The Carbon Border Adjustment Mechanism (CBAM) is a measure taken by the European Union (EU) to encourage the countries from which it sources to adopt cleaner production.
The Border Carbon Adjustment Mechanism, which will enter into force on a transitional basis in October, introduces a carbon tax on exports to the EU. The move, however, has raised concerns in Africa, where Europe is an important export market.
A study by the African Climate Foundation and the London School of Economics suggests that the economic repercussions of CBAM will be “profound” and especially felt in Africa.
Their modeling, based on a price of 87 euros per ton, suggests that the CBAM would result in losses of around $25 billion based on 2021 GDP levels, almost four times what the EU has.
Products such as iron and steel, cement, aluminum, fertilizers, hydrogen, and electricity, which represent a significant share of African exports to Europe, will be the first victims of the mechanism.
After 2026, the scope of the CBAM will extend to other products, which could lead to economic losses.
Experts believe that this measure is punitive and that it considerably reduces the room for maneuvering of developing countries in terms of growth and job creation.
Uganda Eyes Zero Tax on Electric Cars
Uganda is striving to transition to e-mobility despite limited infrastructure in the country. The authorities believe that the removal of taxes on imports of electric vehicles will encourage the mass adoption of these vehicles.
The aim is to reduce pollution and improve Kampala’s ecological reputation.
East African countries defied economic turmoil in 2022 to post 17% growth in foreign direct investment, with South Sudan and Kenya recording the largest percentage increases. By contrast, investment flows declined in Southern, West, and Central Africa.