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Good foundations: Tariffs to ensure Aussie firms avoid ‘carbon leakage’

Imported steel and cement could face a tariff to ensure Australian producers seeking to reduce carbon emissions are not disadvantaged.

Aug 15, 2023, updated Aug 15, 2023
Minister for Climate Change and Energy Chris Bowen. (AAP Image/Mick Tsikas)

Minister for Climate Change and Energy Chris Bowen. (AAP Image/Mick Tsikas)

Climate Change Minister Chris Bowen told an Australian Business Economists forum in Sydney on Tuesday policies were needed to ensure a level playing field for Australian firms.

“The decarbonisation task is most acute for large industrial facilities, frequently in hard-to-abate sectors and subject to competition in international markets,” Mr Bowen said.

He said now that Australia had in place a safeguard mechanism to improve incentives and confidence for facilities to invest in decarbonising their operations, it was time to examine how best to prevent “international carbon leakage risks”.

But at the same time any policy change needed to protect Australia’s reputation as a reliable and secure trading partner.

“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 potentially resulting in increased global emissions,” he said.

“Carbon leakage undermines national and international climate action and has long been a key consideration in the development of climate policy across the world.”

The European Union is developing a “carbon border adjustment mechanism”, which will mean from 2026 key importers into the EU will need to purchase certificates equivalent to the carbon price of their emissions trading scheme.

The European scheme applies to imports in five emissions-intensive sectors deemed at greater risk of carbon leakage: cement, iron and steel, aluminium, fertilisers, and electricity.

Mr Bowen said his department would work with academics on a review to assess carbon leakage risks, develop some policy options, and look at the feasibility of an Australian carbon border adjustment mechanism, particularly in relation to steel and cement.

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