Thread by @CrispianOlver

Today @ClimateZA released a discussion paper on Carbon Border Adjustment Mechanisms #CBAM climatecommission.org.za/publications/c… Thread 1/

#CBAMs are intended to impose a tax on imported products equivalent to the domestic cost of emission reductions i.e. to ensure consistency in carbon pricing of goods traded between different jurisdictions. 2/

EU has been debating different versions of #CBAM between the EU Commission, Parliament and Council, and in Dec 2022 reached agreement on common approach (although some details still need ironing out). 3/

Importers into EU will have to purchase #CBAM certificates according to the embedded emissions in the products. Based on prices in the EU ETS, this would be approximately R144/tCO2eq. EU plans to phase in #CBAM from 2025, reaching 100% in 2033. 4/

The EU’s own impact assessment indicates that African exports to EU could be seriously affected, dropping from €5,7b to €3,9b / annum. 5/

Rebates will be provided for countries that already have a carbon price e.g. SA’s carbon tax will result in 10% reduction. 6/

Sectors that will be included in #CBAM are cement (-44,3%0), fertilizers, iron & steel (-30,5%), aluminium (-16%) and hydrogen – estimated impact on SA exports to EU in brackets. Based on value of SA exports, biggest concerns relate to iron & steel, chemicals and aluminium. 7/

This change could have significant impacts on South African producers. Between 2017 and 2021, the EU imported, on average, $1.4bn per year of products from South Africa and lead to an aggregate 4% reduction in SA exports. 8/

EU is also proposing to withdraw free allowances to EU domestic exporters, which will somewhat lessen the impact of #CBAM. 9/

#CBAM must also be viewed in context of EU Green Deal and USA IRA which are aggressively subsidising local green industries and might trigger new global trade war. 10/

The CBAM is a unilateral trade measure that violates Article 1 of WTO (in particular common but differentiated treatment), and SA should mount a legal challenge in partnership with other developing countries. 11/

While we challenge it through WTO, there may be some room to negotiate aspects of #CBAM that advantages certain sectors, e.g. our green H2 industry. 12/

At same time we must acknowledge that some form of carbon price is inevitable in global economy, and our best long-term defence lies in cutting our emissions. Role of carbon tax is NB in decarbonisation. 13/

Whatever system of carbon pricing is introduced, it must be equitable and just, and take account of development needs of developing countries i.e. in line with principle of common but differentiated responsibilities i.e. a #JustTransition. 14/

Thanks goes to @GenesisAnalytic and John Ward for producing the discussion paper, and to the panelists for engaging in the launch of the paper this morning.