As the US retreats into industrial protectionism, Australia faces a sobering truth: our most reliable ally may now be our biggest source of volatility.

With the Trump administration imposing sweeping tariffs and dismantling decades of global trade policy and norms, the ripple effects are already being felt across Australia’s export-dependent economy.

The challenge now is navigating a world where America’s power is no longer a stabilising force, compelling Australia to solve for economic and geopolitical security in an equation missing its usual constant.

So how should we manage acute risk? In a word, diversify.

Australia’s ongoing, delicate balancing act with China and its deepening economic engagement with India, ASEAN nations and the EU have never been more timely or more crucial.

Yet, the full potential of our alliance with Japan is still waiting to be unlocked. .

The two countries are already close security and economic partners, bound by a Special Strategic Partnership. Now is the time to deepen cooperation in one critical dimension: energy and carbon security – the defining economic battleground of the next two decades.

Australia supplies more than 75% of Japan’s thermal coal and 43% of its LNG. This trade has powered Japan’s economy and created jobs at home. But it also means a significant portion of Japan’s emissions originates from Australian exports.

Every year, Australian exports to Japan generate more greenhouse gas emissions than the powerhouse states of NSW, Victoria and Queensland combined.

In a world heading toward net zero, this is not just a risk – it’s a shared liability.

The current model — exporting fossil energy and importing carbon risk — is economically and diplomatically limited.

And as far as politics goes, the debate on gas remains as flammable as the molecule itself.

Instead, we believe Australia and Japan must forge a sustainable carbon partnership**–** where emissions, investments, and industrial transitions can be jointly managed.

It’s time to replace carbon exports with carbon co-operation. There is now an international framework to do exactly that.

Under Article 6 of the Paris Agreement, only finalised last year, countries can strike bilateral emissions deals. These enable one nation to fund carbon reductions in another and count those reductions toward its own national targets. The deals can be highly tailored to the two parties’ objectives, as long as they meet stringent UN integrity standards.

In practice, it means Japan could fund industrial decarbonisation projects in Australia — like hydrogen, ammonia or green iron — and count those outcomes under its national Green Transformation strategy.

This is not charity. Nor is it a licence to keep polluting at home. For two emissions-intensive economies, it’s mutual economic self-interest and a fast-track to a more sustainable future.

Japan needs clean, secure energy. Australia needs export models that align with a net-zero world. With Article 6 in play, we can trade not just goods, but decarbonisation outcomes.

Both countries have already agreed to enhance co-operation on clean energy through the Special Strategic Partnership.

Now, both allies can together build:

• A joint carbon accounting framework;
• A system to pre-certify exports for new carbon border (CBAM) compliance; and
• Co-funded capital investment to accelerate industrial transition.

Timing is everything. And this time, the clocks are aligned.

Japan has launched its US$1 trillion GX Plan, complete with an emissions trading scheme from 2026, a levy on fossil fuel imports from 2026, and a push to decarbonise its globalised supply chains through US$140 billion in government bonds to fund investment in partner countries.

Australia, meanwhile, has recently announced its Future Made in Australia package — $23 billion in climate-aligned subsidies, a legislated 82% renewables target, and historic investment to build new grids and unlock new energy.

With the Albanese Government re-elected, we can expect to see a renewed Safeguard Mechanism, sectoral decarbonisation plans, new carbon border rules and a new domestic gas supply policy.

The industrial strategy playbooks are finally pointing in the same direction.

Now is the time to turn shared ambition into shared execution. That means setting real co-investment targets, allocating industrial capital together, and treating energy security as a joint priority – not a domestic afterthought.

This is not a vision-setting moment. It’s a delivery moment. And this is the decade in which results matter.

If Australia and Japan move now — linking their energy and emissions strategies — they can set a global benchmark for what a climate-aligned strategic alliance looks like.

Because in a post-Trump world, success will belong to those who can co-ordinate such initiatives.

The views expressed in this article may or may not reflect those of Pearls and Irritations.