South Africa Seeks EU Carbon Tax Flexibility Following US Deal

South Africa has formally requested that the European Union reconsider its implementation of the carbon-border adjustment mechanism (CBAM), seeking similar flexibility to that recently granted to the United States. In a letter dated August 26, 2023, the country’s Department of Trade, Industry and Competition expressed concerns that the expanded levy on carbon-intensive imports could hinder South Africa’s efforts to combat climate change and transition towards a decarbonized economy.

The CBAM is designed to impose surcharges on imports that use carbon-intensive methods, ensuring that these goods are subject to the same regulations as domestically produced items. This mechanism is set to begin next year, with the UK planning to introduce similar measures. Other countries, including Australia and Japan, are also considering adopting comparable policies.

In its communication to the European Commission, South Africa highlighted a recent framework agreed upon by the US and EU. This framework included commitments from Europe to explore implementation options that would mitigate the impact of the carbon charges on small and medium-sized enterprises in the US. The South African government has urged the EU to extend similar considerations to South Africa and other African nations, emphasizing the potential economic repercussions of the CBAM.

According to a June report by Net Zero Tracker, a research unit supported by the Energy & Climate Intelligence Unit, approximately 422,000 jobs in South Africa are tied to exports to countries with active or incoming CBAMs. The report underscores the significance of these exports, particularly in the context of South Africa’s reliance on coal, which generates the majority of its electricity and contributes to its status as the world’s 14th-largest greenhouse gas emitter.

In its letter, the South African Department of Trade, Industry and Competition stated, “We urge the European Union to reconsider the implementation of the CBAM and not to expand the scope further as it will lead to further negative impacts on South Africa and other developing countries, especially in Africa.” This appeal reflects the broader concerns of developing nations regarding the potential for such measures to exacerbate existing inequalities in the global economy.

As South Africa navigates the complexities of climate policy, the response from the EU will be closely monitored, as it may set a precedent for how carbon tariffs are implemented on a global scale. The dialogue between South Africa and the EU will be crucial in determining how developing countries can participate in climate initiatives without facing undue economic hardship.