Australia considers carbon border tax on emissions imports | Farm Weekly

farmweekly.com.au · Feb 17, 2026 · Collected from GDELT

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Carbon leakage review puts fertiliser prices in the firing line. Picture by Gregor Heard.A new report has recommended the federal government consider introducing a carbon border adjustment mechanism that would impose a new charge on emissions-intensive imports and ultimately push up fertiliser prices.Subscribe now for unlimited access to all our agricultural news across the nation or signup to continue readingAll articles from our website & appThe digital version of This Week's PaperOur entire networkThe Carbon Leakage Review, led by climate change economics expert Professor Frank Jotzo, weighed the risks of industrial production shifting offshore because of Australia's tightening emissions rules.The report was handed to Climate Change and Energy Minister Chris Bowen before last year's federal election but only released last week.It found while existing government settings introduced to help the nation hit Labor's climate targets were effective in reducing the risk of carbon leakage in the short and medium term, over time that was likely to change as industries were forced to further cut emissions or purchase carbon offsets.It recommends that a CBAM be initially introduced for cement and clinker and considered for hydrogen, ammonia, glass, steel and iron down the track."In the case of fertiliser, the illustrative estimated carbon cost pass-through for wheat, as an example of a fertiliser-intensive downstream product, amounts to 0.3-0.5 per cent of wheat prices by 2030," the review said."This is due to an estimated 3-5pc increase in the price of ammonia which is passed through to an estimated 1-3pc increase in the price of ammonium nitrate fertiliser."New Liberal leader Angus Taylor has labelled the idea a "carbon tax" that would place further financial pressure on consumers."Labor has always wanted to impose another carbon tax on Australians," he said.While Australia produces around 1.8 million tonnes of ammonia and 1.9m tonnes of ammonium nitrate, it imports the vast majority of the fertiliser used by farmers.Between 2.4 and 4m tonnes of urea are imported into Australia annually.It is emissions-intensive due to the emissions from gas and fossil fuels used in its manufacture.Since the 2022 closure of Incitec Pivot's Gibson Island plant in Brisbane, Australia has had no domestic urea production, relying heavily on low-cost imports from the Middle East and China.The Perdaman project in WA, due to start production in 2027, could eventually supply up to 1m tonnes annually - only half of which would stay in the domestic market.Mr Bowen said the Jotzo review provided options to keep Australia on a "level playing field" regarding the climate policies of other nations.It would be used to "inform discussions" during an upcoming review of its safeguard mechanism.The mechanism was introduced in 2023 and set lower baseline levels for 220 of the nation's largest industrial facilities and provides incentives to reduce emissions in production."We will always back Australian industry to be competitive at home, and on the world stage," he said."As the global transition picks up pace, our Future Made in Australia agenda is giving Australian industry the best footing - ensuring we are fighting climate change and seizing the economic opportunity before us."The European Union activated a Carbon Border Adjustment Mechanism on January 1 for imports of fertiliser, steel, aluminium, hydrogen, cement and electricity, while the UK is one of several nations also considering the new charge.The European Commission similarly pitched its CBAM as a setting that would level the playing field in the bloc.However, Europe's umbrella group for farm and agri-co-ops, Copa Cogeca, has called for the tax to be removed from fertiliser after a stark drop-off of imports.The organisation said the situation was "a harsh reality that is now knocking at the EU's door" and "poses a direct threat to the stability of agricultural production across the EU".In its first month of operation less than 180,000 tonnes of nitrogen fertilisers were imported, compared to 1.18m tonnes in January 2025.GrainGrowers chairman Rhys Turton has previously said a large-scale border tax similar in settings to the EU's could result in additional costs passed on to farmers of up to $300 million, based on price increases of $120-150 per tonne for urea imports and make agricultural exports less competitive in global markets.Meanwhile, Professor Jotzo's review identified urea and ammonium phosphate as among the most exposed products in the domestic market, with import volumes already exceeding local production. Demand for ammonia and urea is also highly price-sensitive."Urea has the attributes of a commodity at risk of carbon leakage, being emissions-intensive, trade exposed and trade sensitive," it said."Carbon costs have less impact on prices than costs for other inputs such as gas."It added that profit analysis placed ammonia and derivatives in the industry group ranked second most at risk of investment leakage.Federal Liberal MP Rick Wilson recently told Parliament that producers were facing a significant new financial burden under government climate policies he believes "effectively constitute a carbon tax".He said that the combined costs of the government's suite of climate policies, including the safeguard mechanism, capacity investment scheme and vehicle emissions reduction scheme, were heavily impacting the mining industry and inflicting damage on agriculture and transport.DailyYour daily updateThe day's top stories curated by our news team.