Business representatives attending the CBI's annual conference in London have warned that precipitate moves to strengthen curbs on carbon emissions could damage the competitiveness of British exporters.

Companies that are heavy energy users say that production would be driven overseas to countries such as India and China if they are required to buy more carbon permits through the European emissions trading scheme.

The concerns emerged in a debate on a CBI taskforce report published this week that called for much great­er efforts to combat climate change, including extending the emissions trading scheme and raising the cost of carbon emissions.

A priority for the government, the report said, was to clarify the future of the scheme after 2012 when present arrangements end, to ensure it sets an effective carbon price.

The taskforce, made up of 18 chairmen and chief executives, recommended more auctioning of emissions permits. At present, they are allocated free of charge to companies in the scheme.

It would require big technological breakthroughs to reduce substantially emissions in the steel industry, the conference was told by Philippe Varin, chief executive of Corus, the Anglo-Dutch group now owned by India's Tata Steel.

Mr Varin, a member of the taskforce, said retaining the competitiveness of European steelmakers would depend on the rapid adoption of such technologies by international competitors.

Hilary Benn, the environment secretary, told the conference he favoured auctioning a high proportion of the permits as the emissions trading scheme was exten­ded. But Kevin Farrell, chief executive of the British Ceramic Confederation and chair­man of the Energy Intensive Users Group, said that a sudden rise in carbon costs would deter investment to reduce emissions.

"Companies with impressive investment plans are assuming a payback period of 20 years," he said. "They can't factor in an unpredictable auction over 20 years."