Australia to stare down Trump’s threats over new global carbon tax

Australia will stare down the Trump administration’s threat to punish nations that back an international pact to impose a carbon price on international shipping, creating another point of division with the United States just days before Anthony Albanese meets Donald Trump next week.

Australian ministers and officials have been nervously weighing options in a series of meetings since the US declared last week that it rejected what it describes as a global carbon tax, saying it would impose sanctions, visa restrictions and port levies on any allies who backed the push.

This masthead has learnt from two sources unable to speak publicly about the sensitive and fluid negotiations that Australia will probably press ahead with support for the scheme. It will be voted on at a meeting of the International Maritime Organisation in London on Thursday, Australian time.

The government would not publicly state its position on Wednesday in response to questions, highlighting the delicate balancing act at play as Labor pursues hard-to-achieve climate targets while Trump shuns green energy.

It is expected to be ratified with the backing of other prominent members of the Paris Agreement such as the European Union, Japan, China, as well as Pacific nations.

The timing is tricky for the prime minister, who is scheduled to meet with Trump on October 20 as he seeks to gain Australia a reprieve from import tariffs imposed by the US on Australian exports, including steel and aluminium.

Known as shipping’s net zero framework, the proposed scheme is a cap and trade system that imposes financial penalties on companies whose ships exceed emissions limits and rewards those that make cuts below the target – enabling them to sell credits to third parties. International shipping emissions are not counted against any nation’s carbon budget, but account for about 3 per cent of global emissions.

US officials were working behind the scenes on Wednesday to move an amendment to the framework that would disallow the scheme from coming into effect unless large shipping nations ratified it domestically, effectively giving it a veto. Australia was not expected to support that amendment.

Australia signalled its support for the scheme when it backed a draft scheme at the International Maritime Organisation, a United Nations agency, in April. Since then, the US has ramped up its opposition with claims that it would raise the cost of shipping by about 10 per cent and hike prices for consumers of imported goods.

Forecasting potential tariffs, visa restrictions or port levies for nations that support “activist-driven climate policies that would burden American consumers”, US Secretary of State Marco Rubio said in a statement on Friday that the US would move to hit Western nations that “sponsor this European-led neocolonial export of global climate regulations”.

“President Trump has made it clear that the United States will not accept any international environmental agreement that unduly or unfairly burdens the United States or harms the interests of the American people.”

Australian officials discussed in recent days their response to the US opposition to the scheme, leading to speculation among industry groups that it would abstain from voting to placate Trump.

The shipping dispute adds to complications with the Trump administration, which is reviewing the AUKUS pact and expressed disappointment with Australia’s decision to recognise a Palestinian state.

Ditching support for the international shipping carbon tax would not just anger many of Australia’s allies, it would open the government to criticism of its vision to revitalise local manufacturing with clean technology.

Opposition transport spokesperson Bridget McKenzie said the carbon tax would hit importing nations such as Australia.

“Labor should have vigorously opposed this tax,” she said. “Instead, it’s another example of Labor signing us up in secret to an international agreement without explaining the costs to the Australian people.”

The government’s $23 billion Future Made in Australia fund is designed to support Australia’s transition to a net zero economy by backing clean industries such as green steel and aluminium. Last month, the government also announced a $1 billion green fuel strategy to support the commercialisation of technology such as renewable diesel, which is produced from organic materials such as plants and animal fat and generates low emissions.

Meanwhile, Australia is still working behind the scenes to prove its climate change credentials to the world as it competes with Turkey for hosting rights of next year’s United Nation’s annual climate summit, known as COP26.

Two Australian sources, including one cabinet minister, said Climate Change Minister Chris Bowen was considering sharing hosting rights with the other international applicant Turkey after President Recep Tayyip Erdoğan made it clear he would not withdraw his nation’s bid.

University of Melbourne Professor of mechanical engineering Michael Brear said it would be a major step towards net zero for international shipping to become the first internationally traded carbon scheme, which would spur investment in commercialising green fuels that could help decarbonise other heavy industries such as mining and road transport.

“The Albanese government unequivocally should support the vote [at the IMO],” Brear said.

“The reason for that is not just the climate benefits, but we won’t notice the impacts on the cost of consuming internationally traded goods.

“If we get this going, it can then reach into a lot of Australian heavy industry as we get better at it, and get the costs down.”

University College London research has found the tax would generate up to US$12 billion per year between 2028-2030, which is when most penalties would be incurred as shipping companies adjust their fleets to comply.

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