Australia: The Department of Climate Change, Energy, the Environment and Water (DCCEEW) has completed its review into whether additional policies are needed to address the issue of carbon leakage in Australia, including the feasibility of a carbon border adjustment mechanism for industries such as cement and steel.
The review was commissioned in November 2023 to evaluate policy options and assess the nature and scale of carbon leakage. It examined 75 trade-exposed commodities under the Safeguard Mechanism, grouped into 42 categories, with a particular focus on steel and cement given their high emissions intensity. It concluded that while the Safeguard Mechanism is effective in the short to medium term, additional targeted measures will likely be required as leakage risks from imports evolve. The report identified a border carbon adjustment as the preferred policy for certain ‘high-risk’ commodities to ensure a level playing field for producers subject to domestic carbon constraints. It said that any mechanism should mirror the Safeguard Mechanism’s scope, avoid export rebates, remove Trade Exposed Baseline Adjustment provisions for covered commodities and be staged, starting with cement and clinker before expanding to ammonia and derivatives, glass, lime and steel. The government will evaluate the recommendations as part of the 2026-27 review of the safeguard mechanism.
