Carbon tariffs from Europe and US could hit $20bn worth of Australian exports

More than $20bn of the nation’s exports would be under threat if Europe and the US impose carbon tariffs on Australian products.

Scott Morrison visits the Portland Aluminium smelter, to announce funding earlier this year. Picture: NCA NewsWire / Nicole Cleary

More than $20bn of the nation’s exports would be under threat if Europe and the US imposed carbon tariffs on Australian products, a new study has found.

Scott Morrison is poised to push back on proposed climate border taxes at the weekend’s G7 summit in Britain as the EU’s central commission gets ready to unveil carbon tariff plans next month and US President Joe Biden considers similar measures.

The report from the Australia Institute on Friday says the aluminium sector - worth $12bn in exports - was at particular threat from the tariffs because Australia’s products were mostly exported and its production methods were among the most carbon-intensive.

“Last year, 64 per cent of aluminium (as well as 40 per cent of Australia’s steel) was exported to countries where carbon prices are in place or under consideration,” the report says.

“Alumina and aluminium made in Australia are highly emissions-intensive compared to competitors outside of China.

“A CBAM (carbon border adjustment mechanism) is a ­serious risk for some goods in Australia, and potentially a ­serious opportunity for those who decarbonise production methods.”

The Australia Institute report says 5 per cent - or $23.5bn - of all Australia’s exported goods and services in the 2019-20 financial year would be considered carbon intensive under most carbon tariff regimes.

Other goods to be exposed to carbon tariffs include other primary metal products worth $7.9bn in exports, paper products worth $1.2bn and chemicals worth $265m in exports.

Australian Aluminium Council chief executive Marg­hanita Johnson said on Tuesday the sector was moving to be less carbon intensive to avoid tariff hits.

“Development of alternative technologies, like mechanical vapour recompression which has the potential to reduce alumina emissions by 70 per cent, will help not only Australian producers but be part of Australia’s contribution to the global decarbonisation pathway,” she said.

The European Commission, a regular member of the G7 in its own right, is due to propose its carbon border tariff policy on July 14 and British Prime ­Minister Boris Johnson has raised taxing products from countries with weaker climate targets.

Former prime minister Malcolm Turnbull this week said his sources in the Biden administration said it was leaning to carbon tariffs and the Prime Minister would be “naive” to think climate border taxes unlikely.