Chinese airlines have been ordered not to join the European Union's Emissions Trading Scheme (ETS) aimed at cutting carbon emissions.
Authorities have also barred airlines from increasing their fares or adding new charges for the scheme.
The ban comes just weeks after the China Air Transport Association said its members did not support the ETS.
The scheme, imposed from January 1, levies a charge on flights in EU airspace based on carbon emissions. But the ETS has faced severe criticism from China, the US and Canada.
China has claimed that the plan could cost Chinese airlines €95 million in extra annual costs, the BBC reports.
"It is going to be very tricky. You have to wait and see how the EU will react," Siva Govindasamy of Flightglobal reportedly said.
"They would be able to stop the Chinese airlines from flying to the EU, but that could see retaliatory action by China which will not be good for either side.”
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