Public Management

European Carbon Tax Could Cost Africa $25 Billion Annually, Warns APPO

European Carbon Tax Could Cost Africa $25 Billion Annually, Warns APPO
Thursday, 10 October 2024 18:21

In December, the African Development Bank (AfDB) urged for Africa to be exempted from the European Carbon Border Adjustment Mechanism (CBAM) due to the risks it poses to the monetization of valuable exports, such as hydrocarbons.

The African Petroleum Producers Organization (APPO) has voiced strong opposition to the European Union’s proposed Carbon Border Adjustment Mechanism (CBAM) and is urging for a moratorium to protect African nations.

Speaking at the 2024 African Oil Week (AOW), which ends on October 10, APPO Secretary-General Dr. Omar Farouk Ibrahim warned about the economic risks this initiative poses for Africa’s growth. He emphasized that Africa's development is closely tied to its ability to monetize its energy resources. The EU's CBAM, introduced under the guise of promoting energy transition, could severely limit Africa’s ability to export these resources.

"Africa cannot develop without fossil fuels. Africa deserves better," Ibrahim stated, stressing the need for a fair and balanced policy that takes into account the unique challenges faced by African economies.

Once the CBAM, adopted by the EU last year, becomes effective in 2026, it is estimated that Africa could lose around $25 billion annually, according to the African Climate Foundation (ACF) and the Firoz Lalji Institute.

To counter the EU’s carbon tax, alongside APPO's call for a moratorium, some analysts suggest Africa could adopt carbon pricing systems to align its industries with international standards. They also propose, though not universally agreed upon, that increasing investments in renewable energy could help reduce Africa’s reliance on fossil fuels and lower the carbon footprint of its exports.

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