Sustainable Growth

Thursday, 10 August 2023

Responding to the European Union's Carbon Border Adjustment Mechanism (CBAM): South Africa's vulnerability and responses

  • Year: 2023
  • Organisation: TIPS
  • Author(s): Seutame Maimele
  • Countries and Regions: South Africa

CBAM is a key policy tool that forms part of the European Green Deal (EGD) to reduce net GHG emissions across Europe and abroad. Within this context, CBAM can be defined as a carbon border tax on embedded GHG emissions of carbon-intensive products imported into the EU. The main intent is to equalise the price of carbon between EU products and imports, by ensuring importers face similar conditions to EU manufacturers, and that the European climate objectives are not undermined by carbon leakage. In its current form, cement, aluminium, fertilisers, electric energy production, hydrogen, iron and steel, as well as some precursors (input materials, i.e. iron ore) and a limited number of downstream products are targeted. Other products are set to be added after the transitional period. These products remain highly exposed in terms of international climate change policies. In South Africa, a total of US$2.8 billion (about R52.4 billion) of South African exports (based on 2022 data) are at risk in the short term, with this number set to increase as the CBAM covers more and more products. The iron and steel (including iron ore) and aluminium industries are particularly at jeopardy, in the short term.

This paper provides an augmented analyses of the Policy Brief by Monaisa and Maimele  (2023), entitled The European Union’s Carbon Border Adjustment Mechanism and implications for South African exports. It updates analysis post the adoption of CBAM on 10 May 2023, reflecting on the vulnerability of the South African economy.