Businesses lobby for carbon tariffs as Labor says Australia is ‘back in the game’ on climate

The Albanese government has left open the possibility that Australia could introduce carbon tariffs as part of a suite of climate policies to help the global shift to net zero emissions by 2050.

The former Morrison government railed against Europe's proposal for a carbon border adjustment scheme, calling it "just a new form of protectionism that will undermine global free trade and impact Australian exporters and jobs".

But Labor's climate change minister, Chris Bowen, says business groups are now lobbying for Australia to adopt its own version.

Australia is poised to join the Coalition of Finance Ministers for Climate Action, which has been exploring proposals for border carbon adjustment schemes and their potential impacts. The group is also sharing views on carbon pricing and phasing out inefficient fossil fuel subsidies.

Carbon tariffs penalise companies and countries trying to evade responsibility for cutting emissions. Penalising imports from countries that don't have serious climate policies helps preserve the relative competitiveness of domestic heavy industry by preventing so-called carbon leakage.

The Business Council of Australia and Ai Group have both used submissions to the government's review of the safeguard mechanism - one of the domestic policies that will aim to drive down industrial emissions - to argue an Australian border adjustment mechanism is worthy of consideration.

The federal treasurer, Jim Chalmers, will attend his first meeting of the Coalition of Finance Ministers for Climate Action during his visit to Washington DC this week. Until now, Australia had been the only advanced economy in the G20 that had opted not to sign up as a member.