UPDATE 1-EU court to rule on airline CO2 cap on Dec 21
* EU's top court sets date for airline CO2 ruling
* Non-EU airlines fight inclusion in scheme from 2012
DURBAN, South Africa, Dec 6 (Reuters) - The European Union's highest court is expected to give its final ruling on Dec. 21 on a European law that would force all airlines to pay for their carbon emissions, an EU source said on Tuesday.
The ruling was previously expected early next year.
"It will be on December 21 at 1100 CET (1000 GMT)," an EU diplomatic source said at United Nations' climate talks in Durban, South Africa.
From Jan. 1 next year, all airlines will have to buy permits under the European Union's emissions trading scheme to help offset the carbon emissions of flights that land or take off in Europe.
The plan has prompted a bitter battle between the European Union and the aviation industry, as the United States, China and two dozen other nations have urged the European Union not to include non-EU carriers in its plan.
Nations opposed to the plan say it would infringe a "cardinal principle of state sovereignty" by basing its charges on the distance flown by each flight, which means calculations would include foreign airspace, in violation of a 1944 pact that gives each country exclusive authority over its skies.
It would also discriminate against nations located furthest away from Europe, they argue.
In October, an adviser to the European Court of Justice said the EU's rules were within the law. The opinion of the advocate general, though not binding, often influences the court's final decision.
The EU's carbon market, which caps the emissions of EU industry by putting a price on carbon, is suffering from record low prices due to concerns over the future of the eurozone economy and the oversupply of permits.
If all airlines are forced to enter the scheme from Jan. 1, 2012, it would be a bullish signal for prices, one emissions trader said.
However, airlines' demand for permits was not forecast to be high at first as they will only be required to pay for 15 percent of the carbon they emit in 2012 and will be given permits for free to cover the other 85 percent. They will have to buy more emissions permits over time.
"The impact of aviation's inclusion from a demand perspective is relatively small. However the impact on market confidence of a ruling against its inclusion could add further pressure to carbon market confidence," another trader said.
"If the EU can't enforce (its law) on aviation the likelyhood of it covering other areas such as shipping becomes all the more remote," he added.
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