Carbon Borders: How the G7 might come down on Australia’s climate negligence

Extract from Climate Council

Australia’s woeful performance on climate action is no international secret, which is perhaps why for this year’s G7 Summit – which has climate change at its centre – Australia has been invited as a ‘special guest’ alongside South Korea, South Africa, and India.

Each of the G7 nations (Canada, France, Germany, Italy, Japan, the UK and the United States) has already significantly strengthened their commitment to climate action, and the group has made clear it expects Australia to lift its game. The period of gentle diplomacy, when foreign leaders would allude to, or tacitly chide, Prime Minister Morrison for his climate inaction, is coming to an end. In its place we will start to see a new era of punitive economic measures. It’s thought that Boris Johnson, with the UK’s presidency of the G7 Summit, will be giving a push to one such measure: ‘carbon border adjustments’.

What are ‘Carbon Border Adjustments’?

‘Carbon border adjustments’ refer to tariffs that a nation may place on emissions-intensive goods imported from a country that either lacks a carbon price of its own or is otherwise failing to take reasonable action to address the climate crisis. They are one way by which countries that are serious about climate action are going to try and coerce laggards – like Australia – to do better.

As an economic measure they have been developed particularly by the EU, and are on track to be phased in from 2023 and fully implemented by 2026. They have already caught Australia’s attention, with Scott Morrison objecting to the prospective measures (“We’re going to do it our way”) ahead of the climate-focussed summit. In spite of the Prime Minister’s complaints of ‘economic coercion’, the UK’s High Commissioner to Australia, Vicki Treadell, has nonetheless urged Australia to raise its ambitions before the summit, stating that “a high level of ambition, not just for net zero by 2050” is the best way for any country to lessen the future toll of carbon tariffs on its economy.

What would carbon borders look like for Australia?

Bad. Until such a time as Australia gets serious about tackling climate change, Australia stands to be hit particularly hard by any new tariffs – if only compared with the other G7 nations, who have all strengthened their climate commitments for the decade.

Until recently, it was only the EU that was moving seriously towards carbon border adjustments. Now, however, it’s clear that other major economies and vital trading partners to Australia, including Japan and the United States, are considering the same coercive route. And while the tariffs from the EU’s carbon borders may prove damaging in themselves (including likely tariffs on aluminium, steel, chemicals, and other products made from Australian raw materials), they pale in comparison to an outcome where every one of the G7 nations puts in place new carbon borders. Such an outcome may be a few years off, but is not unlikely given all of the signs of the G7 nations leading up to the summit.

Climate change as a target for this year’s summit

Beyond talk of carbon border adjustments, we can expect climate change, alongside COVID recovery, to dominate this year’s G7 summit. In the lead up to the summit, hosted in Cornwall from June 11–13, the G7 nations have already taken many steps together to strengthen their climate commitments. This includes:

• Significantly strengthening their 2030 emissions reduction targets.
• Agreeing to stop the direct funding of new fossil fuel projects, an important announcement that was lauded internationally and which came shortly after Australia headed in the polar-opposite direction, announcing a new, taxpayer-funded $600 million gas-fired power station in Kurri Kurri, NSW.
• Greatly increasing funding to less developed countries for climate action.

Some of the specific new pledges made by G7 countries this year include:

• The United States’ pledge to cut greenhouse gas emissions by 50-52% by 2030, below 2005 levels, putting the US on track to reach net zero by 2050.
• Japan’s new 2030 target, which was nearly doubled to 46% by 2030, compared with 2013 levels.
• Canada’s new 2030 target of) 40-45%, below 2005 levels.
• The United Kingdom’s embedding, in law, of an emissions reduction target of 78% by 2035, below 1990 levels, building on its 2030 target of 68%.