Australia's proposed carbon emissions trading scheme may threaten the viability of the country's oil refining industry, Caltex Australia Ltd, the country's biggest oil refiner, said yesterday.

Australia has pledged to launch a carbon emissions trading scheme by 2010, but Prime Minister Kevin Rudd has been under increased pressure from industry groups who have said a scheme could drive manufacturers out of business or offshore.

The scheme, if implemented in its current proposed form, would further squeeze margins for the refinery sector in Australia, which is already importing about 25 per cent of its petroleum supplies.

The profitability of Australian refineries has fallen amidst competition from foreign refineries and as higher fuel quality requirements imposed by regulators force refineries to make costly facility upgrades.

"Many of Australia's refineries, perhaps all, could be competitive in the long run," Caltex managing director Des King said in a statement.

"But, for this to occur, what the refining industry needs is a level playing field, not an emission trading scheme that imposes a large carbon cost on Australian refineries while our international competitors bear no carbon costs."

Assuming a carbon cost of €21 per tonne, Caltex has said that its two oil refineries could face extra costs of around €47 million a year.

Under the proposed trading system, Australia's four oil refining and marketing companies will need to buy more than 25 per cent of the available permits, mostly to cover emissions by their customers, the Sydney-based company said.

BP Plc, Royal Dutch Shell and ExxonMobil Corp. also own refineries in Australia.