African Development Bank Warns EU Carbon Border Adjustment Mechanism May Undermine Continental Industrialization
During the AfDB annual meeting held in Brazzaville this week, Hanan Morsy, the bank’s director of macroeconomic policy and forecasts, voiced strong concerns about the way the European Union is implementing its Carbon Border Adjustment Mechanism (CBAM). Morsy noted that African stakeholders were largely excluded from the design process, a omission she believes risks compromising the continent’s development ambitions.
“Part of our concern is that we were not involved in the design – we were not consulted, engaged or given a say in the implementation,” Morsy said. She added that while the global shift toward lower‑carbon economies is widely supported, the mechanisms used to achieve it must not undermine Africa’s industrialization and transformation goals.
What the EU says CBAM aims to achieve
The European Commission describes CBAM as a tool to create a “level playing field” for EU producers subject to the EU Emissions Trading System (ETS). Under the ETS, manufacturers in carbon‑intensive sectors such as steel, cement, aluminium, fertilizers, electricity and hydrogen must purchase allowances for emissions that exceed a set threshold. The price of these allowances has hovered around €80 per tonne of CO₂ in 2023, according to ICE futures data (ICE, 2023).
CBAM extends this carbon cost to imported goods by imposing a comparable charge based on the embedded emissions of those products. The mechanism entered its transitional phase on 1 October 2023, with full application scheduled for 2026 (European Commission, 2024). The EU argues that without CBAM, firms could relocate production to regions with laxer climate rules—a phenomenon known as “carbon leakage”—thereby undermining the environmental integrity of the ETS.
African perspectives on fairness and development
Morsy warned that CBAM is evolving beyond a pure environmental instrument into a broader trade, industrial and competition policy tool. “What is emerging is not just an environmental tool – climate regulation is increasingly becoming trade regulation, industrial policy and competition policy – and that has profound implications for Africa,” she explained.
She highlighted several concrete risks for African economies:
- Export competitiveness: Key African export sectors—such as steel from South Africa, aluminium from Mozambique, and fertilizers from Egypt—could face additional costs that make their products less attractive in the EU market.
- Investment deterrence: Uncertainty around future CBAM rates may discourage long‑term investments in low‑carbon technologies on the continent.
- Policy space limitation: African governments may find their ability to pursue industrial policy constrained if external carbon charges effectively dictate production decisions.
These concerns echo broader scholarly debates. A 2022 study by the Overseas Development Institute noted that border carbon adjustments could re‑allocate up to 0.3 % of global GDP from developing to developed regions unless accompanied by technology transfer and finance mechanisms (ODI, 2022).
Toward a more inclusive approach
Morsy called for a deeper dialogue between the EU and African stakeholders to ensure that climate‑related trade measures support, rather than hinder, continental development. She proposed three practical steps:
- Joint design workshops: Involve African ministries of trade, industry and environment in the shaping of CBAM modalities, including the selection of covered goods and the calculation of embedded emissions.
- Capacity‑building support: Provide technical assistance and financing for African producers to monitor, report and verify emissions, thereby easing compliance burdens.
- Revenue‑sharing mechanisms: Consider allocating a portion of CBAM revenues to climate‑friendly industrial projects in Africa, mirroring the EU’s own Innovation Fund.
Such measures could transform CBAM from a perceived protectionist barrier into a catalyst for green industrialization across the continent.
Conclusion
The EU’s Carbon Border Adjustment Mechanism represents a significant step in aligning trade policy with climate objectives. However, as Hanan Morsy and the AfDB emphasize, its implementation must be inclusive and development‑sensitive. By engaging African partners, building local capacity, and linking CBAM revenues to sustainable investment, the mechanism can help achieve a truly global low‑carbon transition without sacrificing the industrial aspirations of Africa’s nations.
