UK pressures Australia for carbon reductions in FTA talks as EU and US ponder carbon levies

February 12, 2021: Both new US President Joe Biden and UK Prime Minister Boris Johnson are headlining their determination to reduce net carbon emissions to zero by 2050. But Australia’s Morrison government is declaring that it will fight any proposal to impose border carbon levies, including in the current UK-Australia and EU-Australia Free Trade Agreement negotiations.

The proposed EU carbon intensity levies would apply to all products, not only imported products, that do not meet a standard of reduced carbon intensity in their production. The lead negotiator for the European Union-Australia FTA talks, Mr Valdis Dombrovskis, said in October 2020, that the proposed tax would have to be World Trade Organisation compliant, meaning EU producers would be subject to the same carbon limits as those from Australia to "prevent discrimination between foreign and domestic products".

The Morrison government argues that carbon tariffs are not aimed at combating climate change, but rather at economic objectives including protecting local industries such as British and European meat, cheese and wine.

Trade Minister Dan Tehan has previously labelled carbon tariffs as “a new form of protectionism”, and now declares that Australia is “dead against” carbon tariffs.

However, Johnson is prioritising emission cuts at the June G7 Summit, to which Prime Minister Scott Morrison has been invited. The showdown will certainly come when Johnson hosts the United Nations climate change conference in Glasgow in November.

Johnson is reported to have directed British government departments to come up with options for carbon border levies ahead of several major international summits, which he believes could act as a global emissions trading scheme as the world strives to hit net-zero emissions by 2050.

In the EU-UK Brexit agreement, signed in late December, both parties reaffirmed “its ambition of achieving economy-wide climate neutrality by 2050”. It was the first trade agreement ever to feature climate targets in this way. The deal’s fine print also dictated that not taking sufficient action to reach net-zero would be in direct breach of the trade agreement.

The Sydney Morning Herald reports that Britain wants to use its FTA with Australia to promote trade in low carbon goods and services, supporting research and development collaboration and maintaining both parties’ right to regulate in pursuit of decarbonisation, as well as reaffirming their respective commitments to the United Nations Framework Convention on Climate Change and the Paris Agreement.

President Biden could also impose climate tariffs, with his “Buy American” economic plan endorsing a “carbon adjustment fee” at the border. Biden will host a climate leaders’ summit on Earth Day, April 22, when he is likely to outline his carbon-reduction commitments under the Paris agreement. It is not yet decided if this meeting will be online or in-person, but Morrison will be there.

Labor Opposition trade spokeswoman Madeleine King said Australia’s major trading partners were moving towards establishing climate border levies “aimed at countries like Australia that have weak climate change policies.

“This government has its head in the sand about carbon borders. Our exporters, with the jobs they create, will pay the price,” Ms King said.