Akinwumi Adesina, president of the African Development Bank (ADfB) has warned that the European Union’s Carbon Border Adjustment Mechanism (CBAM), also known as EU’s carbon tax, will penalize Africa’s value-added products with an additional $25 billion in cost.
Adesina, addressing the Sustainable Trade Africa Conference during Cop28 in Dubai, emphasized that the mechanism could impede Africa’s trade and industrialization advancements by penalizing value-added exports such as steel, cement, iron, aluminum, and fertilizers.
- “With Africa’s energy deficit and reliance mainly on fossil fuels, especially diesel, the implication is that Africa will be forced to export raw commodities again into Europe, which will further cause de-industrialization of Africa. Africa has been short-changed by climate change; now it will be short-changed in global trade,” he said.
Referring to data from the International Renewable Energy Agency, Adesina pointed out that Africa is presently being disregarded in the global energy transition.
He contended that the proposed legislation would only widen the disparities between regions, deepening inequalities.
- “Africa received just $60bn or 2% of the $3 trillion of global investments in renewable energy in the past two decades, a trend that will now impact negatively on its ability to export competitively into Europe.
- “This system does not take into consideration the principle of common but differentiated responsibility as per the Paris Accord, which requires developed countries to peak on carbon emissions and achieve net-zero in the first half of the century, while developing countries peak and achieve net-zero in the second half of the century,” he underlined.
What you should know
The European Commission describes the CBAM, which entered its transitional phase on 1 October, as its “landmark tool to fight carbon leakage”.
According to the EU, the carbon tax is intended to equalise the price of carbon between domestic products and imports,
- “ensuring that the EU’s climate policies are not undermined by production relocating to countries with less ambitious green standards or by the replacement of EU products by more carbon-intensive imports.”
The CBAM will target Imports of specific items and key precursors with high carbon intensity, primarily focusing on sectors at substantial risk of carbon leakage.
These include cement, iron and steel, aluminium, fertilizers, electricity, and hydrogen. Once fully implemented, it aims to address over 50% of emissions within the EU’s Emissions Trading System-covered sectors.
Speaking at the time of its introduction, Valdis Dombrovskis, the European Commission’s executive vice-president for an economy that works for people, said that the mechanism was compliant with World Trade Organisation rules.
- “The EU needs the Carbon Border Adjustment Mechanism to achieve its ambitious emission reduction targets and achieve climate neutrality by 2050.
- The CBAM will tackle the risk of carbon leakage in a non-discriminatory way and in full compliance with WTO rules. The EU will be leading by example and encouraging global industry to embrace greener and more sustainable technologies,” he said.