Company executives believe the refinery, which employs 350 people, would be unable to compete with overseas facilities that do not have to pay to emit greenhouse gases.

The Herald Sun quoted ExxonMobil Australia chairman Mark Nolan as saying the company would struggle to deal with extra costs.

"If you put a carbon price on Australian petroleum refining we'd find it very difficult, if not impossible, to recoup any of those costs because the price of petroleum products in Australia reflects the regional market."

He added that ExxonMobil had told Professor Ross Garnaut and others that it would be difficult for domestic refineries to compete on a level playing field unless the Government recognised refining as an emissions-intensive, trade-exposed sector.

Nolan also warned an ETS might make it more difficult for ExxonMobil to develop new liquid natural gas projects.

Climate Change Minister Penny Wong said yesterday the Government would consider industry concerns as it developed the trading scheme, due to start in 2010.

"We understand there are various industries we have to be very mindful of, and obviously these issues will be canvassed in the Green Paper," Wong said.

"But what's important here is this: climate change is facing us, it is coming at us."

Australian Workers Union national secretary Paul Howes said companies subject to international competition should get free carbon emission permits from the Government to ensure that they could change their process to lower emissions while continuing to produce the goods Australia needed.

He added there was no point in Australian refineries closing if they were replaced by facilities overseas that had lower environmental standards.