China has banned all its airlines from joining the European Union's Emissions Trading Scheme.
The government says the scheme, which is designed to cut carbon emissions, will cost its airline industry 95 million euros ($US124 million) in extra annual costs.
Chinese airlines are also barred from increasing their fares or adding new charges for the scheme.
At least 26 countries object to the ETS, which became law on 1 January.
In December, the European Court of Justice ruled the ETS was perfectly legal.
According to EU estimates, the scheme will see the cost of air fares rise by between 2 - 12 euros per passenger.
Analysts said that given the global economic conditions and an uncertain outlook for the travel industry, airlines were wary of the scheme hurting their profits.
Frost & Sullivan global vice president Chris De Lavigne says the aviation sector is already facing quite severe challenges.
''The airline industry as a whole has already been hit by high fuel costs in the past couple of years and no one wants additional cost factors coming in,'' he told the BBC.