The federal government has begun to respond to calls from major manufacturers, including BlueScope, to protect local industries from cheaper, dirty imports, following the introduction of the Safeguard Mechanism.
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In a speech in Sydney on Tuesday, August 15, Climate Change and Energy Minister Chris Bowen outlined that the government will look into whether a carbon border tariff can be applied in Australia.
A similar mechanism is being prepared by the European Union, to protect local, carbon intensive industries that have to pay to reduce or offset their emissions from being undercut by cheaper products imported from overseas that don't have the same requirements.
"We know of the potential for production to shift from countries with more ambitious emissions reduction policies to those with lower emission reduction policies, and potentially resulting in increased global emissions," Mr Bowen said.
Mr Bowen singled out the industries of steel and cement as being particularly in need of protection.
A BlueScope spokesperson welcomed the announcement of a timeframe of the review to take place.
"A well-designed carbon border adjustment mechanism (CBAM) has the potential to assist domestic industries such as steel to remain internationally competitive while decarbonising," the spokesperson said. "We note there are many complex design questions that will need to be addressed for a CBAM to be effective in achieving these goals. We look forward to making submissions and discussing these design questions with the government in detail."
After BlueScope and the federal government came to an agreement on the Safeguard Mechanism in April, which required the steelmaker as one of Australia's 200 largest emitters to rescue or offset its emissions, BlueScope CEO Mark Vassella said the government needed to introduce some form of a carbon border tariff.
"It will be a critical measure in ensuring that Australian domestic manufacturing is not competitively disadvantaged and that greenhouse gas emissions are not transferred offshore," Mr Vassella said in April.
While this would protect BlueScope's current footprint, speaking to an Illawarra industry group in June, BlueScope general manager manufacturing David Scott said having surety that imported products would not undercut domestic alternatives was essential for the steelmaker's future plans.
"If we were to go down this pathway in transition to low emissions and spend billions of dollars, you want some surety that someone isn't just going to then import a higher carbon-based steel from a blast furnace based in Asia," Mr Scott said. "That defeats the purpose of what we're trying to achieve."
The changes would also apply to cement products produced in the Illawarra and Southern Highlands by Boral. Boral CEO Vik Bansal said last week in the company's Financial Year 2023 results that the company would "advocate for an effective carbon border adjusted mechanism for Australia".
Mr Bowen said the review report would be delivered in the second half of 2024 and account for international trade rules and alignment with other schemes such as that proposed for the EU.
"While there has been a lot of focus on CBAMs, we intend for the review to think broadly about the possible carbon leakage policies that could complement and support the Safeguard Mechanism reforms and welcome business engagement in this process," he said.
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