On Friday, the government published its review into carbon leakage risks in Australia, announced as part of the Safeguard Mechanism reform package legislated in 2023. Following consultation over 2023 and 2024, the final report of the Carbon Leakage Review was handed to government in 2025, and has now been released by DCCEEW.
The government will consider the recommendations as part of the 2026-27 review of the Safeguard Mechanism, which already incorporates measures to address leakage, including trade-exposed baseline-adjustments (TEBA).
Notably, the Review recommends that, while current settings are sufficient to prevent carbon leakage risk over the medium-term, a border carbon adjustment could support a select group of commodities at risk of carbon leakage, initially covering cement and clinker, potentially expanding over time.
In this Briefing, we take a closer look at the Review and discuss potential impacts for Australia’s domestic carbon market, including related policy settings for the Safeguard Mechanism, and the 2026-27 policy review.
Background to the Review – and current leakage measures under the Safeguard Mechanism
Carbon leakage refers to shifts in the production of emissions-intensive trade-exposed commodities from countries with more ambitious emissions reduction policies to those with weaker emissions reduction policies, due only to differences in
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