Canberra could protect decarbonising industries from unfair competition

The federal government has engaged an eminent academic to study the need for a carbon tariff to protect local manufacturers from unfair competition from imports which are not subject to restrictions on emissions of CO2.

The move opens the way for import tariffs to be applied on carbon intensive products such as cement and steel to prevent ‘carbon leakage’ from Australia’s efforts to decarbonise the economy.

Professor Frank Jotzo of the Australian National University Crawford School of Public Policy will provide input into the Department of Climate Change, Energy, the Environment and Water’s review of options to address the risk of carbon leakage.

The European Union Carbon Border Adjustment Mechanism or carbon tariff on carbon intensive products is already in place and will take effect in 2026.

The mechanism, which is now being considered for Australia, makes sure imported goods are subject to the same carbon costs as those produced within the EU, protecting local manufacturers from unfair competition.

Australia’s move is necessary following the government’s strengthening in July of the Safeguard Mechanism to reduce emissions, as well as funds going to industry to cut emissions through its Powering the Regions Fund.

The Minister for Climate Change and Energy Chris Bowen said the government was committed to protecting Australia against the risk of carbon leakage.

Bowen said: “We need to ensure our ambitious climate policies have a positive global effect and won’t be diluted by the supply of carbon-intensive products moving to countries with weaker climate policies.

“The review will look closely at the risk of carbon leakage and develop policy options to address any such risks.

“We need to consider how new policy options, like the CBAM being implemented in the European Union, could work for Australia’s national circumstances.”

Two rounds of consultation with Australian industry, environmental groups, research experts, international trade partners and local communities will inform the review, with advice to be presented to the government by 30 September 2024.

Professor Jotzo is also Head of Energy at the ANU Institute for Climate, Energy and Disaster Solutions.

He also advises the International Panel on Climate Change, as well as national and state governments on climate, economics and trade.

Picture: Australian National University/Professor Frank Jotzo