* Only preliminary opinion but expected to guide judges
* Environment commissioner, campaigners welcome the news
* Carbon market rises (Updates carbon price, paragraph 17)
By Johanna Somers and Barbara Lewis
LUXEMBOURG/BRUSSELS, Oct 6 (Reuters) - European rules forcing airlines to pay for carbon emissions are within the law, an adviser to Europe's highest court said on Thursday, in the latest stage of a bitter battle between the European Union and the aviation industry.
From January next year, all airlines will have to buy permits under the European Union's emissions trading scheme (EU-ETS) to help offset the carbon emissions of flights that land or take off in Europe.
"EU legislation does not infringe the sovereignty of other states or the freedom of the high seas guaranteed under international law, and is compatible with the relevant international agreements," said the opinion from Advocate General Juliane Kokott.
Critics of the EU rules have argued that under the 1997 Kyoto climate pact, countries agreed to address emissions from aviation jointly through the U.N.'s aviation body, the International Civil Aviation Organization (ICAO).
More than a decade on, talks have not yielded progress.
Kokott said the EU was within its rights to take unilateral action.
A U.S. government spokesman said the United States was not a party to the court case brought by U.S. airlines but questioned the European court's authority.
"We maintain our strong legal and policy objections to the inclusion of flights by non-EU carriers in the EU-ETS and do not see the European Court of Justice (ECJ) process as resolving these objections," Deputy Assistant Secretary of State for Transportation Affairs Krishna R. Urs said in a statement.
In contrast, European Climate Commissioner Connie Hedegaard welcomed the Luxembourg court's recommendation and added: "The EU reaffirms its wish to engage constructively with third countries during the implementation of the legislation."
NOT BINDING, BUT COMPELLING
Although the advocate general's opinion is not binding, judges at the European Court of Justice, expected to make a final ruling early next year, usually follow such guidance.
In turn, lawyers expect the London High Court of Justice, which referred the case brought by the Air Transport Association of America, American Airlines and United Continental to the ECJ, to respect its view.
The airlines took the case to the London court after Britain introduced national laws to implement the European directive. Many other airlines and governments have also expressed vehement opposition to the EU law.
Thursday's opinion casts a shadow over sales of aircraft to China by Europe's Airbus and could help favour U.S. rival Boeing , analysts say.
Airbus is preparing for a ceremony next week to mark the first delivery to China of an A380 superjumbo, earmarked for China Southern Airlines .
Earlier this year, Beijing threatened to hold back on Airbus purchases because of the EU emissions scheme.
The EU already sets a cap on the level of emissions allowed from factories and power plants. Emitters that exceed their quotas must buy carbon permits, while those within their quotas can sell any unused allowances.
The European carbon market gained more than 3 percent after the opinion was published and was trading at 10.43 euros by 1611 GMT, up nearly 2 percent. Earlier this week, anxiety about European debt and oversupply of permits dragged carbon permits to a 31-month low of 9.82 euros. <CFI2Zc1>
PRINCIPLE NOT PRICE
Airlines initially would only be required to pay for 15 percent of the carbon they emit and would be allocated free allowances to cover the other 85 percent.
For both sides, the amount of money at stake is less significant than the principles being contested, analysts say.
Depending on decisions by airlines on how much to pass on to customers, the European Commission has calculated that costs per passenger could rise between 2 and 12 euros (${esc.dollar}2.66-${esc.dollar}15.96), much less than the 100 euro per allowance penalty it would impose on airlines that do not comply.
Airlines have given much higher assessments of the cost. They have said it could hamper them from investing in more environmentally-friendly new aircraft.
The International Air Transport Association (IATA) said it was disappointed but that the debate was not over yet.
"It is only part of a complex set of developments," said Tony Tyler, IATA's director general and CEO.
"We support and need positive economic measures as part of our strategy to manage aviation's emissions," he added. "But it must be a global scheme under the leadership of ICAO."
European Commission figures show emissions from airlines have doubled since 1990 and could triple by 2020, in contrast to emissions from most other sectors, which have been decreasing.
Environmental campaigners welcomed Thursday's news as a step towards taming aviation emissions. Some said the industry should not be wasting court time.
"The aviation industry should be tackling climate change with engineers, not lawyers," said Bill Hemmings, programme manager of lobby group Transport & Environment.
Jean Leston, head of transport policy at WWF, said the inclusion of airlines in the EU carbon scheme could help to calm developing countries' fears about the cost of managing climate change.
"It's a great opportunity to fill the coffers of the Green Climate Fund," she said, referring to the fund set up by the 2010 Cancun climate change talks to manage ${esc.dollar}100 billion a year in aid to poor nations most at risk of climate change.
For now, the EU only recommends how governments should use revenues from the carbon scheme.
Lawyers said Thursday's preliminary opinion was very clearly in favour of the EU but the fight could go on.
"I suspect, it is a bit early to say that the airlines have lost this case," said Peter Zaman, a partner at Clifford Chance in London.
(Additional reporting by Charlie Dunmore in Brussels, Michael Szabo and Victoria Bryan in London, Tim Hepher in Paris, Tom Miles in Geneva and Svetlana Kovalyova; Editing by Rex Merrifield and Jane Baird)
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