Business Daily Media

Australia's economy can withstand the proposed European Union carbon tariff — here's what we find

The European Union has committed to very significant emission cuts — 55% on 1990 levels by 2030, and zero net emissions by 2050.

To help it get there without too much disruption, the president of the European Commission proposed a carbon tariff – known as the carbon border adjustment mechanism, or CBAM.

The details will be tabled in the European Parliament later this year.

A carbon tariff is a tax on imports based on the carbon dioxide emissions involved in making them. Its purpose is to level the playing field with the domestic producers who will be made to pay a carbon price based on their emissions.

At the Victoria University Centre of Policy Studies we have modelled the effect on Australia’s economy.

Initially, we find it will reduce demand for Australian exports of coal, and steel and other emissions-intensive commodities, lowering both export prices and volumes.

But then a range of second round effects will kick in.

Less coal, lower dollar

Lower export income will lower the Australian dollar, pushing up prices for Australian households, particularly the price of imports.

The lower dollar will also make exporters not directly affected by CBAM more attractive to customers overseas.

How big will these effects be?

We have used simulations from the Victoria University Regional Model to run the numbers taking into account emissions intensities, the importance of the EU as a destination for individual Australian exports and the extent to which Australian producers are able to divert each export from the EU to other markets.

Increase in price of exports to EU under carbon border adjustment mechanism

Australia's economy can withstand the proposed European Union carbon tariff — here's what we find Assumes an EU carbon price of 60 euro per tonne, which is roughly today’s price; assumies the CBAM covers CO2 emissions including fugitive emissions involved in production other than direct combustion emissions that are priced already by the EU Emissions Trading Scheme.

We find that some of the price effects are big (especially for coal) but, with a few exceptions, the EU isn’t an important market for Australian exports.

The exceptions are steel, alumina and aluminium where the EU accounts for between 10% and 20% of Australia’s exports.

Our simulations suggest that for the most part that the projected impacts on the Australian economy are small.

A week’s worth of economic growth

The long-run projected loss in gross domestic product is 0.05%, which is equivalent to a fall in weekly income of less than $1 per person or about one weeks’ worth of normal growth.

At an industry level, most industries slightly increase production, the fall in EU demand being more than compensated for by the weaker exchange rate.

Following a temporary increase in unemployment, job losses in declining industries are offset by expansion in other industries.

Change in industry output under carbon border adjustment mechanism

Australia's economy can withstand the proposed European Union carbon tariff — here's what we find The main loser is coal mining. The carbon border adjustment mechanism has the potential to increase the landed duty-paid price of Australian-produced coal in the EU by more than half, effectively excluding it from the EU market. Overall, it is projected to cut Australian coal production by 3.8% relative to where it would have been with the loss of about 3,000 jobs. Jobs lost, jobs gained The mechanism is projected to increase the buying price of iron and steel in the EU by almost 10%. While the EU is an important export market for Australian iron and steel, most of it is sold within Australia, meaning total production should fall by only 0.6%. The decline in production should be relatively small, costing around 200 jobs. Read more: The EU is considering carbon tariffs on Australian exports. Is that legal?[1] The job losses in mining and metal industries would be offset by the gains in the other industries which are able to take advantage of the lower exchange rate, including agriculture, some parts of manufacturing, tourism and education. A temporary increase in unemployment as workers transition out of affected industries could be eased by training and other support for displaced workers.

Authors: Philip Adams, Professor at the Centre of Policy Studie, Victoria University

Read more https://theconversation.com/australias-economy-can-withstand-the-proposed-european-union-carbon-tariff-heres-what-we-find-159062

Business Daily Media Business Development

The cost-of-living crisis will put more pressure on shoppers than COVID

Shutterstock/Zivica KerkezCOVID drastically changed shopping habits. Lockdowns, isolation and illness led variously to panic buying, a surge in online deliveries, and some impulse purchases...

Kokho Jason Sit, Senior Lecturer in Marketing, University of Portsmouth - avatar Kokho Jason Sit, Senior Lecturer in Marketing, University of Portsmouth

Firms are cutting sick pay for the unvaccinated – what does employment law say?

baranq / ShutterstockA person’s COVID-19 vaccination status is increasingly determining which events they can attend, where they can travel and where they can work. Vaccines influence ...

Lisa Rodgers, Associate professor, labour law, University of Leicester - avatar Lisa Rodgers, Associate professor, labour law, University of Leicester

Is your tech stack protecting you from potential cybercrime?

There has been a big focus on the rapid adoption of hybrid work, and with many Australians making the gradual return to the office, it has become an increasingly preferred way of work. C...

Ellen Benaim, Chief Information Security Officer at Templafy - avatar Ellen Benaim, Chief Information Security Officer at Templafy

sports expert Q&A on what Djokovic row means for unvaccinated elite athletes

Tennis star Novak Djokovic looks to be out of the Australian Open after the country’s immigration minister, Alex Hawke, cancelled his visa “on the basis that it was in the public...

Keith Parry, Deputy Head Of Department in Department of Sport & Event Management, Bournemouth University - avatar Keith Parry, Deputy Head Of Department in Department of Sport & Event Management, Bournemouth University

Inflation will probably melt away in 2022 – central banks will do far more harm trying to tackle it

It remains to be seen whether the omicron variant will shift Sars-CoV-2 towards becoming manageably endemic. But as and when this happens, there will still be “long COVID” to con...

Brigitte Granville, Professor of International Economics and Economic Policy, Queen Mary University of London - avatar Brigitte Granville, Professor of International Economics and Economic Policy, Queen Mary University of London

here's what UK government can do to cut household bills

According to the boss of the UK’s biggest energy supplier, Centrica, high gas and electricity prices could last for two years. With many already unnerved by the fact that the average U...

Lawrence Haar, Senior Lecturer in Finance, University of Brighton - avatar Lawrence Haar, Senior Lecturer in Finance, University of Brighton



NewsServices.com

Content & Technology Connecting Global Audiences

More Information - Less Opinion