The African Development Bank Group (AfDB) has raised alarm over the potential impact of a new European Union (EU) carbon border tax on Africa’s trade and industrialization prospects.
The EU carbon border tax, also known as the carbon border adjustment mechanism (CBAM), is a proposed policy that would impose a levy on imports of carbon-intensive goods into the EU, based on their greenhouse gas emissions. The aim is to prevent carbon leakage, which occurs when production shifts to countries with less stringent climate policies, and to encourage global climate action.
However, the AfDB President, Dr. Akinwumi Adesina, has warned that the CBAM could significantly constrain Africa’s trade and industrialization progress by penalizing value-added exports including steel, cement, iron, aluminum, and fertilizers.
Speaking at the Sustainable Trade Africa Conference held at the UAE Trade Centre in Dubai, Adesina said, “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 the de-industrialization of Africa.”
He added, “Africa could lose up to $25bn per annum as a direct result of the EU carbon border tax adjustment mechanism.”
Adesina stressed that Africa was already being overlooked in the global energy transition, according to data from the International Renewable Energy Agency (IRENA).
“Africa received just $60bn or two percent of the $3tn 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,” he said.
Adesina called for what he termed the Just Trade-for-Energy Transition policies, which would enable Africa’s renewable ambitions without restricting its trade prospects.
He said Africa would need to use natural gas as a transition fuel to reduce the variability of renewable energy and stabilize its energy systems in support of its industrialization.
The AfDB chief also urged the EU to support Africa’s green growth agenda through increased financing, technology transfer, and capacity building.
The CBAM proposal has been met with mixed reactions from various stakeholders, including African governments, businesses, and civil society groups.
Some have argued that the CBAM would violate the principle of common but differentiated responsibilities and respective capabilities (CBDR-RC), which recognizes the historical responsibility of developed countries for climate change and the different capacities of countries to mitigate and adapt to its effects.
Others have expressed concern that the CBAM would create trade barriers, increase costs, and reduce competitiveness for African exporters, especially in sectors such as agriculture, mining, and manufacturing.
However, some have also seen the CBAM as an opportunity for Africa to diversify its economy, enhance its value addition, and embrace low-carbon development.
The EU is expected to present its legislative proposal on the CBAM by July 2023, as part of its broader package of measures to achieve its 2030 climate targets and its 2050 net-zero emissions goal.
The CBAM is also likely to feature in the upcoming negotiations on the post-Cotonou agreement, which will define the future partnership between the EU and 79 countries in Africa, the Caribbean, and the Pacific (ACP).
The AfDB, as the premier development finance institution in Africa, has been playing a leading role in promoting sustainable trade and industrialization on the continent.
The bank has invested over $35bn in trade finance, infrastructure, energy, agriculture, and regional integration in the past five years, supporting millions of jobs and livelihoods.
The bank has also launched several initiatives to boost trade and industrialization in Africa, such as the Africa Investment Forum, the Africa Trade Fund, the Africa Continental Free Trade Area (AfCFTA), and the Africa Industrialisation Strategy.
The bank’s vision is to help transform Africa into a globally competitive, inclusive, and business-friendly continent that creates wealth, generates jobs, and reduces poverty.
Source: Punch
