UPDATE 1-Top EU powers backing down over aviation emissions-sources
* Britain, France, Germany seen watering down EU position
* UN group seeking global deal on aviation emissions
* European Parliament can block a weak deal
BRUSSELS/MONTREAL, Oct 2 (Reuters) - Britain, France and Germany are prepared to water down the EU's position on aviation emissions as a way to strike a global deal, after some regions threatened a trade war when the EU imposed restrictions on its own, sources close to the talks said.
But the sources said the shift could jeopardise the EU's carbon trading scheme - the central plank of its climate policy - and put the three countries on a collision course with the European Parliament, which could reintroduce the EU emissions restrictions if it is not happy with a global deal.
"These three countries - France, Germany and Britain - are putting the whole deal at stake," one of the sources said, speaking on condition of anonymity.
The U.N.'s International Civil Aviation Organization (ICAO) is meeting in Montreal to try to resolve the global row, which was sparked when the EU introduced a law making airlines using EU airports pay for their carbon emissions. Two weeks of talks are slated to end on Friday.
The outcome will have implications for international relations, aviation competitiveness and the EU Emissions Trading Scheme (ETS), which is already struggling under a burden of surplus carbon allowances.
The EU introduced its law after a decade of ICAO talks failed to reach a deal on aviation emissions, which account for 5 percent of global warming, according to U.N. data, and are expected to triple by 2050.
But, after international outrage, the bloc agreed to suspend for one year its law for intercontinental flights.
Sources close to the matter said Britain, France and Germany - which represent some of the EU's biggest aviation interests, including IAG, Airbus, Deutsche Lufthansa and Air France-KLM - were instrumental in agreeing to the delay, and were ready to back down again.
While the three powers dominate the European Council of member states, they have less influence in the European Parliament, which has said it needs a strong deal.
NEARLY 200 COUNTRIES TO APPEASE
Negotiators from 191 countries are debating a global market-based measure by 2020, plus a framework on regional schemes for the interim.
That proposal was supported by the 36-member ICAO governing council in early September as the basis for talks at the ICAO general assembly, which concludes on Friday.
The framework is needed to allow the EU ETS, the only existing regional scheme that applies to foreign carriers, to continue to function until 2020.
Parts of the framework for what will transpire between now and 2020 have drawn fierce opposition from the United States, Singapore, Russia, Brazil and emerging economies.
Michel Wachenheim, France's ICAO representative and president of the two-week assembly, unveiled a revised negotiating text Wednesday morning with drastically watered-down framework language.
Wachenheim tried to mesh input from key nations and blocs of countries he met with over the past five days, especially surrounding concerns about the framework for interim measures.
The new text says that "mutual consent" is needed if a regional scheme is found to cover flights that do not depart or land within that region, or if the scheme is "intended to cover any portion of those flights beyond the national airspaces of the States concerned."
The revised text also tried to address festering concerns about which countries would be exempt from complying with regional schemes.
The United States had suggested an approach which appears in the new text, exempting airlines based on routes rather than country, and based on a hard number of so-called "revenue ton kilometers" (RTKs) that gets reduced each year after 2014. That would replace an earlier plan to exempt countries that account for less than 1 percent of global RTKs.
Englebert Zoa Etundi, Cameroon's representative to ICAO, who represents the African bloc of negotiators, told Reuters last week that the 1 percent threshold was necessary to protect African air passengers and Africa's burgeoning airline industry.
WINDOW OF OPPORTUNITY
Britain and Germany declined to say whether they backed a watered down deal, while the French government was not immediately available to comment.
"The UK is continuing to work closely with EU and international partners to achieve an ambitious package toward a global market-based aviation emissions measure by 2020, plus a framework on regional schemes which allows the EU ETS to continue to function in the interim," Britain's department of energy and climate change said.
An EU official said ICAO's executive committee continues to debate the text, and may vote on the changes on Thursday. Should the text win committee approval it would be sent to the entire plenary for approval on Friday - in theory, the final day of the meeting.
European Commission spokeswoman Helen Kearns said any agreement was unlikely before the very end of the talks.
"Europe has already been extremely flexible in agreeing to stop the clock," she told reporters. "In doing this we avoided a probable trade war. We now have a very important window of opportunity between now and Friday."