US carbon border tax could hit Australian exports

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Washington: Senior Democrats have unveiled plans for a carbon border tax that could hit Australian exports of steel, aluminium and other high-pollution goods with tariffs, a move set to antagonise the Morrison government.

Trade Minister Dan Tehan, who will soon visit Washington to meet with Biden administration officials, has blasted similar plans by the European Union as a new form of “protectionism” that would undermine global free trade.

The Democrats behind the bill believe they could raise up to US$16 billion ($22 billion) a year through the proposed “border carbon adjustment” on carbon-intensive imports.

Trade Minister Dan Tehan has been an outspoken opponent of proposals for carbon border taxes.Credit:Alex Ellinghausen

Fees would initially apply to US imports of aluminum, cement, iron, steel, natural gas, petroleum, and coal, with the list of goods set to expand over time.

Australia managed to win a rare exception to the Trump administration’s steel and aluminium tariffs thanks to intense lobbying by former prime minister Malcolm Turnbull and then-US ambassador Joe Hockey.

The legislation is being championed by Senator Chris Coons, a close ally of Joe Biden who represents the President’s home state of Delaware, and California congressman Scott Peters.

The EU has said it plans to use a “carbon border adjustment mechanism” to impose carbon taxes on imports.Credit:AP

The New York Times reported that the proposal has been developed with input from the Department of the Treasury, the Office of the United States Trade Representative and other parts of the Biden administration.

Coons and Peters said they were aiming to “reframe trade around climate values” with the legislation.

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“Despite the leadership of many US businesses in reducing harmful greenhouse gas emissions, they will be left at a disadvantage as trading partners consider levying carbon-related tariffs on certain goods,” Coons and Peters said in a statement.

“The border carbon adjustment will raise billions of dollars to support communities as they adapt to increasingly severe weather events and invest in new technologies to eliminate greenhouse gas emissions.”

The tariff would start in 2024 and apply to around 12 per cent of imports coming into the US.

Developing countries would be excluded from the tariffs, as would countries that are judged to have environmental policies “at least as ambitious” as those in the US.

US environmental groups praised the Democrat’s proposal, with National Wildlife Federation Collin O’Mara describing it as “visionary”.

Danny Richter, a spokesman for the Citizens’ Climate Lobby, said: ”This bill is particularly well timed with the release of details to the EU’s carbon border adjustment mechanism.

US Senator Chris Coons is spearheading the effort.Credit:AP

“The prospect of the two largest economies in the world demanding accountability for carbon pollution at the same time should be a cause of celebration for climate advocates everywhere.”

Tehan said the European Union’s plan for a similar carbon border tariff, unveiled last week, was a threat to Australian jobs and may be at odds with global trading rules.

“Our major concerns are that we think it is protectionist,” Tehan told the ABC.

“We think it would be much better to incentivise countries to deal with emissions reduction, rather than penalising them.”

Tehan said he was concerned such tariffs were more about raising government revenue rather than reducing emissions.

“It’s technology that is going to provide the answers to reducing emissions, not taxes,” he said.

Matthew Knott is North America correspondent for The Sydney Morning Herald and The Age.

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