South Africa will be taking on the EU regarding its carbon border adjustment mechanism (CBAM) and associated carbon taxes at a trade meeting in Abu Dhabi later this month.
“We’ve pointed out the very significant impact this will have on industrialisation on the African continent. [The] CBAM, together with the other measures on deforestation, will impact very, very significantly on our ability to export,” minister of trade, industry & competition Ebrahim Patel told Business Times.
“At the same time, we are now taking our discussion to the World Trade Organisation [WTO] in a few weeks’ time, where trade ministers across the world will get together and reflect on trade climate change,” he said.
Patel was speaking on the sidelines of the 2024 Investing in African Mining Indaba in Cape Town this week. He said he and his advisers would participate in a WTO meeting in Abu Dhabi on February 26-29, the second gathering of trade ministers since the pandemic.
The CBAM policy, to be introduced in January 2026, proposes a carbon tax on imports — such as hydrogen, steel, fertiliser, iron and aluminium — whose production is carbon-intensive.
Our view is that the CBAM put forward by the EU is in contravention of both the Paris Agreement and the WTO
— Minister of trade, industry & competition Ebrahim Patel
The scheme seeks to achieve net neutrality by 2050. According to trade and industrial policy strategies, up to $7.3bn (almost R140bn) in African exports are at risk. South Africa’s most vulnerable sectors are iron and steel and aluminium — worth just under 1% of the country’s GDP and nearly 3% of its exports.
Patel said he had held meetings with European officials to voice the concerns of South Africa and the African continent about CBAM and its impact on the region’s industrialisation, where he had pointed out that the continent’s emissions were being dwarfed by those of the developed world.
“I’ve met with the German state minister [and] raised our concerns, and essentially what it comes down to is our view that the CBAM put forward by the EU is in contravention of both the Paris Agreement and the WTO.”
He warned that the CBAM in its current form was unilateral, and that the world’s policy on emissions needed to take the perspective of the developing world into account.
“It’s a unilateral step when the world needs multilateralism. We need a rules-based system where we co-design the rules. Everybody must contribute to [tackling] climate change. It’s real. It’s going to impact the global south too. But it can’t be done unilaterally. It can’t be done by the imposition of a mechanism of one trading partner or one market on behalf of the global commons,” he said.
“I’m looking forward to a constructive engagement with the EU on these matters, and I have raised it with my counterpart, the trade commissioner of the EU, Valdis Dombrovskis.”
The CEO of Minerals Council South Africa Mzila Mthenjane said discussions about the CBAM and emissions should be handled appropriately by South Africans, as the carbon tax would also impact exports to other regions, as global trade policy shifted more towards emissions reduction.
“It’s something that does need to be thought about seriously. The EU is proceeding with the [CBAM]. There are country-to-country engagements in terms of trying to alleviate the impact on South African exports to the EU and get some concessions.
“But I think what it highlights ... is what South Africa’s energy strategy is insofar as [its] investment in renewables [is concerned], and therefore [what it intends to do] over time [to reduce] the carbon content of products that are going to be exported, not only to Europe, but [also] globally,” he said.
He said South Africa’s mining sector was taking the lead in ensuring the production of its goods reduced both direct and indirect emissions.
“This is why you see the mining industry investing heavily in its own renewables, particularly to reduce scope 1, which is the direct emissions, as well as scope 2, which is the electricity from Eskom. So the operations of mines are becoming carbon-efficient,” he said.
Ninister of mineral resources & energy Gwede Mantashe said engagement on the impact of the CBAM would be critical to minimising its fallout.
“I don’t think economics works with assurances. There is no economic activity that depends on assurances. It is a function of projection and analysis, and you predict what will happen and you pre-empt it with your plan. So we can’t give assurances that there will be exports and so forth because we are not the exporter.
“It is going to be a very serious issue for us because we are a developing economy. We are not a developed economy. That is one thing we must internalise as South Africans, and we must work on it,” he said.
David Luke of the Firoz Lalji Institute for Africa, who specialises in trade policy and trade negotiations, said African nations could respond to the CBAM in six ways: by exerting diplomatic pressure, mounting a legal challenge, financing an energy transition, developing a voluntary carbon credit market, setting up a uniform African carbon credit scheme, and linking sustainability with trade.
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