A new EU carbon border tax could significantly constrain Africa’s trade and industrialization progress by penalizing value-added exports including steel, cement, iron, aluminium and fertilizers, the African Development Bank (AfDB)Group has warned.
“With Africa’s energy deficit and reliance mainly on fossil fuels, especially diesel, the implication is that Africa will be forced to export raw commodities again into Europe, which will further cause de-industrialisation of Africa,” AfDB President, Akinwumi Adesina Adesina, told delegates at the Sustainable Trade Africa Conference held at the UAE Trade Centre in Dubai.
“Africa has been short-changed by climate change; now it will be short-changed in global trade,” the Pan African Bank chief said at the summit, on the sidelines of COP 28.
And it could be worse. Benedict Oramah, President of the African Export-Import Bank, Afreximbank, warned that “preliminary results of a study recently commissioned by Afreximbank reveal that rapid decarbonisation by fossil fuel-exporting countries in Africa could cut merchandise exports by $150 Billion.”
Adesina commented: “Because of weak integration into global value chains, Africa’s best trade opportunity lies in intra-regional exchanges, with the new Africa Continental Free Trade Area estimated to increase intra-Africa exports over 80% by 2035.”
The AfDB chief stressed that Africa was already being overlooked in the global energy transition, according to data from the International Renewable Energy Agency.
“Africa received just $60Billion or 2% of the $3 trillion of global investments in renewable energy in the past two decades, a trend that will now impact negatively on its ability to export competitively into Europe,” said Adesina as he called for what he termed the Just Trade-for-Energy Transition (JTET) policies, which would enable Africa’s renewable ambitions without restricting its trade prospects.
Africa will need to use natural gas as a transition fuel to reduce the variability of renewable energy and stabilize its energy systems in support of its industrialization, Adesina explained.