Economic Implications for Australia of the EU’s Carbon Border Adjustment Mechanism
In simple terms, a carbon tariff is a tax on foreign imports based on their CO2 content. Such tariffs are designed to level the playing field for domestic import-competing industries whose costs have risen due to a domestic CO2-price levied at the point of production. It is argued that carbon tariffs are necessary to avoid “carbon leakage” – local production shutting down and moving to countries without strong climate policies.
The European Union and Britain have both made commitments to make significant emission cuts by 2030 (55% and 68% compared with 1990 levels, respectively) and to achieve carbon neutrality by 2050. As part of its commitment, the EU president, Ursula von der Leyen, proposed a tariff – known as a carbon border adjustment mechanism (CBAM). The proposal was strongly endorsed by the European Parliament’s environment committee, and is due to be tabled in parliament this year.
The question addressed in this paper, is what effect an EU CBAM will have on the Australian economy. Using the Victoria University Regional Model (VURM), we evaluate those effects through to 2050 based on an EU CO2 price rising from its current level of around $70 a tonne to $120 per tonne in 2050.
Economic implications of carbon neutrality in China
China aims to curb greenhouse emissions before 2030 and achieve carbon neutrality by 2060. Using a newly developed economic model of China, CHINAGEM-Energy, we investigate the economic implications of China’s carbon neutrality path over the period 2020 to 2060. To achieve carbon neutrality by 2060, China must change its energy structure significantly. Coal and gas consumption must decline dramatically, while demand for renewable energy, especially solar and wind, must expand. In broad terms, dramatic carbon emission reduction has only a mild negative impact on China’s real GDP. China can still grow strongly, while reaching carbon neutrality by 2060. However, China’s import demand for fossil fuel will fall significantly. Since China is the second largest destination of Australia’s coal and gas exports, China’s movement to carbon neutrality implies declining demand for Australia coal and gas in the long term.
The Impact of the COVID-19 Pandemic on the Australian Economy
The Treasurer’s economic statement of 23 July 2020 highlighted the extreme uncertainty surrounding the macroeconomic outlook globally and nationally, with the course of the economy being profoundly influenced by the course the COVID-19 pandemic might take. Yet we know we are experiencing the deepest national and global recession since the Great Depression.
Will it be a V-shaped recovery, or U-shaped, L-shaped or possibly W-shaped involving a double dip? As recovery begins, more of those workers who gave up searching for jobs when the COVID-19 lockdowns began will be encouraged to re-enter the labour market, adding to the pool of unemployed. When might unemployment peak?
Australia’s services exports, including inbound university students and tourists and professional services exports such as engineering services, will be hostage to ongoing international travel restrictions. What effect will those restrictions have on national prosperity?
Understanding Australia’s Poverty Issues: A Multi-Dimensional Matter
The Forum will touch on what we know about poverty from a macro and micro economic perspective as well as take a look at some of the issues that are linked to addressing matters related to poverty.
The Banking Royal Commission has been scrutinising the behaviour of banks and other financial institutions. It will make recommendations to the government on reforms to the financial sector. The Melbourne Economic Forum will discuss possible reforms.
The Economic Challenge for the 45th Parliament
The Forum will address the economic policy challenges facing Australia in the aftermath of the federal election.
Since tax reform remains an ongoing policy issue, this Forum builds on the excellent discussion at the December Forum.