly.

"The next five or six months will be important," said Jens Nilsson, an MEP from the parliament's centre-left grouping. "There will have to be a decision on the best way to act in Europe with this global deal in place."

Eickhout, who favours imposing the ETS on foreign carriers, said lawmakers should weigh whether the ICAO deal goes far enough to curb pollution from airlines.

"That will be the yardstick. Was (the deal) decided here ambitious? My answer is 'no,'" Eickhout said in Montreal.

The EU had ordered foreign carriers to buy credits under its ETS in 2012 but backtracked when countries said it violated their sovereignty and China threatened to cancel plane orders to Airbus Group SE (LSE: 0KVV.L - news) .

The EU instead agreed to temporarily stop applying the ETS to foreign carriers and allow ICAO to craft a global deal.

At least 65 countries generating 86 percent of aviation activity will join that deal's voluntary phases from 2021 to 2026. The deal becomes mandatory from 2027 for states with larger aviation industries. (Additional reporting by Allison Lampert in MONTREAL and Susanna Twidale in LONDON; Editing by Ruth Pitchford and David Gregorio)