PREVIEW
Concessions to Washington are likely to ramp up opposition to levy
South Africa has stepped up its demands for concessions from the EU’s Carbon Border Adjustment Mechanism (CBAM) after Brussels’ recent deal with Washington. In a letter to the European Commission on 26 August, Xolelwa Mlumbi-Peter, deputy director of the Department of Trade, Industry and Competition, argues that South Africa and other developing economies should receive the same treatment the EU granted to the United States.
The 21 August framework agreement between the US and the EU, which sets out the deal on tariffs and other trade matters agreed by US President Donald Trump and European Commission President Ursula von der Leyen, promises ‘additional flexibilities’ for American firms under CBAM without spelling out the detail.
The levy, which will start being applied in the coming months, seeks to prevent EU industries from being undercut by requiring importers to pay a carbon price equivalent to that paid by European producers under the EU Emissions Trading System (AC Vol 64 No 13, How Brussels's green tax will hit Africa).
However, if US industry has obtained a blanket exemption from CBAM that would be poorly received by the likes of South Africa and India, who had previously threatened to take the EU to the World Trade Organization, claiming that CBAM breaches the WTO’s non-discrimination principle.
South Africa has been one of the leading critics of CBAM for some time, warning that its steel industry would be badly hit despite contributing little to global carbon emissions. South Africa's Presidential Climate Commission estimates that CBAM would cut Africa's exports to the EU by 30-35% – worth between €1.7 billion and €2.1bn – by 2030.
Concessions were also requested by Pretoria at a bilateral summit with the EU in March.
Carlos Lopes of the African Climate Foundation has warned that CBAM could lead to exports of aluminium to the EU from Africa dropping by 13.9%, and iron and steel by 8.2%
The EU Commission, however, has indicated that it plans to expand the scope of CBAM later this year (AC Vol 66 No 9, Blitzed by Trump tariffs, can Africa and Europe agree on trade?).
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