The European Union’s Proposed Carbon-Border Adjustment and Its Impact on Trade With Africa

Abstract

On 11 December 2019, the European Commission officially presented its proposed carbon border adjustment mechanism (CBAM), which seeks to address carbon leakage by putting a price on carbon-intense imports into the European Union (EU). In essence, importers in targeted sectors (cement, electricity, fertilizers, iron, steel and aluminium) would be required to monitor and declare greenhouse gases (GHG) emissions embedded in products coming from outside the EU so as to purchase and surrender each year ‘certificates’ offsetting such emissions. Such a carbon border adjustment, to the extent it only covers specific sectors, at least in its initial phase, would not equally affect African countries. Trade with most of the continent would – in general – not be subject to such an adjustment. However, specific industries, primarily in Northern and Southern Africa, including in least developed countries, would shoulder the pain associated with such an adjustment, both in terms of costs and risks of trade diversion. Africa has little contributed to the situation which the EU seeks to tackle by putting a price on carbon globally. In order to mitigate the impact on Africa, specific tools should be considered, including outright exclusions, reinforced cooperation towards decarbonization and partnerships building on existing trade agreements. Africa, Algeria, Egypt, Libya, Morocco, Tunisia, Mozambique, South Africa, Zimbabwe, Trade, Environment, Energy, Carbon Leakage, Carbon Border Adjustment, Border Adjustment, European Union