The head of airline industry group IATA on Tuesday urged the European Union to postpone its controversial carbon tax scheme, amid warnings it could spark a trade war that would penalise Europe.

The scheme -- under which airlines flying to, from or in the EU must pay a tax if they exceed their carbon allowance -- has caused a major outcry among carriers, which say they are already struggling due to global economic woes.

Already, EU authorities have had to push back a deadline for airlines to comply to mid-June after Chinese and Indian carriers refused to cooperate with the scheme, which came into effect on January 1.

"The European Commission have said all the time 'we cannot amend our scheme'... but as soon as the Indian and Chinese carriers didn't comply they gave them more time," said Tony Tyler, head of the International Air Transport Association.

"There is obviously some flexibility. So why don't they postpone the whole thing? Make the deadlines flexible," he told reporters at IATA's annual general meeting.

In February, China's aviation watchdog forbade Chinese airlines from participating in the so-called Emissions Trading Scheme (ETS).

"The scheme will result in growing costs for air carriers and these costs will be transferred to passengers," Wang Changshun, chairman of the Chinese state-owned carrier, said at the annual meeting.

The ETS tax will cost China's aviation industry 790 million yuan ($124 million) this year and an estimated 3.7 billion yuan by 2020, he added.

IATA officials have warned the scheme could trigger a trade war, with governments and airlines refusing to buy European planes and aviation equipment or to give overflight permission to European carriers in retaliation.

"No airline -- European or otherwise -- should be a target for retaliation because European governments are acting extra-territorially," Tyler said in his opening remarks on Monday.

Brian Steele, IATA's director of aviation environment, told reporters IATA was working with the UN's International Civil Aviation Organisation (ICAO) to create a multilateral solution.

The proposed solution -- which both bodies hope will persuade Europe to step back from the ETS -- is expected to be finalised by the end of 2012.