UPDATE 1-Steelmakers say top EU court rejects carbon case
* Commission welcomes the decision
* Eurofer says has option to take case to a national court (Adds background, comment)
BRUSSELS, June 7 (Reuters) - European steelmakers said the European Union's top court had thrown out their case seeking to change the rules on free carbon allowances in the next phase of the Emissions Trading Scheme (ETS).
Steel industry body Eurofer confirmed the case had been declared inadmissible by the Luxembourg-based European Court of Justice.
"We knew it was possible because of the ... rules for going to the court," Eurofer Director for Public Affairs Axel Eggert said.
Eurofer launched the case in July last year, challenging the regime that determines how many permits to pollute that steelmakers will get for free in the next phase of the ETS beginning in 2013.
It said the rules did not set a fair benchmark for allowing the industry's most efficient 10 percent of factories to get all their pollution permits at no cost.
"There is no steel company that would get all its allowances for free, because the benchmark is so low," Eggert said.
He added that steelmakers still had the option to take the case to a national court.
A spokesman for the European Court of Justice said he could not comment on the status of the case but the court would publish its decision once all parties were notified.
"Of course the Commission is satisfied that the European Court of Justice sided with us," Commission spokesman Isaac Valero-Ladron said. "It is very positive to see that our solid arguments prevailed."
Under the pressure of oversupply following economic slowdown, allowances on the EU ETS have collapsed to record lows below 7 euros a tonne, far below the roughly 20 to 50 euros analysts have said is necessary to stimulate low carbon investment.
The market did not respond to news of the court case.
"Whatever the outcome the case would have been, the overall cap for Phase 3 (2013-2020) is already set in stone and will not change," Isabelle Curien, a carbon analyst at Deutsche Bank, said.
"It would only change the volume of allowances to be bought at auctions by installations in the sector, so I would not see a noticeable impact on prices."
For now, steelmakers are given their allowances, but from the next phase of the ETS in 2013, far fewer will be handed out.
Steelmakers' permit allocations will be based on an efficiency index - generally a value reflecting the average greenhouse gas performance of the 10 percent most efficient installations.
Heavy industry, already suffering from economic downturn, has said increased costs resulting from the ETS could drive it out of Europe and result in carbon leakage, rather than reduced emissions.
Those considered vulnerable to carbon leakage, such as the steel and aluminium sectors, will be given help with the transition, the Commission has said. (Additional reporting by Jeffrey Coelho in London, editing by Jane Baird)