Creating a Climate-Just Carbon Border Adjustment Mechanism

The EU’s Carbon Border Adjustment Mechanism (CBAM) is expected to launch in October 2023, with reporting obligations only. The scheme aims to ensure that European efforts to reduce greenhouse gas emissions do not induce so-called ‘carbon leakage’, which could occur if companies based in the EU relocate carbon-intensive production to countries with less ambitious climate standards or increase imports of carbon-intensive products to the EU. The mechanism will require companies importing certain products to the EU to offset embedded GHG emissions by purchasing CBAM certificates, thus ensuring that the carbon price of imported products is equivalent to that of products made by European producers under the EU Emissions Trading Scheme (ETS). CBAM’s effectiveness and impact will be evaluated by the EU towards the end of its phase-in period. This evaluation will likely lead to adjustments in the mechanism’s design and will be followed closely by third countries considering the introduction of similar instruments. Economies and sectors dependent on exports to the EU will be both more exposed and vulnerable to the mechanism. In this policy brief we explore the views of stakeholders in South Africa, the EU’s largest trading partner in Africa, and consider measures necessary to ensure that CBAM addresses issues of justice and sustainability. In particular we identify three key recommendations for European policymakers.