Reducing the carbon footprint of major exports has become more doable as other nations introduce emission charges at their borders, the head of Australia's carbon leakage review says.
"Carbon leakage" is not a very helpful term because it makes people think it's about something leaking from a pipeline," professor of environmental and climate change economics Frank Jotzo told AAP.
"Really it's about carbon competitiveness - that's a better label for it, but that's not the nerdy, technical label it has," Professor Jotzo said.
His review focused on the risk of the displacement of jobs and emissions offshore and the feasibility of an Australian carbon border adjustment mechanism.
The 2024 review examined ways to sustain Australia's heavy industries in the long term, and make sure local production is not disadvantaged compared to imports from other countries where there is not an equivalent climate policy.
Prof Jotzo said a "carbon border adjustment mechanism for a few select commodities and in a measured way" had been identified in the final report as the durable solution, and as a useful way to complement the safeguard mechanism.
For almost a decade, Australia has relied on the so-called safeguard mechanism - under Labor and coalition governments - to encourage leading industries to stop increasing emissions and invest in decarbonisation.
The review found subsidies for decarbonisation investment also had a role but were not a systematic solution to carbon leakage, and relied on public finance that might not always be available, Prof Jotzo said.
Britain and the European Union are introducing levies on carbon-intensive products, which sparked fresh discussions - and support from some industry groups - for Australia to have a version of what is known as a carbon border adjustment mechanism or CBAM.
Europe's CBAM may be irrelevant for Australia's major exporters but the main effect was to make it possible for other countries to consider a similar mechanism, according to Prof Jotzo.
Climate Change Minister Chris Bowen commissioned the Jotzo review to assess and counter the risk of carbon leakage for Australian industries that produce a lot of heat - and therefore greenhouse gas emissions - during production.
The existence of carbon leakage, even if at moderate levels, has important implications for economic, industrial and trade policy design, the OECD has warned.
But calculations by the global economic body also suggested carbon leakage through international trade was offsetting "modest" domestic emission reductions by aluminium, cement and steel plants.
"The main commodities in the spotlight are the heavy industrial commodities where the carbon emissions are high compared to the volume of the product - cement and pre-products like clinker and lime, steel, and ammonia," Prof Jotzo said.
"Australia imports these things and we make them ourselves and they are part of the safeguard mechanism in terms of reducing the baseline emissions rates for their production in Australia."
Most countries that Australia imports from do not have similar obligations, so that introduces an imbalance that needs to be deal with in some way, he said.
There are special provisions in place under the safeguard mechanism for the more trade-exposed heavy industries, which means their facilities are required to reduce baseline emissions less than plants.
"But that's complicated and not necessarily the solution you want for the long term," Prof Jotzo said.
"It's constantly contested and creates the ongoing need to check whether the bandaid is still the proper size."
Labor is expected to stall on adopting the recommendations. Nor has the coalition declared a position, with the latest opinion poll deadlocked heading into the 2025 election.
