With momentum building in the European Union for tariffs on global carbon free riders, the Morrison government is left with few options except to rail impotently against what it calls, with Trump-level deceit, “protectionism”.
Last week the European Parliament backed a motion proposing the adoption of a Carbon Border Adjustment Mechanism (CBAM) that would impose tariffs on products from countries with lower emissions reductions targets than Australia. The goal is to prevent “carbon leakage” — whereby economic activity is shifted to other countries with high emissions intensity than Europe.
Scandal-plagued Morrison government minister Angus Taylor says Australia is “dead against” carbon tariffs, as if that mattered to European politicians and the European industries that have to compete with Australian products. The government says it will use the World Trade Organisation to oppose the tariffs “we want a trade liberalization approach, not a protectionist approach,” says Trade minister Dan Tehan.
In fact it is the Europeans who are the free traders here: by refusing to take any meaningful climate action, and promoting the expansion of fossil fuels like gas, the Australian government is free riding on international emissions abatement efforts and subsidising Australian exports which should cost more, reflecting a proper carbon price.
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European industries required to comply with realistic carbon abatement goals reflecting the Paris Agreement — nearly twice as ambitious as the useless Tony Abbott era ones Australia has — face an unfair playing field against Australian exports.
In making the carbon leakage argument, the EU can look for support to none other than Mathias Cormann, head of the OECD, who last night defended his role in the destruction of one of the world’s most effective and efficient carbon abatement schemes — the Gillard government’s carbon pricing system — by saying “it was not desirable to shift economic activity and emissions into other parts of the world where for the same level of economic output emissions would be higher and that remains an issue that the world needs to grapple with today”.
Cormann thereby neatly encapsulated exactly why the EU is justified in imposing tariffs on carbon free riders like Australia.
The OECD head made another reference in his quest to draw a line under his long climate denialist actions as a senior member of the Coalition, repeatedly noting “the absence of an appropriately comprehensive global agreement on carbon pricing”.
With one of the world’s biggest trading blocs embracing carbon tariffs, a lot of very large corporations may suddenly decide that a comprehensive carbon pricing agreement is a good thing. A European oil major is now calling for an international carbon price. And the American Petroleum Institute — one of the most powerful fossil fuel lobbying groups in Washington — has recently endorsed carbon pricing, saying “API supports economy-wide carbon pricing as the primary government climate policy instrument to reduce CO2 emissions.”
Corporations prefer carbon pricing over mandates and regulatory intervention. And now that the Democrats have the White House and Congress, mandates are a real possibility. Hence the sudden push for pricing.
In Australian politics, carbon pricing is supposedly completely dead. Which would leave us in a peculiar position if other major economies started implementing it.
And any move toward a comprehensive global pricing agreement would leave Australia badly exposed. How do we know? None other than the OECD showed in 2018 that Australia is at the very bottom of all developed countries in terms of the amount of carbon emissions that are properly priced. No wonder the Europeans want our free riding to end.
Lucky we have Mathias Cormann to speak for us from the OECD. Or, perhaps, the world might start to look different to Cormann the longer he spends the OECD’s Paris headquarters. And not just because Passy has such great restaurants.