The federal government has hit out at the European Union’s proposal to impose a carbon border tariff, calling it “protectionist," despite assurances the measure is aimed at levelling the playing field on curbing emissions.
Trade Minister Dan Tehan says the move, , is a threat to Australian jobs and could risk not complying with global trading rules.
“Our major concerns are that we think it is protectionist,” Mr Tehan told the ABC.
“We think it would be much better to incentivise countries to a deal with emissions reduction, rather than penalising them.”
The Carbon Border Adjustment Mechanism was revealed as part of a raft of draft climate change measures aimed at securing Europe’s path to carbon neutrality by 2050.
The carbon levy would be first imposed on EU-based businesses that import cement, iron and steel, aluminium, fertilisers and electricity, but must still be approved by 27 member states in the EU Parliament.
It is designed to make sure imports from overseas face the same carbon price, which would be imposed on goods produced in Europe under the EU’s own emissions trading scheme.
The EU has warned there is a strong risk of "carbon leakage" undermining its efforts to drive down emissions through carbon-intensive industries moving to countries with less ambitious climate policies.
The policy also intends to encourage countries outside the EU to adopt greener policies that aren't doing enough to tackle climate change.
The levy is part of what has been named the "Fit for 55" package, which intends to reduce emissions by 55 per cent on 1990 levels by the end of the decade.
It would be phased in with a reporting system to be implemented from 2023 and countries required to pay costs from 2026 onwards.
It's not clear how the carbon border tariffs would hit Australian exports, but Mr Tehan's objections indicate there is concern over the potential impact.
“We're more likely to see indirect costs than direct costs in terms of Australian direct export of those products into the EU. So we'll continue to assess all that,” Mr Tehan said.
Australia exported $11.7 billion worth of goods to EU countries in the 2019-20 financial year, including major exports such as coal, accounting for $2.7 billion.
But the country is not listed in the top 10 exporters that would be worst impacted by sectors covered by the carbon border tariff, which include China, Russia, Turkey and the United Kingdom.
The European Union has insisted the measures will comply with rules from the World Trade Organization.
President of the European Commission Ursula von der Leyen said CO2 emissions had to have a price “that incentivised consumers, producers and innovators to choose the clean technologies”.
"Change on this scale is never easy, even when it's necessary,” she said.
“For that reason there are some who will say that we should go slower, that we should go lower, that we should do less. But when it comes to climate change, doing less or doing nothing literally means changing everything.”
Mr Tehan said Australia intended to closely examine whether the carbon tariffs amounted to a breach of global trading rules.
President of the European Commission Ursula von der Leyen. Source: Getty Images Europe
“We worry that it's focused more about raising revenue than really reducing emissions themselves,” he said.
“It's technology that is going to provide the answers to reducing emissions, not taxes.”
Opposition climate and energy spokesperson Chris Bowen said the EU’s move places pressure on the Australian government over the ambition of its climate change policies.
“I don’t want this tax to apply to Australia,” he told reporters.
“But under federal government policy settings, it will apply to Australia because our emissions reduction ambition is not strong enough.”
The United States, UK and Japan are also considering similar carbon tariffs in the lead up to the COP26 climate conference in Glasgow at the end of the year.
Australian National University associate professor Dr Christian Downie said while the initial impacts of a European carbon border tariff may be “modest”, this could increase if other countries get on board.
“The real risk is that if Japan, the US follow Europe’s lead, the impact on our export industries could mount up pretty quickly,” he told SBS News.
“The government has failed to put in place a plan to reduce emissions, so what we’re seeing now is other countries set to impose carbon taxes on our export industries.”
Prime Minister Scott Morrison has indicated Australia is committed to reaching net zero emissions as soon as possible and preferably by 2050.
But the Australian government has faced international pressure to lift its emissions reduction commitments, with both the US and UK increasing the ambition of their climate change targets this year.
