Carbon tariffs risk ‘slip into protectionism’

afr.com:

The climate change expert conducting a review for the Albanese government into carbon leakage – the importation of products from countries which do not have strong carbon abatement policies – said a carbon tariff for imported goods could become a “slippery slope into protectionism”.

Australian National University professor Frank Jotzo, who federal Energy and Climate Change Minister Chris Bowen appointed to look into different schemes to avoid carbon leakage, said it was not inevitable that Australia would follow the European Union’s lead and introduce a carbon border adjustment mechanism.

Smelters in Australia may have more stringent emission rules than this one in Russia. Bloomberg

But he expected many other countries to consider the idea, known by the acronym CBAM, which seeks to stop so-called carbon leakage.

“With the EU going this way, the floodgates are open for other countries to do likewise,” Professor Jotzo told The Australian Financial Review.

Trade-exposed industries, such as steel and cement, currently receive discounted baselines under the federal government’s safeguard mechanism for large carbon emitters.

This allows them to increase production and their emissions to remain competitive against global rivals who may not be subject to carbon abatement policies that are as stringent.

Professor Jotzo said that over time, discounts for trade-exposed and energy-intensive industries become more expensive, so alternatives may be needed.

“After a while, it starts to look like a subsidy, so border measures become more attractive in that context,” he said.

“But the main argument against CBAM is an obvious concern that when you start levying import tariffs it could be a slippery slope towards protectionism.

“Of course,