In April 2023, the European Union voted to implement the Carbon Border Adjustment Mechanism (CBAM), a policy tool to promote sustainable trade and industry within the economic bloc. 

CBAM encourages local climate action in member states by levying a duty at the point of import of certain products and supplies, acting towards driving the global economy to a low carbon system. This continental wide action serves as a touchstone for regional bodies, including the African Union, on the necessity of intra-African efforts towards fighting climate change. By introducing carbon prices on imports, the EU aims to promote equality among countries and encourage other nations to choose cleaner production. 

Globally, CBAM can be considered a pioneering measure that shows the EU’s commitment to reducing greenhouse gas emissions while avoiding disadvantages for local industries. CBAM is part of the EU Green Deal and Fit for 55, the goal of which is to reduce GHG emissions by 55% by 2030. 

Officially implemented on 1st October, 2023, CBAM applies to carbon – intensive sectors including iron, steel and aluminum, certain fertilizers, cement, hydrogen, and some ‘downstream’ products, such as bridge sections, rails, pipes, screws etc. 

CBAM will be rolled out in phases, the transitional phase (2023-2025) as a test run to correct how emissions are calculated and get businesses geared up for future compliance. Starting in 2026, as the final phase, importers will have to purchase CBAM certificates to offset embedded emissions in imported goods. The surrender obligation will be calculated based upon the relevant embedded emissions, the carbon price paid abroad, and adjustment to reflect free allocation within the EU.

CBAM’s results are likely to go beyond Europe and reach the entire globe, especially impacting the international commerce of emerging economies, and countries such as Kenya. The CBAM is an inspiration to forward thinking about climate action in Africa. By tying accountability to regional trading, the EU has made their member states accountable to each other  for their products, ensuring that there is a regional effort towards lowering carbon emissions. The African Union can follow this example by creating its own policy that ensures that intra-Africa trade is sustainable and local industries are regulated to ensure a low carbon industrial process.

An “African CBAM” could speed up the move to low-carbon economies around the continent. It would encourage individual countries and businesses to take a step back and evaluate their manufacturing processes, fostering a global shift towards more ambitious climate policies. It has the potential to drive innovation and drive the competitiveness of African industries. It incentivises businesses to invest in sustainable practices and green technologies. This in turn leaves these businesses better positioned for long – term growth and the continent accountable for its environmental impact. 

Nevertheless, this mechanism has some concerns in terms of trade tensions and economic disparities. The majority of developing countries would face such difficulties due to their heavy industries that emit large amounts of carbon dioxide. In addition, this may lead to more costs incurred by exporters from there, which might increase existing global trade imbalances. Furthermore, retaliatory measures from affected countries could make international efforts to address climate change even harder. 

A concentrated effort by African countries has the potential to truly change the way we operate. It has the potential to increase investments in local industries, increase exports to other countries and drive sustainable development across Africa. The short term drawbacks are outweighed by the long term benefits that the continent would experience from such a policy.

The implementation of “AU CBAM” needs to be handled cautiously. As an audacious move towards a sustainable future, it calls for a middle ground, where economic impacts are considered, but environmental sustainability is promoted. All nations will need collaboration and green technologies investment so as to prosper under this new trade regime.