Essay by Eric Worrall
The review may consider carbon adjustment tariffs on imports from nations like the United States.
Labor considers capping carbon offsets for Australia’s biggest polluters
Ryan Cropp Energy and climate reporter
Aug 7, 2026 – 1.54pmThe Albanese government will consider capping the unlimited use of carbon offsets to encourage greater on-site emissions cuts by some of Australia’s biggest industrial facilities and meet ambitious near-term climate targets.
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The policy requires more than 200 big coal, gas, manufacturing and transport facilities to cut their emissions by around 5 per cent each year, or buy carbon credits to make up any shortfall.
Under existing rules, there are no limits on the number of carbon credits companies allowed to purchase to meet their mandated targets. In 2024-25, the top 10 purchasers of offsets in the scheme included six coal companies.
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“This review is focused on ensuring the Safeguard Mechanism continues to drive real, durable emissions reductions across Australia’s largest industrial facilities and contributes its fair share to achieving the nation’s emissions targets,” Bowen said.
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Read more: https://www.afr.com/policy/energy-and-climate/labor-considers-capping-carbon-offsets-for-australia-s-biggest-polluters-20260807-p60mc6
Where do I get the border adjustment claim from? From the Aussie Government Carbon Leakage review, which concluded in 2025;
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The Review assessed the risk of carbon leakage and considered whether additional policies are needed.
The Review found existing policy measures mitigate leakage risks in the short to medium term.
The Review recommended that a border carbon adjustment be introduced for a select group of commodities that are at particular risk of carbon leakage from imports, with it initially covering cement and clinker, and to be considered for other commodities subject to further assessment.
The Review’s recommendations will be considered in the 2026-27 review of the Safeguard Mechanism.
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Read more: https://www.dcceew.gov.au/climate-change/publications/carbon-leakage-review
Carbon leakage refers to the flight of energy intensive industries when carbon taxes are imposed. A border carbon adjustment is an attempt to lure energy intensive industries into staying, by imposing a carbon tax on imports, so imports have no advantage over local products whose costs have been inflated by carbon taxes.
Border carbon adjustments don’t work, because most of the time it is still cheaper to produce goods in low cost jurisdictions and pay the border tax – as the EU discovered when China started outcompeting industry in Germany and other protected EU industrial regions, despite the EU’s tariff border.
Any attempt to raise border carbon adjustment taxes to the point they influence people’s behaviour would invite retaliation from trading partners, which in an export oriented economy like Australia would be an utter disaster. Ratcheting up Aussie carbon pricing will accelerate the decline of Aussie manufacturing, which will be even less able to compete with low cost energy intensive imports.
Strangely advocates of these tired economic ideas never ask why carbon taxes keep failing, why so much coercion is required to force people to embrace what greens claim is the cheapest form of energy, and why heavy industries consistently flee regions which introduce carbon taxes. But asking why despite a 100% track record of failure greens still believe carbon taxes are a good idea is like asking why some people still think communism is a good idea.
