Africa ( Commonwealth) _The new carbon border tax imposed by the European Union might cost Africa up to $25 billion a year, damaging commerce on the continent by penalizing high-value exports like fertilizers and iron, according to Akinwumi Adesina, president of the African Development Bank Group.
A tax on carbon-intensive imports, including fertilizers, cement, iron, steel, and aluminum, is the EU’s carbon border adjustment mechanism. Its goal is to persuade businesses to invest in more energy-efficient technologies and stop producing items with high carbon content outside of the European Union.
With Africa’s energy deficit and dependence on fossil fuels, particularly diesel, the consequence is that Africa will be obliged to export basic goods to Europe again, causing more de-industrialization, Adesina stated in a statement sent by email Thursday.
Climate change has disadvantaged Africa, and now it will be disadvantaged in global commerce, he claims. South Africa also spoke out against the EU tax’s influence.
The EU’s carbon-adjustment policies impede equality and the growth of trade initiatives, National Assembly Speaker Nosiviwe Mapisa-Nqakula said on Wednesday at the COP28 climate meeting in Dubai. It can have a negative and discriminating impact on struggling economies, particularly in emerging and poor countries.
Dr. Adesina, President of the African Development Bank Group, has cautioned that a new EU carbon border tax might considerably impede Africa’s trade and industrialization growth by punishing value-added exports such as steel, cement, iron, aluminum, and fertilizers.
Adesina noted that due to Africa’s energy deficit and dependency on fossil fuels, particularly diesel, the conclusion is that Africa would be obliged to export raw commodities back into Europe, further de-industrializing the continent.
The Bank President informed participants at the Sustainable Trade Africa Conference hosted at the UAE Trade Centre in Dubai that the EU Carbon Border Tax Adjustment Mechanism might cost Africa up to $25 billion per year.
Climate change has shortchanged Africa, and now it will be shortchanged in global commerce, according to the Bank President. Due to a lack of integration into global value chains, Africa’s biggest trade potential is intra-regional exchanges, with the proposed Africa Continental Free Trade Area expected to raise intra-Africa exports by more than 80% by 2035.
According to data from the International Renewable Energy Agency, Africa is already being disregarded in the global energy shift, according to Adesina.
Africa has received only $60 billion, or 2% of the $3 trillion in global investments in renewable energy over the last two decades, a trend that will now have a negative impact on its ability to export competitively into Europe, according to Adesina, who is arguing for measures he called the Just Trade-for-Energy Transition (JTET), which would allow Africa’s renewable objectives without limiting its trade chances.
According to Adesina, Africa will need to employ natural gas as a transition fuel to minimize the unreliability of renewable energy and stabilize its energy infrastructure in order to sustain industrialization.
According to Walid Mohammed Hareb Alfalahi, Chief Executive Officer of the UAE Trade Centre, Africa is the new frontier for investment, contrary to popular belief that the continent is a hazardous and difficult location to do business.
What you hear about Africa isn’t true. Africa has a lot of promise, in my opinion. I see opportunities to do more, Alfalahi added, recounting his great experience investing in Several projects which are underway across the continent.
According to Adesina, a Moody’s Analytics research found that Africa has the lowest default rate on infrastructure investment when compared to the rest of the globe. According to the research, Africa has a default rate of 5.5%, compared to 12.9% in Latin America, followed by Asia at 8.8%, Eastern Europe at 8.6%, North America at 7.6%, and Western Europe at 5.9%.
Adesina also highlighted some of the megaprojects that have piqued the interest of investors through the Africa Investment Forum, which was established by the African Development Bank and seven other founding partners.
