‘Very naive’: Former PM warns of looming threat facing Australia

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Former Australian prime minister Malcolm Turnbull believes there is very little the government can do to stop a looming threat to the country's key exports.

While China has slapped bans and punitive tariffs on various Australian exports due to a souring in relations, the US, the UK and the European Union could also stick Aussie exporters with damaging penalties.

The problem? Australia's lack of ambition in reducing emissions and tackling climate change

The Australian government is "dead against" the use of carbon tariffs, but the former Coalition leader says such a position is "naive". 

The policy idea centres on placing punitive tariffs on carbon-intensive goods from countries that haven’t adopted a carbon price or a 2050 net-zero emissions target.

Coal tankers are seen waiting offshore.
Carbon intensive exports from Australia face a potentially more difficult future. Source: Getty Images

Scott Morrison will head to the G7 conference in the United Kingdom later this week opposed to the trade measure, but there is growing momentum for carbon tariffs among Australia's traditional allies. 

European nations are strongly committed, and UK prime minister Boris Johnson earlier this year directed British government departments to come up with options for carbon border levies, and Joe Biden's administration has also signalled its support.

Carbon tax inevitable, says Turnbull

Selling a tariff to voters at home could offer governments an easy political victory through the promise of protecting local jobs and businesses, the former PM said.

"If you can impose a tariff which does all those things but at the same time say you are saving the planet, well that sounds much more appealing," he told ABC radio on Monday.

"Politically, it is so easy to sell domestically. You'd have to be very naive not to recognise it's coming up in the lift."

Former Australian prime minister Malcolm Turnbull is pictured.
Former Australian prime minister Malcolm Turnbull says it is naive to believe penalties won't be levelled against parts of Australia's carbon intensive economy. Source: AAP

Mr Turnbull said his successor faced a tough political equation with many inside the Coalition party room influenced by fossil fuel lobbyists and the Rupert Murdoch-owned News Corp which oppose climate action and have turned "what should be questions of physics into effectively questions of religion or political views".

"He's trying to navigate that craziness as best he can. He's under huge international pressure and it will only increase," he said.

"At some point hopefully that will persuade the right wing and the coalition, which holds those parties hostage effectively, to succumb to reality."

What could the costs be for Australia?

Only the European Union has gone as far as legislating such a plan but while it would "reduce demand for Australian exports of coal, and steel and other emissions-intensive commodities, lowering both export prices and volumes", the impact on the economy would not be dramatic, according to analysis by the Victoria University Centre of Policy Studies (CoPS).

Focusing on the EU, "any carbon tariffs placed on Australian products directly would have fairly minimal effects on the Australian economy," Professor Phillip Adams, the Director of CoPS who has also worked for Treasury on carbon pricing, says.

He forecasts a drop in exports of about 1.2 per cent, roughly the value of $5.2 billion.

Children holding up signs during a climate strike rally outside Parliament House.
School children look on as they hold up banners outside Parliament House during a climate strike rally. Source: Getty Images

"But if the EU at the same time were to impose a carbon tariff on Chinese products – which is entirely plausible but politically unlikely – then that's likely to have flow-on effects for Australia that are much more significant," he told Yahoo News Australia. 

"Because Australia provides key inputs into Chinese products that are sold to the EU, notably steel. China sells a lot of steel to the EU and in making steel it uses a lot of iron ore and LNG [liquified natural gas] coming from Australia."

China is heavily reliant on Australia's high-grade iron ore, but given the current trade tensions it's also possible the country could use a similar justification to block carbon-intensive imports from Australia, Prof Adams said.

While Prof Adams is unsure if there will be broad adoption of carbon tariffs used against Australia, he said it would at least be a "bargaining chip" used by other nations that Australia will have to deal with as it negotiates international talks increasingly focused on tackling global warming. 

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