Australia Considers Imposing Tariff on GHG-Intensive Imports in Effort to Cut Emissions
Australia’s federal government is set to investigate the possibility of imposing tariffs on imports of greenhouse gas (GHG) intensive materials, including steel, aluminium, and cement. This move is part of the government’s new policies aimed at reducing emissions and promoting equal opportunities between domestic and international producers in environmentally challenging industries.
The country’s energy minister, Chris Bowen, has expressed the need to examine the potential benefits of implementing a carbon border adjustment mechanism (CBAM), similar to the one being developed in the European Union (EU). The purpose of this mechanism is to prevent carbon leakage and ensure a level playing field for manufacturers operating in hard-to-abate sectors.
Bowen stated, Carbon leakage undermines national and international climate action and has long been a key consideration in the development of climate policy across the world. He emphasized the importance of safeguarding domestic capacity in order to mitigate risks to the Australian economy and facilitate a transition to clean energy.
To fulfill its emissions reduction targets, Australia has introduced changes to its safeguard mechanism, aiming to reduce GHG output by 43 percent against 2005 levels by 2030. Industries emitting over 100,000 tonnes per year of carbon dioxide equivalent are required to reduce emissions by 4.9 percent annually until 2030. The government acknowledges the challenges faced by emissions-intensive and trade-exposed industries and has made funding available to support vulnerable facilities.
Under the new policies, emissions-intensive, trade-exposed businesses (excluding coal and gas) can receive up to A$1 billion ($650 million) in funding. In particular, A$400 million has been allocated to industries such as steel, aluminium, and cement, which are crucial for renewable energy projects.
The Australian Industry Group, representing employers’ interests, has welcomed the government’s decision to conduct a review. The organization emphasizes the importance of establishing credible markets for low-emissions goods as a long-term solution to carbon leakage. They also highlight the need for any CBAM to minimize costs on businesses, while respecting international trade agreements.
Innes Willox, the Chief Executive of the Australian Industry Group, stated, The global transition to net zero is clearly underway, but different economies are moving at different paces and using varied mixes of sticks and carrots to get there. He stressed the importance of ensuring that emissions and industry do not simply shift from one region to another due to uneven policies.
The review report on the potential implementation of a carbon border adjustment mechanism is expected to be finalized in the July-September quarter of next year.
Overall, Australia’s consideration of imposing tariffs on GHG-intensive imports signifies its commitment to reducing emissions and ensuring a fair playing field for domestic manufacturers. This move not only supports climate action but also protects the Australian economy and promotes the transition to cleaner energy sources.
