Australia's Carbon Leakage Review recommends a staged Australian border carbon adjustment covering five commodity groups, starting with cement and clinker before extending to ammonia and derivatives, glass, lime, and steel. The Department of Climate Change, Energy, the Environment and Water (DCCEEW) published the review's final report on February 13, 2026, led by economist Frank Jotzo, and the Australian government has not yet legislated the recommendation. It will weigh the findings as part of the 2026-27 review of the Safeguard Mechanism, a decision window running from July 2026 to June 2027. No Australia CBAM exists today. What exists is a formal, government-commissioned recommendation putting Australia on the same policy path as the EU, the UK, and Norway. This guide covers what the review recommends, how a future Australian carbon border adjustment would differ from the EU's CBAM, and what it means for exporters shipping into Australia.
What Does the Carbon Leakage Review Recommend?
The Carbon Leakage Review sets out four core design principles for a future Australian border carbon adjustment: stage the rollout by commodity, mirror the existing Safeguard Mechanism's scope, exclude export rebates, and remove Trade-Exposed Baseline Adjustment (TEBA) provisions for any commodity brought under the new mechanism.
- Stage the rollout by leakage risk. Cement and clinker come first, since the review's modelling found these two commodities carry the highest import-substitution risk of any assessed group.
- Mirror the Safeguard Mechanism's scope. Rather than building a separate administrative system, the recommended border adjustment would apply to the same commodities and reference the same baselines already used inside Australia's industrial carbon scheme.
- Exclude export rebates. Australian producers of covered commodities would receive no refund on the carbon cost embedded in goods they export, a design choice that keeps the mechanism focused on import parity rather than export subsidy.
- Remove Trade-Exposed Baseline Adjustment provisions. TEBA currently gives some Safeguard Mechanism facilities more lenient baselines because of their trade exposure. The review recommends withdrawing that adjustment for any commodity once a border measure replaces it as the leakage protection.
Behind these four principles sits one finding: the Safeguard Mechanism protects Australian industry well in the short to medium term, but leakage risk from imports will grow as its baselines tighten toward 2030. The Safeguard Mechanism covers only onshore emissions, not the emissions embedded in imported cement, steel, or fertilizer, which is exactly the gap a carbon leakage mechanism like the EU's CBAM was built to close.
The Staged Rollout: Cement and Clinker Come First
Cement and clinker sit first in the recommended sequence because the review's economic modelling found clinker carries the highest carbon leakage exposure of any commodity assessed. The table below sets out the review's published exposure figures for the commodities with quantified projections. Ammonia, glass, and steel are included in the staged rollout, but the review's public summary reporting does not break out separate percentage figures for those three.
| Commodity | Recommended stage | Projected import exposure by 2030 (high carbon-price scenario) |
|---|---|---|
| Clinker | Stage 1 | Approximately 14% rise in imports, the highest of any assessed commodity |
| Cement | Stage 1 | Approximately 2.5% rise in imports |
| Lime | Later stage | Approximately 13.5% combined import and export impact |
| Ammonia and derivatives | Later stage | Included in the staged rollout; no separate figure published |
| Glass | Later stage | Included in the staged rollout; no separate figure published |
| Steel | Later stage | Included in the staged rollout; no separate figure published |
Clinker's 14% exposure figure explains the sequencing on its own: no other commodity in the review's public reporting comes close, which is why the recommendation starts narrow, with cement production as the entry point rather than launching across all five groups at once.
Australia's Safeguard Mechanism: The Foundation a BCA Would Build On
The Safeguard Mechanism is Australia's existing industrial emissions scheme, and it is the structure the Carbon Leakage Review recommends building on rather than replacing. It covers 215 facilities that each emit more than 100,000 tonnes of CO2-equivalent per year, accounting for roughly 28% of national emissions. Each facility carries a declining baseline, and facilities that emit above it must acquire credits to cover the difference.
That baseline-and-credit design explains why the review recommends mirroring the Safeguard Mechanism's scope rather than building an EU-style certificate market from scratch. Administered by the Clean Energy Regulator, the mechanism already prices carbon for onshore production in the five recommended sectors; a border adjustment on the same baselines would extend that cost to imports of the same goods, closing the onshore-versus-imported gap without a second, incompatible pricing system.
Government Decision Timeline: What Happens Next
No legislation implementing an Australian border carbon adjustment exists as of July 2026, and none has been introduced to Parliament. The recommendation is a report, not a law, and the review itself sets no legislated start date for any of the five commodity groups.
- February 13, 2026: DCCEEW publishes the Carbon Leakage Review's final report, recommending a staged border carbon adjustment.
- July 2026 to June 2027: The government's decision window, running alongside the 2026-27 review of the Safeguard Mechanism, the process the government has stated will weigh the recommendation.
- Not yet set: Any legislated start date, sector-by-sector implementation schedule, or administering authority for a border adjustment.
