Leading energy experts believe new European Union (EU) carbon tariffs could trigger a cascade of similar action from Australia’s major trading partners that would damage the nation’s coal and iron ore industries.
- New EU carbon tariffs target cement, iron, steel, aluminium and fertiliser
- The coking coal industry may be impacted
- Experts say other countries are likely to implement similar measures
The EU’s Carbon Border Adjustment Mechanism (CBAM) proposed to charge EU-based businesses that import carbon-intensive products including cement, iron, steel, aluminium and fertiliser.
The measures are designed to help the EU reach its goal of cutting emissions by 55 per cent by 2030, but are yet to be passed by the parliament.
“[The CBAM] is the first time we’ve ever seen any country, let alone the largest trading block, actually take a position to tax carbon exporters,” said Richie Merzian, director of climate and energy at progressive think tank The Australia Institute.
Trade Minister Dan Tehan claimed the measures may contravene World Trade Organisation (WTO) rules.
“Australia is very concerned that the EU’s carbon border adjustment mechanism is just a new form of protectionism that will undermine global free trade and impact Australian exporters and jobs,” he said.
The domino effect
Mr Merzian says while local exports may escape a direct hit from the tariffs, the indirect impacts on coking coal used in steel production could be significant.
“The EU has included iron and steel as part of the goods it will tax at the border and it will take into account the emissions from the production of those goods,” he said.
“We know Australian coking coal will go into the steel that will ultimately end up in the EU [and] will have to start factoring that price in.”
The ramifications for local exports could be even more dire if major trading partners adopt similar schemes, according to Mr Merzian.
“This is of much greater concern because of the much greater quantity of trade with Japan.
“If Japan or South Korea go down this path, we’re looking at a much larger impact to industries that export aluminium or iron or steel.”
‘Makes perfectly good sense’
The CBAM attracted the ire of the Minerals Council of Australia.
“Achieving net-zero emissions requires a concerted effort on new technologies, not trade protection,” said chief executive Tania Constable.
Ms Constable insisted “Australia has a good story to tell”, and urged the EU to recognise “over 39 [emissions] abatement activities” already underway.
Director of Energy at the Grattan Institute Tony Wood said the measures were unlikely to contravene WTO rules.
“If they design it properly, it should no way breach World Trade Organisation rules and is perfectly economically sensible.”
‘The world is changing’
Mr Merzian said the CBAM proves Australia is at the whim of international policy on climate change.
“Minister Angus Taylor says technology not taxes in terms of Australia’s approach to climate action,” he said.
“Well, the taxes are coming and they’re completely outside the control of the Australian Government.
Mr Wood said the measures should serve as a warning to coal-dependent communities.
“The writing’s on the wall. This is going to happen in various ways,” he said.
“It’s difficult to predict precisely how it’s going to play out, but it is going to happen and regions like the Hunter need to be very aware of this and that has an influence on the way you plan for the future.”