No climate action ‘to cost $15bn, 70,000 jobs’ from carbon tariffs

The imposition of carbon border tariffs on Australian exports could increase the cost of transitioning to a carbon neutral economy by about 45 per cent over the next decade.

The EU, the US and Britain have flagged the imposition of carbon border taxes on countries that don’t take fast enough action to slash their carbon emissions. Picture: Peter Lorimer

The imposition of carbon border tariffs on Australian exports by the nation’s major trading partners could increase the cost of transitioning to a carbon neutral economy by about 45 per cent over the next decade, Deloitte ­Access Economics modelling has suggested.

The analysis says delaying action towards net-zero carbon emissions – a likely green tariff trigger – would slash Australia’s share of global investment, driving up costs in the services and construction sectors by 40-90 per cent to 2030.

The less price-sensitive mining and agriculture sectors would face 10-15 per cent high transition costs over the decade.

“No action on climate change is now a deliberate choice; one which is costly for the Australian economy,” Deloitte Access Economics head Pradeep Philip said.

“Across the economy, we are talking additional costs in the order of $15bn by the end of this decade with over 70,000 fewer jobs created.”

The EU, the US and Britain have flagged the imposition of carbon border taxes on countries that don’t take fast enough action to slash their carbon emissions, with Japan and Canada working on similar schemes.

The Deloitte model assumes that if Australia does not match the net-zero climate change commitments of its major trading partners, the nation‘s exporters will have to pay the proposed green tariffs, with implications for the broader economy.

It argues this represents an extra transition cost on the country’s eventual shift towards carbon neutrality.

“Australia … is exposed to the rest of the world through our reliance on exports and imports of goods and services, and the flow of capital, could be severely penalised by a carbon border adjustment tax if we don’t act in broad concert with the rest of the world,” Dr Philip said.

He said the tariffs could be in place within a few years, punishing countries that refused to join the global march towards net-zero emissions. “We already know that to deal with climate change, our economy will have to undergo a transition – our production and energy systems need to change to produce the outputs we need but with much lower emissions intensity,” Dr Philip said.

“We can drive this transition ourselves, or have it determined for us by other countries imposing carbon border adjustment taxes.

“A failure to act early means we will be forced to act later; but then we will need to act drastically, further exposing the economy, our businesses and workers to higher and unnecessary transition risks.”

Australia is resisting the push towards carbon border taxes, equating them with job-destroying industrial protectionism.

Trade Minister Dan Tehan said last week the government would analyse whether proposed new EU carbon tariffs represented a breach of global trading rules.

The nation’s emissions-intensive industries have said they can withstand the economic hit.

Australian Industry Group chief executive Innes Willox said his early research showed the nation’s exporters would face little to no impact from the EU’s ­carbon border adjustment mechanism.

The latest analysis is an extension of earlier Deloitte Access Economics modelling suggesting the impact of climate change, if it continues unchecked, will slash the size of Australia’s economy by 6 per cent by 2070, resulting in 880,000 fewer jobs.