Exporters and importers tracking this recommendation should watch the 2026-27 Safeguard Mechanism review itself, not a separate CBAM-style legislative process, since any change is more likely to arrive as an amendment to that existing scheme than as standalone carbon border legislation.
What This Means for Exporters to Australia
Exporters of cement, clinker, ammonia, glass, lime, or steel to Australia face no new border carbon cost today. Nothing in the Carbon Leakage Review has been enacted, and no Australian authority currently collects a carbon charge on imports. The recommendation's value to exporters lies in the risk it signals, not in any obligation it creates now.
- Watch the 2026-27 Safeguard Mechanism review directly, since that process, not a separate bill, is where the government has said it will weigh the recommendation.
- Model exposure using the review's own sequencing: cement and clinker exporters face the earliest possible risk window, while ammonia, glass, lime, and steel exporters sit in a later, less-defined stage.
- Expect a baseline-linked design, not a certificate market, since the review recommends mirroring Safeguard Mechanism baselines rather than building a new registry.
- Note that the no-export-rebate stance affects Australian exporters, not foreign suppliers: a future BCA would raise costs on imports into Australia, not create a rebate foreign exporters could claim.
Australia's Proposed BCA vs the EU CBAM and UK CBAM
An Australian border carbon adjustment, if legislated, would differ from the EU CBAM in its administrative foundation: the review recommends building on the Safeguard Mechanism's existing baseline-and-credit framework rather than a new certificate market, putting the recommended design closer to a domestic emissions trading extension than to the EU's registry-and-certificate model.
| Feature | EU CBAM | UK CBAM | Australia (recommended, not yet law) |
|---|---|---|---|
| Status as of July 2026 | In force since January 1, 2026 | Adopted; launches January 1, 2027 | Recommended February 13, 2026; not legislated |
| Mechanism type | Certificate-based, linked to EU ETS price | Tax-based levy, linked to UK ETS price | Baseline-based, linked to Safeguard Mechanism (recommended) |
| First sectors covered | Steel, cement, aluminium, fertilizers, electricity, hydrogen | Aluminium, cement, fertilizers, hydrogen, iron and steel | Cement and clinker first; ammonia, glass, lime, and steel in later stages |
| Export rebates | None | None | None recommended |
| Administering body | National competent authorities and DG TAXUD | HMRC | Not yet designated; Safeguard Mechanism uses the Clean Energy Regulator |
The comparison also clarifies what an Australian BCA would not be: it would not price imports against a traded carbon market the way the EU ETS or UK ETS do, since Safeguard Mechanism baselines are domestic and facility-specific. Foreign suppliers should treat the Australian proposal as a distinct design, not a copy of either European mechanism.
Australia in the Global CBAM Trend
Australia's review places it among a growing group of countries building their own CBAM in response to the EU's lead, alongside the UK's tax-based mechanism launching January 2027 and Norway's incorporation of the EU's own regulation into domestic law. Other major emitters are moving on related but distinct tracks: Japan is phasing in a mandatory domestic emissions trading scheme (GX-ETS) rather than a border adjustment, and South Korea is reviewing its own domestic ETS while coordinating with other exporters to resist the EU's CBAM as a trade barrier. Australia's approach sits apart from all of them: rather than copying the EU's certificate system or building a new levy, the review recommends extending a scheme Australia already runs.
That distinction matters for businesses tracking multiple carbon border developments at once. A company exporting steel to both the EU and Australia would eventually face two structurally different compliance regimes, since the EU's certificate obligation and a Safeguard-Mechanism-linked Australian charge would calculate cost differently. Whether that becomes reality depends on the decision Australia makes during the 2026-27 Safeguard Mechanism review.
Frequently Asked Questions About Australia's Carbon Border Adjustment
Does Australia have a CBAM?
No. As of July 2026, Australia has no border carbon adjustment in force. The Carbon Leakage Review, published February 13, 2026, recommends creating one, but it has not been legislated and no start date has been set for any sector.
When will Australia decide whether to adopt a border carbon adjustment?
The government has said it will weigh the Carbon Leakage Review's recommendations as part of the 2026-27 Safeguard Mechanism review, a window running from July 2026 to June 2027. No confirmed decision date exists within it as of July 2026.
Which sectors would an Australian BCA cover first?
Cement and clinker come first, based on the review's finding that clinker carries the highest leakage exposure of any assessed commodity, an estimated 14% rise in imports by 2030. Ammonia and derivatives, glass, lime, and steel follow in later stages.
Would Australian exporters get a rebate under the proposed mechanism?
No. The review explicitly recommends against export rebates for any covered commodity, keeping the mechanism focused on equalizing costs between domestic and imported goods rather than subsidizing exports.
How would an Australian BCA differ from the EU's CBAM?
The recommended Australian design would link to the Safeguard Mechanism's facility-level baselines rather than to a traded certificate price the way the EU CBAM links to the EU ETS. The EU CBAM is already in force; the Australian proposal remains an unlegislated recommendation that would, if adopted, run through the Safeguard Mechanism under the Clean Energy Regulator.