Carbon Tariff on the Table for Australia
(11 September 2023 – Australia) The Australian government is considering introducing a tariff on carbon-intensive imports such as steel and cement to level the playing field for Australian enterprises facing inhibitive costs to accelerate decarbonisation efforts.
A Carbon Border Adjustment Mechanism (CBAM) in Australia would deliver a compelling incentive for corporates to focus on emissions reductions, in a way that avoids competitive disadvantages. Australia would be following the lead of the European Union (EU) while also establishing a “shadow carbon price”.
“Australia's consideration of a CBAM reflects the growing global movement to create a proxy price on carbon" said EY Oceania Chief Sustainability Officer, Mathew Nelson.
"Border adjustment mechanisms are ways that countries can do that in their jurisdiction without needing overseas jurisdictions to jump on board, which we know can be really challenging to deliver. A CBAM is about creating a level playing field specifically for imports, rather than creating that for exports” Nelson said.
“In the Australian context you're concerned by local businesses providing local products to the local market, rather than overseas exports. It also creates the efficiency in terms of carbon, because importing cement is cheaper than making it here clearly makes no sense because it defeats the purpose of carbon taxes."
"Detailed design of any agreed policy options will take place after a review that will consider whether Australia needs to address "carbon leakage" with a CBAM of its own and will be taken into account in the Government's Net Zero 2050 plan" Minister for Climate Change and Energy, Chris Bowen stated.
"While some in industry think a CBAM or other policy response can be implemented quickly, experience with the EU makes clear a range of complex policy issues need to be examined carefully. While we intend to learn from the EU's extensive work, any policy for the Australian policy context will need to account for our national circumstances. The final review report will be finalised in Q3 2024” Bowen added.