* Refiners face buying more permits, higher permit cost
* European Commission to analyse regulatory cost further
* Middle Eastern refiners increasingly tough competitors
By Barbara Lewis
BRUSSELS, March 1 (Reuters) - The next phase of the EUEmissions Trading System (ETS) will nearly quadruple Europeanrefiners' carbon costs to around 23 euro cents per barrel, upfrom six cents now, the head of the European refiners' industrybody said on Tuesday.
He added to calls from other energy intensive industries forfree allowances to cover their emissions until there is a globalcarbon price.
"A carbon market is fundamentally the right approach," JohnCooper, director general FuelsEurope, said at a forum attendedby the European Commission and representatives from the refiningindustry.
"But we see the pathway to global pricing of carbon as keyto restoring a global level playing field. We need to berealistic. That will take time."
EU regulators are implementing ETS reforms to reduce thenumber of allocations handed out for free and to increase theprice of permits, now around 5 euros per tonne.
In the current market phase, which ends in 2020, refinersbuy around 23 percent of their allocations, which on theassumption carbon costs 10 euros per tonne, translates into afee of 6 cents per barrel for refiners.
Apart from buying permits, they face extra energy costs asutilities that buy their ETS allowances pass on costs.
Arguments are ongoing about how free allowances will bedistributed in the phase from 2021 and all heavy energy usersare making their case to the Commission in parallel with a widerdebate about industrial competitiveness.
FuelsEurope estimates the refiners will buy 30 percent ofETS allowances they need to cover emissions in the next marketphase, when it assumes carbon permits will cost 30 euros pertonne and a 23 euro cent carbon cost per barrel.
European refiners have enjoyed rare success as the low oilprice has boosted profits, but Cooper said they faced a growingchallenge from Middle Eastern refiners with lower regulatorycosts and very low energy costs.
For those selling into Europe, the higher regulatory costsare a bonus because they increase market prices for refinedproducts, Cooper said.
For the Europeans, in addition to the ETS, they also have toimplement other EU pollution laws, whose costs the industryestimates at $1.50 per barrel.
The Commission in June said EU environment law added 47 eurocents per barrel and on Tuesday said it would analyse the issuefurther.
From the Netherlands, holder of the EU presidency and hometo major refiner Royal Dutch Shell, Erik Janssen, anadviser to the Dutch economics ministry, said the focus was onimplementing the Paris Agreement on climate change, without "anegative impact on the level playing field for Europeanindustry". (Editing by David Evans)
