Canberra’s diplomatic and trade representatives are in the midst of negotiating a multibillion-dollar free trade deal with the European Union. But MEPs in Brussels are warning they will not ratify any such deal with Australia until it does more to reduce its emissions.
Australian exporters to Europe will face millions of dollars in new tariffs after the European Parliament voted to move forward with a carbon levy on products from countries lacking serious pollution reduction programs.
The program is expected to begin by targeting a narrow range of industrial sectors including cement and chemicals. Yesterday the EU warned that Australian steel and aluminium industries would be among the first to be hit.
The prospect of paying additional tariffs comes under the new Carbon Border Adjustment Mechanism (CBAM). This mechanism is designed to apply tariffs on imports equivalent to the fees paid under the EU’s Emissions Trading System (ETS) by local businesses producing the same product.
Europe’s ETS was introduced in 2005, and now Brussels is rolling out a suite of new climate reforms aimed at cutting Europe’s CO2 emissions by 55% by the end of the decade.
In 2016, Australia exported goods to Europe worth more than A$20 billion. In the past decade, we have exported to Europe more than 980,000 tonnes of steel. At the price of €50 (A$77) per tonne of carbon — Brussels’ own forecast — exports of the same volume would attract tariffs equivalent to A$77 million.
The European Steel Association has said the industry only supported the introduction of carbon tariffs as a “supplementary mechanism,” and expected that industry would continue to be able to claim pollution allowances to defray other expenses, such as the high costs of carbon abatement technology.
Further reaction is expected now from Canberra and we continue to monitor the situation.
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