Australia considers carbon border adjustment mechanism

Australia's federal government will investigate a new tariff on imports of greenhouse gas (GHG) intensive materials such as steel, aluminium and cement, as part of the government's new policies designed to cut emissions.

Energy minister Chris Bowen has promised to examine whether a carbon border adjustment mechanism (CBAM), similar to that under development in the EU, will help give equal opportunities between domestic and international producers of manufactured goods in hard-to-abate sectors.

"Carbon leakage undermines national and international climate action and has long been a key consideration in the development of climate policy across the world," Bowen said on 15 August. "Loss of domestic sovereign capacity creates broader economic risks for the Australian economy and clean energy transition."

The safeguard mechanism changes imposed from 1 July are designed to bring Australia's GHG output down by 43pc against 2005 levels by 2030, requiring major emitters of more than 100,000 t/yr of carbon dioxide equivalent to reduce emissions by 4.9pc/yr until 2030.

The government said the challenges faced by emissions-intensive and trade-exposed industries have been noted in its safeguard mechanism changes and a range of funding is available for vulnerable facilities.

Emissions-intensive, trade-exposed businesses excluding coal and gas have been promised up to A$1bn ($650mn) in funding, with A$400mn for industries such as steel, aluminium and cement that are required for renewable energy projects.

Employers' organisation the Australian Industry Group welcomed the announcement of the review. It said it will push the government to build credible markets for low-emissions goods as a long-term solution to carbon leakage, while adding any CBAM will need to minimise costs on business while respecting World Trade Organisation and bilateral trade accords.

"The global transition to net zero is clearly under way but different economies are moving at different paces and using varied mixes of sticks and carrots to get there," its chief executive Innes Willox said. "Every nation is keen to ensure that emissions and industry don't simply leak from one region to another based on uneven policies rather than economic advantage."

The final CBAM review report will be finalised in next year's July-September quarter.

By Tom Major