Africa Faces Challenges from EU Carbon Border Tax
The European Union's carbon border tax is poised to impact the competitiveness of various African exports to the EU. Set to fully take effect on 1 January, this tax will raise the cost of importing African goods into Europe.
Economic Impact Forecasts
A 2023 study by the African Climate Foundation and the Firoz Lalji Institute for Africa at the London School of Economics examined six potential scenarios for the Carbon Border Adjustment Mechanism (CBAM), applying two economic models.
- One model predicts that with carbon priced at €87 ($101) per tonne, no single African country's GDP would decline by more than 0.18%.
- The other model forecasts a continent-wide GDP decrease of 0.91%, equal to about $25 billion based on 2021 GDP figures.
Sectors Most Affected
The study identifies the aluminium sector as the most vulnerable, followed by electricity, and iron and steel exports.
The CBAM could cause a fall of up to 13% in these industries.
Summary
The EU's carbon border tax is expected to significantly raise costs for African exports, particularly hitting the aluminium and steel industries, while potentially shrinking Africa’s GDP by up to nearly 1%.
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