Around 4.9 million allowances were issued to just three of more than 230 airlines that the UK regulates, it said, suggesting many large airlines, such as British Airways, have not yet completed the required steps to open registry accounts.

"There is nothing holding up the issuing of free allowances, as soon as aircraft operators complete the registry account opening process, they will be able to receive their allowances," the statement said.

British Airways, part of IAG (ICAG.L), is set to receive 10.3 million permits or around 18 percent of the UK's total allocation of so-called EU aviation allowances (EUAAs) to airlines this year, DECC said last October.

EasyJet (EZJ.L) and Virgin Atlantic are expected to be allocated more than 3 million EUAAs each this year.

The EU ETS covers around half of the 27-nation bloc's carbon dioxide emissions by including around 12,000 power and industrial plants. Airlines joined the scheme this year.

But non-EU governments have lashed out against the scheme because the cost is calculated on the emissions from the point of origin, not just in Europe.

More than 20 countries opposed to the EU law have agreed on a basket of retaliatory measures, adding to a series of threats that have raised the prospect of the globe's first carbon trade war.

Airlines using EU airports this year will receive around 183 million EUAAs free, or 85 percent of the sector's emissions cap in 2012. The rest, or 15 percent, will be sold via auctions.

The UK's DECC has said it will auction 7 million EUAAs each year.

(Reporting by Jeff Coelho; editing by Jason Neely)

• A Permanent Economic Emergency