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A disputed levy

Report finds EU's new carbon import levy will hit many third countries less than feared but another think-tank says Africa faces possible 4% drop in exports to Europe

The economic effects of the EU's new carbon import levy are set to be far smaller than feared by many third countries, many of them African, according to a report published on Monday by Sandbag, a think-tank focused on EU climate policies.

The report contends that foreign manufacturers can minimise the charges they face under the Carbon Border Adjustment Mechanism by utilising 'resource shuffling' – 'selectively exporting to Europe the low-emission intensity goods to enjoy lower CBAM charges, while the high-emission goods are kept for other markets'.

'Although the EU wishes to avoid such practice, it might not manage to do so under current rules,' the report adds. However, Sandbag's research does not look at the costs that could be faced by African states.

The levy will apply to imports of a group of products including steel, cement, iron and aluminium and the African Climate Foundation has estimated that the levy could result in a 4% drop in Africa's exports to Europe, with South Africa and Mozambique among those likely to be worst affected (AC Vol 64 No 13, How Brussels's green tax will hit Africa).

However, trade experts tell Africa Confidential that these effects could be mitigated if the EU provides financial and technical support to allow Mozambique, whose energy for aluminium production comes from the South African grid, to be plugged into a domestic energy source.

Though South Africa is still threatening to challenge the CBAM at the World Trade Organization, EU Trade Commissioner Valdis Dombrovskis said last week that Brussels was in talks with a group of countries to assuage their concerns about the levy – under which payments will only start in 2026 (AC Dispatches, 28/2/24, Carbon row heads to the World Trade Organization).

Other African ministers have complained about the lack of consultation by the EU Commission on the levy, pointing out that their carbon emissions are very low.

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