Emissions reduction should stimulate trade flows, not disrupt them

Australian made and manufactured products may become more expensive when sold in the European Union under plans for a Carbon Border Adjustment Mechanism (CBAM). The measures, if adopted by other nations, could result in severe impacts for Australian industry.

“The proposed emissions permit, that charges ‘carbon-intensive products’ imported into the EU, will undermine longstanding agreements on international free trade,” ACCI’s international director Bryan Clark said.

“We expect more and more nations to consider these mechanisms in the lead up to 2021 United Nations Climate Change Conference, however it’s paramount that any such decisions are compliant with the WTO’s rules-based system of global trade.

“Despite Australia pledging to meet its international obligations on emissions reduction through the Paris Agreement commitments, businesses could expect to be hit with charges on their European exports under these EU initiated measures.

“After almost 75 years of removing obstacles to the free and fair flow of global trade, now is not the time to be introducing new barriers – especially as the world continues to suffer from the COVID-19 pandemic.”

Under the newly released policy framework for a CBAM, EU importers will be required to purchase emissions certificates at a price determined by the EU Emissions Trading Scheme through an existing auction system, ultimately raising costs for consumers.

“Rather than reflecting the true emissions profile of imports, the CBAM applies an EU cost base to imports irrespective of action taken in other countries. Australia’s technology-focused approach to emissions reduction could see the EU apply internal costs to Australian imports even if Australia’s approach to emissions reduction is more effective,” Mr Clark said.

“Australia has a demonstrable track record of progressively meeting its international climate commitments under both Kyoto and Paris agreements. We are world leaders on investment in renewable energy and are committed to achieving net-zero as soon as possible.

“Applying obstructions to the free flow of trade is not the best platform to bring about coordinated action on climate change, nor is it likely to generate widespread support from the international community.

“The free flow of goods, capital, intellectual property and people can help solve the challenges of climate change.

“Investment in the research and development of low-emissions technologies are more likely to achieve effective climate action. Reducing tariffs and barriers to the distribution of technology and ideas can directly address climate change on a global scale.

“Emissions reduction proposals should stimulate trade flows rather than disrupt them.”

/Public Release. This material comes from the originating organization/author(s)and may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).View in full here.