EU carbon border levy could sabotage climate goals, says thinktank

The EU could inadvertently “sabotage efforts” to limit global heating to 1.5C or 2C as a result of a controversial carbon border levy, a thinktank has said.

The European Council on Foreign Relations (ECFR) said the EU’s proposed “carbon-border adjustment mechanism” (CBAM) – which would require importers of energy-intensive goods to pay a price for environmental damage – could lead to African producers selling into other markets with lower standards, hindering climate action.

Under the EU proposal, companies importing iron, steel, aluminium, fertiliser, cement or electricity into the bloc would be required to buy carbon certificates. These certificates would reflect the same carbon prices faced by European producers under the EU’s emissions trading system.

Long championed by France, the plan is intended to stop European manufacturers going bust when their international rivals are not subject to the same green standards. In such a situation, emissions are unchanged, a problem known as “carbon leakage”.

While the policy would have the biggest financial impact on China, Russia and Ukraine, African countries that rely on a small number of industries are the most exposed, says the ECFR. Mozambique, Guinea, Sierra Leone, Ghana and Cameroon are big exporters of aluminium, while Zambia and Zimbabwe sell a lot of steel and Algeria and Egypt’s fertiliser exports would be affected.

The ECFR supports the border levy, but says the EU should redistribute CBAM revenues to low-income countries that are worst affected by the measure.

African states “have limited fiscal headroom and face multiple development and pandemic-related challenges”, the researchers write. “As such it is understandable that they perceive CBAM, and the EU’s refusal to grant exemptions to the least developed countries, as a threat.” African exporters are unable to compete with Europeans on green innovation or research and development, they add. “These concerns could undermine the EU’s climate leadership, deepen mistrust between the bloc and countries in the global south, and sabotage efforts to achieve the Paris’ Agreement’s 1.5C or even 2C targets.”

Alex Clark, a researcher at the University of Oxford and one of the ECFR report authors, said CBAM was “a good idea”, but the EU needed to complement it with measures to help African states secure investment for the green transition.

He said Africa was “still essentially treated as a charity case” when it came to the EU’s approach to climate policy towards the continent. “It’s still really just the recipient of adaptation money rather than a genuine effort at economic transformation. If Africa’s place in the future global economy is going to be not limited to damage control and allow it to grasp some of the clear opportunities of the green transition, the EU will need to complement CBAM with some serious, well-thought-out, broad-based investment.”

A “poorly managed CBAM” could lead to African producers selling into other markets with lower standards, while slowing political progress on the global climate effort, Clark said.

Recent attempts by the European Commission president, Ursula von der Leyen, to improve relations with the African Union had not gone beyond rhetoric, he argued. “There is a huge trust deficit in bilateral relations between the EU and African states, between EU member states and African states. Perhaps most obviously between the EU and the AU.”

Despite the concerns over the border levy, the report says the EU has the potential to play a leading role in the global path to net zero emissions. “The EU is a powerful market economy and export market, a major donor, a regulatory superpower, and an essential source of expertise in intellectual property and infrastructure that can help other powers implement the green transition,” the authors write.

The EU’s role in helping sustain a “fragile global consensus” on emissions reduction could be even more important if another US president hostile to climate action enters the White House after the 2024 elezioni, the report suggests. It also says that the EU should compete to balance China’s influence in Africa and Latin America, so developing countries have other routes to carbon neutrality.

The authors praise Germany for its attempt to help South Africa phase out coal, arguing that the EU and other member states should take a similar approach, sharing finance and expertise to help the green transition in other African countries.

The European Commission did not respond to a request for comment.

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