REPORT: Carbon border tax may prove unequal, disproportionately hurting Africa

A new EU law imposing the world’s first carbon border tax takes effect in October 2023.

1. The tax is meant to discourage companies from moving production to countries with lax climate policies.
2. The EU’s carbon border adjustment mechanism will charge importers the same carbon price as EU producers.
3. A new report finds Africa could lose 0.91% of GDP annually, equivalent to $25 billion, due to the border tax.
4. The annual losses represent 3 times the EU’s 2021 development cooperation budget for Africa of $6.8 billion.
5. Africa would be the most affected region as a share of GDP due to its exports to the EU of affected products.
6. Though Africa has a limited carbon footprint, the policy still disproportionately affects African economies.
7. African countries could mitigate impacts by diversifying exports but market diversification has been a challenge.
8. African countries need a differentiated approach that allows time to adjust plus appropriate finance to respond to the EU policy.