What are ‘carbon border adjustments’ and what would they mean for Australia?

09.06.21 By

The period of gentle diplomacy, when foreign leaders would allude to or tacitly chide Prime Minister Morrison for Australia’s climate inaction, is coming to an end. In its place we are beginning to see a new era of punitive economic measures, with one such measure being ‘carbon border adjustments’.

What are ‘Carbon Border Adjustments’?

‘Carbon border adjustments’ refer to tariffs that a nation may place on emissions-intensive goods imported from a country that either lacks a carbon price of its own or is otherwise failing to take reasonable action to address the climate crisis. They are one way by which countries that are serious about climate action are going to try and coerce laggards – like Australia – to do better.

As an economic measure they have been developed particularly by the EU, and are on track to be phased in from 2023 and fully implemented by 2026. They have already caught Australia’s attention, with Scott Morrison objecting to the prospective measures (“We’re going to do it our way”) ahead of the climate-focussed summit. In spite of the Prime Minister’s complaints of ‘economic coercion’, the UK’s High Commissioner to Australia, Vicki Treadell, has nonetheless urged Australia to raise its ambitions before the summit, stating that “a high level of ambition, not just for net zero by 2050” is the best way for any country to lessen the future toll of carbon tariffs on its economy.

What would carbon borders look like for Australia?

Bad. Until such a time as Australia gets serious about tackling climate change, Australia stands to be hit particularly hard by any new tariffs – if only compared with the other G7 nations, who have all strengthened their climate commitments for the decade.

Until recently, it was only the EU that was moving seriously towards carbon border adjustments. Now, however, it’s clear that other major economies and vital trading partners to Australia, including Japan and the United States, are considering the same coercive route. And while the tariffs from the EU’s carbon borders may prove damaging in themselves (including likely tariffs on aluminium, steel, chemicals, and other products made from Australian raw materials), they pale in comparison to an outcome where every one of the G7 nations puts in place new carbon borders. Such an outcome may be a few years off, but is not unlikely given all of the signs of the G7 nations leading up to the summit.

What other climate measures are being discussed at the moment?

Beyond talk of carbon border adjustments, many nations have taken other steps together to strengthen their climate commitments. These include:

And some of the specific new pledges made by countries this year include:

Join the Climate Council! Sign up to our newsletter to receive the latest Climate Council news and alerts.

Pink button with white text saying 'join'.