In December 2023, the Department of Climate Change, Energy, the Environment and Water (DCCEEW) released the first phase of its carbon leakage review with a consultation focusing on the assessment of methods for carbon leakage risks, and initial review of policy options to address these risks. CA ANZ responded to the review by providing feedback which reflects our experience and expertise as a membership body and representative of our members, finance professionals in business and practice.

In our submission, we:

• Outline that Government should review and progressively strengthen the Safeguard Mechanism so that it is considered a sufficient carbon price by other countries that also introduce a CBAM.
• Note that a CBAM in Australia would need to clearly link to Australia’s emission reduction ambitions and be underpinned by a balanced approach, which considers advantages and disadvantages for the Australian economy.
• Believe that consideration should also be given to how the potential CBAM would be levied and administered in a streamlined way, together with existing border taxes and duties such as the Goods and Services Tax (GST), Luxury Car Tax (LCT), Wine Equalisation Tax (WET) and customs duty.
• Highlight that the compliance requirements and cost for importing entities associated with a CBAM need to be balanced to ensure they do not become excessively prohibitive for entities to trade with Australia.

A second consultation paper, involving analysis and modelling of leakage risks, and an assessment of the feasibility of policy options to address any identified leakage risks will be released mid 2024 with final review recommendations to government expected in Quarter 3 of 2024.