Costing the Pathway to Transition Coupled with Policy Changes should Form the Basis of Africa’s Response

A new European law that imposes the first ever carbon border tax in the world comes into force in October 2023. It will be applied gradually over the next three years before it is fully implemented. In the global south it’s been heavily criticised. Critics see it as an industry protection measure that will have negative repercussions on regions such as Africa. In a newly released report, researchers point out that the affected sectors – cement, iron & steel, aluminium, fertilisers and electricity – are key drivers of African economies. We conclude that the new policy will wipe out 0.91% of the continent’s combined GDP (equivalent to a fall of US$25 billion at 2021 levels of GDP). To put this in context, the annual losses from the border tax represent, in value, three times the development cooperation budget that the EU committed to Africa in 2021. In 2021 the EU allocated US$6.8 billion to the continent. We find that Africa would be the most affected region, as a share of GDP. This is because the EU represents a key market to many African economies exporting the products covered by the new law.