The federal government of Australia is contemplating whether or not the country should follow the lead of the European Union and apply taxes on certain imports from countries that have less stringent climate targets.
Chris Bowen, climate change-energy minister, announced that his department would initiate two rounds of consultation on whether or not Australia should implement a so-called cross-border adjustment mechanism (CBAM) to avoid giving foreign corporations an advantage over local businesses. The first two goods that would be taken into consideration are going to be steel and cement.
Bowen addressed a gathering of Australian Business Economists in Sydney that “We know of the potential for production to shift from countries with more ambitious emissions-reduction policies to those with lower emission-reduction policies, and that this could potentially result in increased global emissions.” “[This] undermines national and international climate action and has long been a key consideration in the development of climate policy across the world.” “[This] undermines national and international climate action.”
Beginning in the year 2026, the EU will begin implementing its very own CBAM. Bowen has stated that by the third quarter of 2024, he wants a final report to have been compiled with the assistance of academics regarding whether or not Australia ought to enact a policy that is comparable to the one in question or take other actions.
After delivering his speech, Bowen gave an interview to the media in which he stated, “Everyone understands, including in my discussions with industry, that this is a large and complicated process which can’t be rushed.” “The European Union provides us with a model, and we will examine it carefully in the context of Australia.”
On July 1st, the legally mandated safeguard mechanism that the government enacted in order to cut carbon emissions from the roughly 200 major industrial polluters began to take effect. Some protection will be afforded to industries such as steel and aluminum in the event that it is determined that they are “trade-exposed” to competitors that do not suffer the same carbon limits.
Despite this, the government is eager to make certain that other safeguards are in place so that it does not undermine the competitiveness of local producers. Bowen continued by saying that border restrictions such as a CBAM might serve various types of industrial objectives.
According to him, “It’s a potentially important mechanism to ensure domestic sovereign capability and supply,” and he called it that.
“One of the biggest challenges we face is supply-chain crunches, and any measure which helps us deal with that is a positive thing for the transition [off fossil fuels],” he said, adding that any system would have to be “sensibly designed” to limit any impact on costs. He was referring to the transition away from fossil fuels.
It was crucial, according to Bowen, that Australia’s top emitters contributed their “fair share,” and the improvements to the safeguards will save more than 200 million tonnes of varous greenhouse gas emissions by the year 2030.
“It is important to note that 80 percent of the safeguard companies and 86 percent of the emissions that are covered are covered by corporate net zero commitments,” he said.
Cement, iron and steel, aluminum, fertilizers, and power are the five industries that would first fall under the purview of the EU’s CBAM. These industries are considered to pose a bigger threat of shifting emissions to countries outside of the EU.
This evaluation by the government looks at these industries and the policy alternatives that are available to solve them, such as a CBAM for the steel and cement industries.
“The team will engage with key stakeholders including industry, peak business groups, experts and researchers, commonwealth and state and territory government agencies, international trading partners, relevant international bodies, and the broader community,” Bowen said. “The team will also engage with the broader community.”
According to what he mentioned in his address, important questions that need to be contemplated include the measurement of emissions that are already entrenched in traded commodities, the costs of carbon in the countries of origin, how to respond to changes in policy over time, and the type of obligations placed on importers and exporters.
Additionally, Australia would need to assess its commercial links, as well as whether or not its system was consistent with the regulations governing international trade and whether or not it was interoperable with other systems, such as the EU’s.