COP28: Africa Could Lose $25 Billion Yearly Over New EU Carbon Tax – AfDB’s Adesina

African Development Bank Group President, Akinwumi Adesina, has expressed concern about the potential impact of a proposed EU carbon border tax on Africa’s trade and industrialisation efforts.

He warned that such a tax could pose a significant obstacle by penalising value-added exports, such as steel, cement, iron, aluminium and fertilisers, thereby impeding Africa’s progress in these sectors.

Adesina emphasised that Africa’s energy deficit and reliance on fossil fuels could lead to de-industrialization and potential losses of up to $25 billion annually due to the EU Carbon Border Tax Adjustment Mechanism.

The Bank President suggested intra-regional exchanges as Africa’s best trade opportunity, with the Africa Continental Free Trade Area expected to increase exports by 2035.

Adesina said, “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 the de-industrialisation of Africa.”

“Africa could lose up to $25 billion per annum as a direct result of the EU Carbon Border Tax Adjustment Mechanism,” the Bank President 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 Bank President said.

“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.”

According to data from the International Renewable Energy Agency, Adesina stressed that Africa was already being overlooked in the global energy transition.

“Africa received just $60 billion 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 stabilise its energy systems in support of its industrialisation,” Adesina said.