The Business Council of Australia (BCA) has released modelling showing emissions trading would be "fatal" to five of the 14 actual companies studied, while pre-tax profits would be slashed by more than 20 per cent.
The government wants to start emissions trading in 2010.
The BCA doesn't like the government's proposed model and has released a scheme of its own, which would be slower, softer, and offer more protection for business.
Green groups are outraged by the plan, saying it would do nothing to tackle climate change.
But BCA president Greig Gailey said emissions trading should not force Australian businesses to close.
"Nobody wants to see these industries disappear," Gailey said.
"All that happens is they close and those jobs move offshore."
The BCA's alternative plan is to hold off on emissions trading until an international agreement on climate is signed - which could take years.
In the meantime, a warm-up scheme would start, with a fixed, low carbon price of $10-20 a tonne.
When emissions trading did start, its target for emissions reduction would be "modest" - the BCA suggests returning emissions to 2000 levels by 2020.
Companies which want to expand would be allowed to go over that target.
There would be a cap on how much any company would have to pay for its carbon permits, set at three to five per cent of profits plus labour costs.
But while business would pay less, households might pay more.
Petrol would be included in the scheme, so the price would rise.
And it would be easier for electricity companies to put up their prices.
Federal Climate Change Minister Penny Wong welcomed the BCA's input, but rejected any special pleading.
"As the government, we have to be very conscious that any decision to shield one sector or increase the protection to one sector will inevitably place greater costs on other parts of the community and other parts of the economy," Senator Wong said.
Green groups panned the BCA's proposal.
Don Henry, executive director of the Australian Conservation Foundation, said polluting industries should not get a free kick.
"The emissions trading scheme must do what's right for the climate and for all Australians, not what's good for a few big polluters seeking a golden handshake," Henry said.
He described the BCA's scheme as "totally irresponsible", complicated, weak and full of exemptions.
Climate Institute chief executive John Connor said the BCA was trying to water down emissions trading.
"There appears to be a growing chorus of big carbon emitters calling for weak carbon targets and special treatment as part of the government's response to climate change," he said.
The BCA modelled the effects of the government's ETS on 14 businesses in sectors like metal processing, cement, glass, and oil refining.
Using a relatively high carbon price of $40 a tonne, the modelling found the ETS would be "fatal" for three of them. Two more would "very likely" go under.
Gailey said those results would be replicated throughout the industry.
"It may only be 14 companies in the data but I think you can take it pretty clearly that the way those 14 companies react would be pretty typical of the industry sectors," he said.
