Australian businesses face another crackdown on exports with the European Parliament voting overnight to move forward on plans for a carbon levy.
The European Union will introduce a levy on any goods it imports from countries that do not have a carbon pricing mechanism – including Australia.
The Carbon Border Adjustment Mechanism (CBAM) is aimed at ensuring imports are not cheaper than products in Europe, which has had an emissions trading scheme for more than a decade.
Australia Institute climate and energy program director Richie Merzian said the move was a “clear indication” the EU will take measures to ensure its trading partners face the same costs as their own businesses when it comes to factoring in the price of carbon.
“And they’ll no longer put up with free riders,” he said.
“Europe has had a price on carbon for over 15 years now.”
Australia’s trade with Europe is different to its trade with its East Asian partners, which are heavily geared towards resources such as oil, gas and LNG in particular.
“Europe is more mixed but almost a million tonnes of steel from Australia was exported to Europe in the last decade,” Mr Merzian said.
“And a good chunk of resources go there as well as other goods – which could potentially be impacted by a carbon price.
“That’s enough for Australia to sit up and take notice.”
Mr Merzian said the measure would make it more beneficial for Australia to ramp up its own carbon pricing mechanism, rather than see taxes being paid to overseas governments.
“Businesses will have to pay a tax to Europe, rather than paying the Australian Government an equivalent carbon tax that could be redirected towards climate change projects,” he said.
Energy Minister Angus Taylor has previously declared Australia is “dead against” carbon tariffs, saying they were a “new form of protectionism designed to shield local industries from free trade”.
However, Australia is not the only target of the measure, with some saying it’s actually aimed at pressuring China to shift its zero emissions date from 2060, to 2050.
There are also reports UK Prime Minister Boris Johnson will call for carbon border levies at the G7 summit to be held in London in June.
Mr Merzian said Australia’s lack of action on climate change would also play into negotiations around a free-trade agreement with the EU.
“There have already been 10 rounds of negotiations with Australia and major area of difference is that the Europeans have been pushing for Australia to actually have a stronger suite of climate policies,” he said.
PAYING TAX OVERSEAS WON’T BENEFIT AUSTRALIA
Mr Merzian said Australia currently had a voluntary carbon offset scheme, where companies can pay about $16 a tonne to offset their greenhouse gas emissions.
This compares to the EU’s emissions trading scheme, where credits trade for about 40 euros a tonne (about $A61).
“If exporters face paying carbon prices in Europe, it will be much more expensive than what they are facing here,” he said.
Mr Merzian said Australia could instead pull together a system to collect the revenue onshore and use this money to support companies that are struggling to reduce emissions because of technology limitations such as agriculture, or to build up resilience and adaptation measures.
“The bushfires were our most expensive climate disaster and having revenue on hand for the government could be handy,” he said.
Europe’s moves already have places like Japan and Canada looking into creating their own carbon pricing systems.
While details of the EU’s carbon levy scheme are still being developed and its start date won’t be before 2020, Mr Merzian said the vote to move ahead with the scheme was significant.
“It’s a long road but this is an early, clear indication of where Europe is headed, with clear support also from the United States,” he said.
AMERICA TO UNVEIL NEW TARGET
More pressure is also likely to be placed on Australia when the United States holds its Leaders’ Climate Summit on April 22, which Australia is attending.
Mr Merzian said United States Special Presidential Envoy for Climate, John Kerry had noted comments from scientists recently that 2020 to 2030 “must be the decade of action”.
“The US will be announcing a new 2030 target next month, which is important because Australia’s target is pretty much a carbon copy of the US target,” Mr Merzian said.
The US has a target to reduce carbon emissions by 26-28 per cent below 2005 by 2025, while Australia’s target is the same but hopes to achieve this five years later, by 2030.
Mr Merzian said there was speculation the US could next month almost double its target to 40-50 per cent by 2030.
“This will highlight how weak Australia’s target and action is over the next 10 years,” he said.
“Other countries are taking action and Australia will have to now respond.”