Australia's Department of Climate Change, Energy, Environment and Water said in its carbon leakage review report that the government should assess future carbon leakage risks, policy options to address them and the ability to adjust carbon emissions at the border.
The report concluded that the current safeguards are effective in mitigating carbon leakage in the short to medium term. However, he cautioned that customizations for certain sectors may require additional measures over time. In particular, lowering the baseline reduction rates for trade-exposed facilities was found to limit the contribution of protective sectors to the country's overall emission reduction efforts.
Public funding on its own is considered insufficient
The review found that public investment can help reduce emissions intensity and eliminate leakage risks in specific cases, especially for export-oriented industries. However, such financing is not considered a financially sustainable stand-alone solution for products facing a high risk of diversion. Instead, it should be part of a broader set of policy responses, particularly for emerging green export sectors.
The commodity assessment identified cement, clinker, lime, hydrogen and ammonia derivatives, steel and iron, and glass as sectors that could face significant carbon leakage risks over time, indicating the need for additional policy support.
Border Carbon Adjustments Proposed for Selected Sectors
