Thread by @fatenaggad

Time for a🧵on the EU's #CBAM (Carbon Border Adjustment Mechanism). Today, EU institutions reached an agreement on the CBAM. It will enter into force on 1 October 2023. What does this mean for #Africa?
europarl.europa.eu/news/en/press-…

1) What is the logic behind the CBAM? The EU introduced ambitious decarbonization measures for its industry=> risk of carbon leakage (companies shifting production to more tolerant jurisdictions) => industrial exodus from EU with major socio-economic impact & no climate impact.

But what does the evidence say about this assumption? The European Commission's own assessment of the impact of the CBAM is not conclusive but theorizes that more ambition may result in more carbon leakage.
ec.europa.eu/transparency/d…

In its report on CBAM, UNCTAD also looked at this, looking at the only comparable case to CBAM (California’s cap-and-trade program) concluding: "system has not reduced carbon leakage".
unctad.org/system/files/o…

2) How will it work? People often think CBAM is a tax. It is not. This is how it will work: EU importers will need to buy "CBAM Certificates" from an authorized national authority. Certificates correspond to the amount of emissions generated in the production of imported goods.

The price, calculated by the European Commission, will reflect the weekly average of the European Emissions Trading Scheme (ETS) (this week's average is 88,2euro/Mt). Key to this is the ability to track embedded carbon in producing countries and certify. A challenge at this point

3) What imports are affected? In the first phase of implementation, the following imports will fall under the CBAM regime: iron and steel, cement, aluminum, fertilizers and electricity, and hydrogen. Both direct and indirect emissions are covered.

4) This leads me to the anticipated impact on Africa. That depends on how exposed exports of countries is based on: 1) whether their exports fall under the categories above, and 2) how important is the European market.

African countries most exposed are both middle-income and low-income countries. #Mozambique, which accounts for 7% of EU's aluminium imports but for which EU exports represent 25% of its export earnings, may lose up to 1% of its GDP according to @CGDev
cgdev.org/blog/eu-tax-af…

#Egypt and #Algeria, which respectively represent 21 and 20% of EU fertiliser imports will also be hard hit. Algeria (6% of total EU imports), Morocco (5%) and Tunisia (3%) also export cement. South Africa will also be heavily impacted. Nigeria, Cameroon, the Congo and Ghana too

5) The CBAM foresees NO waivers, e.g. to developing countries. The EU argued that a waiver would not be WTO compatible - questionable considering that similar waivers were previously secured. They also argued that a waiver would encourage...

...the relocation of dirty industry to Africa. Questionable too (due to studies as mentioned above) but arguably that will depend on policies put in countries to prevent that too (with the right incentive this can be overcome). Some have in fact argued that...

...the only effect CBAM would have is a resource shift whereby clean energy capacity in already under-resourced countries will be shifted for export production while industry aimed at local consumption and energy access wl depend on dirty fuels. Energy transition 4 Africa anyone?

Concerns about Africa acting as a backdoor to access the EU market in case of a waiver are also raised. The truth is that it is not like manufacturing capacity can be built overnight to allow "undesired" partners to benefit from preferential access to the EU in case of a waiver.

What the CBAM can achieve, though, is a rapid de-industrialisation especially that African industry is currently export-oriented. The ramifications of that on Africa's longer-term capacity to position itself in delocalised manufacturing (rhetorically cheered in Brussels) is bad

A temp waiver for Africa will neither lead to carbon leakage nor represent a major competitiveness risk to EU. Its implementation will do more harm than good for Africa, especially considered against the backdrop of unmet climate finance. So what's this trying to achieve, really?

One addition: I am not a supporter of the "let's use CBAM revenue for climate finance". Effect is that that we'd b disincentivising industrial development & having major impact on economies in return for ODA. It is a matter of structural transformation vs ODA approach.