Australia Considers Implementing a Border Carbon Adjustment (Australian CBAM) for High-Risk Imports

On February 13, 2026, the Australian Department of Climate Change, Energy, the Environment and Water (DCCEEW) released its final report assessing carbon leakage risks and providing recommendations to the government. The report identified specific products where carbon leakage risks may arise in the future:

• High risk: Cement, clinker, and lime.
• Moderate to high risk: Hydrogen, ammonia and derivatives, steel, and glass.
• Potential future risk: Alumina, aluminum, refined petroleum, pulp, and paper.

The report recommends the gradual implementation of a border carbon adjustment (Australian CBAM) for these products. Additionally, it presents various policy approaches to address these risks, as well as the feasibility and potential impacts of a border carbon adjustment. These recommendations are scheduled for consideration during the review of the nation’s Safeguard Mechanism, planned for 2026–2027.

A border carbon adjustment is a system that requires targeted imports to bear a carbon price equivalent to that imposed on domestically produced goods. The European Union was the first to implement such a system through its Carbon Border Adjustment Mechanism (CBAM), which entered full operation on New Year’s Day 2026. The United Kingdom has also proposed its own CBAM (UK CBAM), with deliberations underway for an implementation target of January 2027.

Safeguard Mechanism

The Safeguard Mechanism is a system that mandates large-scale facilities emitting more than 100,000 tonnes of greenhouse gases annually to keep their net emissions below a prescribed baseline (or cap). This covers approximately 220 large emitters, accounting for roughly 30% of Australia’s total annual emissions. The primary sectors of the covered facilities include:

• mining
• oil and gas production
• manufacturing
• transport
• waste facilities

In March 2023, the Australian Government proposed a review of carbon leakage as part of this system and conducted public consultations in November 2023 and November 2024. The final report reflects these consultations and provides the following recommendations.

Key Recommendations

• Applying a border carbon adjustment to imports could be an appropriate policy tool for certain products with a high risk of carbon leakage. It can also serve as a means to balance substantial emission reduction efforts between Australia and other countries.
• Cement and clinker were determined to have a relatively high risk of carbon leakage, making them suitable targets for a border carbon adjustment, with early implementation considered realistic.
• Lime, hydrogen, ammonia and derivatives, steel, and glass could also be candidates for a border carbon adjustment. However, since these products have limited coverage under the Safeguard Mechanism or involve complex supply chains, more detailed investigation and problem-solving will likely require additional time.
• Alumina, aluminum, refined petroleum, pulp, and paper are not currently judged to be at high risk, but risks may manifest in the future. Evidence regarding these products remains mixed across leakage risk indicators and analyses.
• When implementing border carbon adjustment, policies regarding emissions reporting and verification should be designed to minimize administrative burdens. This requires a framework that includes:
  ・Simplified reporting processes
  ・Efficient and highly reliable emissions verification
  ・Setting appropriate default values for emission intensities
• The Safeguard Mechanism includes several measures to suppress the risk of carbon leakage. While these are sufficient to suppress risks in the short-to-medium term, risks may increase over time as default values continue to decrease. Consequently, additional measures may be necessary for some sectors in the future.

Related Link

• “Carbon Leakage Review Final Report” and its Annex can be downloaded from the following URL:
  https://www.dcceew.gov.au/climate-change/publications/carbon-leakage-review
• DCCEEW news article regarding this matter:
  https://www.dcceew.gov.au/about/news/carbon-leakage-review-final-report